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Glossary of Student Loan Terms

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A

ACT
American College Testing Program

AFDC
Aid to Families with Dependent Children

AFSA
Association for Federal Student Assistance

ALAS
Auxiliary Loans to Assist Students (previous loan type)

AP
Advanced Placement

Academic Year
The period during which school is in session, consisting of at least 30 weeks of instructional time. The school year typically runs from the beginning of September through the end of May at most colleges and universities.

Accrued Interest
Interest that accumulates on the unpaid principal balance of a loan.

Accrual Date
The date on which interest charges on an educational loan begin to accrue.

Achievement Tests (SAT II)
A collection of tests that measure the student's proficiency and accumulated knowledge of specific subject areas. Different schools require different achievement tests as part of their admissions requirements. Since March 1994, these tests are known as the SAT II tests.

Adjusted Available Income
In the Federal Methodology, the remaining income after the allowances (taxes and a basic living allowance) have been subtracted.

Admit-Deny
A practice in which a school will admit marginal students, but not award them any financial aid. 

Advanced Placement Test (AP)
Test used to earn credit for college subjects studied in high school. they are offered by ETS in the spring. AP tests are scored on a scale from 1 to 5 (5 being the best possible score).

American College Test (ACT)
One of two national standardized college entrance examinations used in the U.S. The other is the SAT. The ACT is widely used in the West and Midwest. most universities require either the ACT or the SAT as part of an application for admission.

Amortization
The process of gradually paying off a loan over time through scheduled payments of principal and interest.

Appeal
A formal request to have a financial aid administrator review your aid eligibility and possibly use professional judgment to adjust the figures. For example, if you believe the financial information on your financial aid application does not reflect your family's current ability to pay (because of death of a parent, unemployment, or other circumstances, you should definitely make an appeal. The financial aid administrator may require documentation of the special circumstances or of other information listed on your financial aid application.

Asset
An item of value, such as a home, business, farm, real estate, stocks, bonds, mutual funds, cash, certificates of deposit, bank accounts, trust funds and other property and investments.

Asset Protection Allowance
A portion of your parents' assets that are not included in the calculation of the parent contribution, as calculated by the Federal Methodology need analysis formula. The asset protection allowance increases with the parents' age.

Associate Degree
The degree granted by two-year colleges.

Award Letter
An official document issued by a school's financial aid office that lists all of the financial aid awarded to the student. This letter provides details on their analysis of your financial need and the breakdown of your financial aid package according to amount, source and type of aid. The award letter will include the terms and conditions for the financial aid and information about the cost of attendance. You are required to sign a copy of the letter, indicating whether you accept or decline each source of aid and return it to the financial aid office. Some schools call the award letter the "Financial Aid Notification (FAN)."

Award Year
The academic year for which financial aid is requested (or received).

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B

BIA
Bureau of Indian Affairs

Bachelor's Degree
The undergraduate degree granted by four-year colleges and universities.

Balloon Payment
A larger than usual payment used to pay off the outstanding balance of a loan without penalty. Not all loans allow balloon payments. Simple interest loans, like many educational loans, generally do allow balloon payments.

Bankruptcy
A person is declared bankrupt when they are found to be legally insolvent and the person’s property is distributed among his/her creditors or otherwise administered to satisfy the interests of creditors.

Base Year
The tax year prior to the academic year (award year) for which financial aid is requested. The base year runs from January 1 of the junior year in high school through December 31 of the senior year. Financial information from this year is used to determine eligibility for financial aid.

Borrower
The person who takes out the loan.

Bursar’s Office
The university office that is responsible for the billing and collection of university charges.

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CAM
Common Account Management

CASHE
College Aid Sources for Higher Education

CBA
Consumer Banking Association

CBHE 
Coordinating Board for Higher Education (MO)

CFR
Code of Federal Regulations

CLEP
College-Level Examination Program

COA
Cost of Attendance

CPS
Central Processing System

CSS
College Scholarship Service

CWS 
College Work Study

Campus-based Aid
Financial aid programs administered by the university. The federal government provides the university with a fixed annual allocation, which is awarded by the financial aid administrator to deserving students. Such programs include the Perkins Loan, Supplemental Education Opportunity Grant and Federal Work-Study. Note that there is no guarantee that every eligible student will receive financial aid through these programs, because the awards are made from a fixed pool of money. This is a key difference between campus-based loan programs and the Direct Loan Program. 

Cancellation
Some loan programs provide for cancellation of the loan under certain circumstances, such as death or permanent disability of the borrower. Some of the federal student loan programs have additional cancellation provisions. 

Capital Gain
An increase in the value of an asset such as stocks, bonds, mutual funds and real estate between the time the asset was purchased and the time the asset was sold.

Capitalization
The practice of adding unpaid interest charges to the principal balance of an educational loan, thereby increasing the size of the loan. Interest is then charged on the new balance, including both the unpaid principal and the accrued interest. Capitalizing the interest increases the monthly payment and the amount of money you will have to repay. If you can afford to pay the interest as it accrues, you are better off not capitalizing.

Collateral
Property that is used to secure a loan. If the borrower defaults on the loan, the lender can seize the collateral. For example, a mortgage is usually secured by the house purchased with the loan.

Collection Agency
A company hired by the lender or guarantee agency to recover defaulted loans.

College Board
A nonprofit educational association of colleges, universities, educational systems, and other educational institutions. 

College Work-Study (CWS)
College Work-Study is simply a part-time job. This term is sometimes erroneously used to refer to the Federal Work-Study Program. 

Commuter Student
A student who lives at home and commutes to school every day.

Compounded Interest
Interest that is paid on both the principal balance of the loan and on any accrued (unpaid) interest. Capitalizing the interest on an unsubsidized Stafford loan is a form of compounding.

Consolidation
A loan that combines several student loans into one bigger loan from a single lender. The consolidation loan is used to pay off the balances on the other loans.

Cooperative Education
A program where the student spends time engaged in employment related to their major in addition to regular classroom study.

Cosigner
A cosigner on a loan assumes responsibility for the loan if the borrower should fail to repay it.

Cost of Attendance (COA)
The total amount it should cost the student to go to school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses. Loan fees, if applicable, may also be included in the COA. Child care and expenses for disabilities may also be included at the discretion of the financial aid administrator.  Schools establish different standard budget amounts for students living on-campus and off-campus, married and unmarried students, and in-state and out-of-state students.

Credit Rating
An evaluation of the likelihood of a borrower to default on a loan. Credit bureaus and credit reporting agencies provide this information to banks and businesses to help them decide whether to issue a loan or extend credit. Your credit rating may include your payment history, a list of current and past credit accounts and their balances, employment and personal information, and a history of past credit problems. Defaulting on a loan can hurt your credit rating.

Custodial Parent
if a student's parents are divorced or separated, the custodial parent is the one with whom the student lived the most during the past 12 months. The student's need analysis is based on financial information supplied by the custodial parent.

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D

DOE
Department of Education

Default

A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 270 days) or otherwise fails to meet the terms and conditions of the loan. if you default on a loan, the university, the holder of the loan, the state, and the federal government can take legal action to recovery the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect your credit rating.

Deferment
Occurs when a borrower is allows to postpone repaying the loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan.

Most federal loan programs allow students to defer their loans while they are in school at least half time. If you don't qualify for a deferment, you may be able to get a forbearance. You can't get a deferment if your loan is in default.

Delinquent
If the borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default.

Dependency Status
Determines to what degree a student has access to a parent's financial resources.

Dependent
For a child or other person to be considered your dependent, they must live with you and you must provide them with more than half of their support. Spouses do not count as dependents in the Federal Methodology. You and your spouse cannot both claim the same child as a dependent.

Direct Loans
The William D. Ford Federal Direct Loan Program (aka the Direct Loan Program) is a federal program where the school becomes the lending agency and manages the funds directly, with the federal government providing the loan funds. Not all schools currently participate in this program. Benefits of the program include faster turnaround time and less bureaucracy than the old "bank loan" program. The terms for direct loans are the same as for the Stafford Loan program. For more information about Direct Loans, contact the Direct Loan Servicing Center at 1-800-848-0979. 

Disbursement
The release of loan funds to the school for delivery to the borrower. The payment will be made co-payable to the student and the school. Loan funds are first credited to the student's account for payment of tuition, fees, room and board, and other school charges. Any excess funds are then paid to the student in cash or by check. Unless the loan amount is under $500, the disbursement will be made in at least two equal installments.

Discharge
To release the borrower from his or her obligation to repay the loan.

Disclosure Statement
Provides the borrower with information about the actual cost of the loan, including the interest rate, origination, insurance, and loan fees, and any other kinds of finance charges. Lenders are required to provide the borrower with a disclosure statement before issuing a loan.

Due Diligence
If a borrower fails to make payments on their loan according to the terms of the promissory note, the federal government requires the lender, holder, or servicer of the loan to make frequent attempts to contact the borrower via telephone and mail to encourage him or her to repay the loan and make arrangements to resolve the delinquency.

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E

ED 
U.S. Department of Education

EFC
Expected Family Contribution

EFT
Electronic Funds Transfer

ELO
Expanded Lending Option

ETS
Educational Testing Service

Early Action
A program with earlier deadlines and earlier notification dates than the regular admissions process. Students who apply to an early action program do not commit to attending the school if admitted, unlike an early decision program. Ivy League schools do not allow you to apply to more than one Ivy early action.

Early Admission
A program that allows gifted high school juniors to skip their senior year and enroll instead in college. The term "Early Admission" is sometimes used to refer collectively to Early Action and Early Decision programs.

Early Decision
A program with earlier deadlines and earlier notification dates than the regular admissions process. Students who apply to an early decision program commit to attending the school if admitted. Unfortunately, this means the student has accepted the offer of admission before they find out about the financial aid package. You should only participate in an early decision program if the school is your first choice and you won't want to consider other schools.

Electronic Data Exchange (EDE)
Program used by participating schools to electronically receive SARs from the federal processor. At some schools EDE allows students to electronically file their Free Application to Federal Student Aid (FAFSA).

Educational Testing Service (ETS)
Company that produces and administers the SAT and other educational achievement tests.

Electronic Funds Transfer (EFT)
Used by some schools and lenders to wire funds for Stafford and PLUS loans directly to participating schools without requiring an intermediate check for the student to endorse. The money is transferred electronically instead of using paper, and thus is available to the student sooner. 

Eligible Non-Citizen
Someone who is not a U.S. citizen but is nevertheless eligible for federal student aid. Eligible non-citizens include U.S. permanent residents who are holders of valid green cards, U.S. nationals, holders of form I-94 who have been granted refugee or asylum status, and certain other non-citizens. Non-citizens who hold a student visa or an exchange visitors visa are not eligible for federal student aid.

Emancipated
To release a child from the control of a parent or guardian. Declaring a child to be legally emancipated is not sufficient to release the parents or legal guardians from being responsible for providing for the child's education. The criteria for a child to be found independent are much more strict.

Endowment
Funds owned by an institution and invested to produce income to support the operation of the institution. Many educational institutions use a portion of their endowment income for financial aid. A school with a larger ratio of endowment per student is more likely to give larger financial aid packages.

Enrollment Status
An indication of whether you are a full-time or part-time student. Generally you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.

Entitlement
Entitlement programs award funds to all qualified applicants. The Pell Grant is an example of such a program.

Equity
The dollar value of your ownership in a piece of property.

Expanded Lending Option (ELO)
Under ELO, some schools can offer higher annual and cumulative loan limits to students receiving the Perkins Loan. The ELO is restricted to schools with a Perkins Loan default rate of 15% or less.

Expected Family Contribution (EFC)
The amount of money that the family is expected to be able to contribute to the student's education, as determined by the Federal Methodology need analysis formula approved by Congress. The EFC includes the parent contribution and the student contribution, and depends on the student's dependency status, family size, number of family members in school, taxable and nontaxable income, and assets. The difference between the COA and the EFC is the student's financial need, and is used to determine the student's eligibility for need-based financial aid. If you have unusual financial circumstances (such as high medical expenses, loss of employment, or death of a parent) that may affect your ability to pay for your education, tell your financial aid administrator. He or she can adjust the COA or EFC to compensate.

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F

FAA
Financial Aid Administrator

FAF
Financial Aid Form

FAFSA
Free Application for Federal Student Aid

FAO
Financial Aid Office

FAS
Financial Aid System

FAT
Financial Aid Transcript

FDLP
Federal Direct Loan Program (The William D. Form Federal Direct Loan Program through selected colleges and universities)

FDSLP
Federal Direct Student Loan Program

FFELP
Federal Family Education Loan Program

FISL
Federally Insured Student Loans (previous loan type)

FSEOG
Federal Supplemental Educational Opportunity Grant

FM 
Federal Methodology

FWS
Federal Work-Study

Federal Direct Student Loan Program (FDSLP)
Similar to the Federal Family Education Loan Program (FFELP). The funds for these loans are provided by the US government directly to students and their parents through their schools. Benefits of the program include faster turn-around time and less bureaucracy than the old "bank loan" program. The FDSLP includes the Federal Direct Stafford Loan (Subsidized and Unsubsidized) and the Federal Direct Parent Loan for Undergraduate Students (PLUS).

Federal Family Education Loan Program (FFELP)
Includes the Federal Stafford Loan (Subsidized and Unsubsidized), the Federal Perkins Loan, and the Parent Loan for Undergraduate Students (PLUS). The funds for these loans are provide by private lenders, such as banks, credit unions, and savings and loan associations. These loans are guaranteed against default by the federal government.

Federal Methodology
The needs analysis formula used to determine the EFC. The Federal Methodology takes family size, the number of family members in college, taxable and nontaxable income, and assets into account. Unlike most institutional methodologies, however, the Federal Methodology does not consider the net value of the family residence.

Federal Processor
The organization that processes the information submitted on the Free Application for Federal Student Aid (FAFSA) and uses it to compute eligibility for federal student aid. There are two different federal processors serving specific geographic regions.

Federal Work-Study (FWS)
Program providing undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student's salary, making it cheaper for departments and businesses to hire the student. For this reason, work-study students often find it easier to get a part-time job. Eligibility for FWS is based on need. Money earned from a FWS job is not counted as income for the subsequent year's need analysis process.

Fellowship
A form of aid given to graduate students to help support their education. Some fellowships include a tuition waiver or a payment to the university in lieu of tuition. Most fellowships include a stipend to cover reasonable living expenses (e.g., just above the poverty line). Fellowships are a form of gift aid and do not have to be repaid.

Financial Aid
Money provided to the student and the family to help them pay for the student's education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work).

Financial Aid Administrator (FAA)
A college or university employee who is involved in the administration of financial aid. Some schools call FAAs "Financial Aid Advisors" or "Financial Aid Counselors."

Financial Aid Form (FAF)
The old name for the Financial Aid PROFILE. The Financial Aid PROFILE is a supplemental financial aid form processed by the College Scholarship Service (CSS). It is not necessary to file a Financial Aid PROFILE in order to apply for federal student financial aid; the FAFSA is sufficient. The Financial Aid PROFILE is used by many private colleges and universities for awarding institutional funds.

Financial Aid Notification (FAN)
See Award Letter.

Financial Aid Office (FAO)
The college or university office that is responsible for the determination of financial need and the awarding of financial aid.

Financial Aid Package
The complete collection of grants, scholarships, loans and work-study employment from all sources (federal, state, institution and private) offered to a student to enable them to attend the college or university. Note that unsubsidized Stafford loans and PLUS loans are not considered part of the financial aid package, since these financing options are available to the family to help them meet the EFC. 

Financial Aid Transcript (FAT)
A record of all federal aid received by the student at each school attended. If you have previously attended an institution of higher education and are now applying for financial aid from a different university, the university will require a FAT from each of the schools previously attended, regardless of whether aid was received or not. They are required to do this by federal law. You have to submit a FAT even if you were in high school at the time. An electronic FAT process will be in place soon which will eliminate the need for the student to submit a FAT. The FAT is not the same as an academic transcript.

Financial Safety School
A school you are certain will admit you, and which is inexpensive enough that you can afford to attend even if you get no (or very little) financial aid.

First-Time Borrower
A first-year undergraduate student who has no unpaid loan balances outstanding on the date he or she signs a promissory note for an educational loan. First-time borrowers may be subjected to a delay in the disbursement of the loan funds. The first loan payment is disbursed 30 days after the first day of the enrollment period. If the student withdraws during the first 30 days of classes, the loan is cancelled and does not need to be repaid. Borrowers with existing loan balances aren't subject to this delay.

Fixed Interest
In a fixed interest loan, the interest rate stays the same for the life of the loan.

Forbearance
During a forbearance, the lender allows the borrower to temporarily postpone repaying the principal, but the interest charges continue to accrue, even on subsidized loans. The borrower must continue paying the interest charges during the forbearance period. Forbearances are granted at the lender's discretion, usually in cases of extreme financial hardship or other unusual circumstances when the borrower does not qualify for a deferment. You can't receive a forbearance if your loan is in default.

Free Application for Federal Student Aid (FAFSA)
Form used to apply for Pell Grants and all other need-based aid. As the name suggests, no fee is charged to file a FAFSA.

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G


GA
Guaranty Agency

GPA
Grade Point Average

GSL
Guaranteed Student Loan

Gapping

The practice of failing to meet a student's full demonstrated need. 

Garnishment
The practice of withholding a portion of a defaulted borrower's wages to repay his or her loan, without their consent.

Gift Aid
Financial aid, such as grants and scholarships, which does not need to be repaid.

Grace Period
A short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period may also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. Depending on the type of loan, you will have a grace period of six months (Stafford Loans) or nine months (Perkins Loans) before you must start making payments on your student loans. The PLUS Loans do not have a grace period.

Grade Point Average (GPA)
An average of a student's grades, converted to a 4.0 scale (4.0 is an A, 3.0 is a B, and 2.0 is a C). Some schools use a 5.0 scale for the GPA.

Graduate Assistantship
There are two types of graduate assistantships: teaching assistantships (TA) and research assistantships (RA). TAs and RAs receive a full or partial tuition waiver and a small living stipend. TAs are required to perform teaching duties. RAs are required to perform research duties, not necessarily related to the student's thesis research.

Graduate Student
A student who is enrolled in a Masters or PhD program.

Graduated Repayment
A schedule where the monthly payments are smaller at the start of the repayment period and gradually become larger.

Grant
A type of financial aid based on financial need that the student does not have to repay.

Gross Income
Income before taxes, deductions and allowances have been subtracted.

Guarantee Agency or Guarantor
State agencies responsible for approving student loans and insuring them against default. Guarantee agencies also oversee the student loan process and enforce federal and state rules regarding student loans.

Guarantee Fee
A small percentage of the loan that is paid to the guarantee agency to insure the loan against default. The insurance fee is usually 1% of the loan amount (and by law cannot exceed 3% of the loan amount).

Guaranteed Student Loan (GSL)
(Now called the Stafford Loan.) A guaranteed loan is insured against default. In the case of guaranteed student loans, the federal government agrees to repay the loans in case of default. Each loan is charged a guarantee fee to cover the costs of defaulted loans.

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H

HEA
Higher Education Act (of 1965)

HEAL

Health Education Assistance Loan

HHS
US Department of Health and Human Services

HPSL
Health Profession Student Loan

Half-time
Most financial aid programs require that the student be enrolled at least half-time to be eligible for aid. Some programs require the student to be enrolled full-time.

Health Education Assistance Loan (HEAL)
A low interest loan administered by the US Department of Health and Human Services (HHS). It is available to medical school students pursuing medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry, clinical psychology, health administration, and public health. Undergraduate pharmacology students are also eligible.

Health Professions Student Loan (HPSL)
A low interest loan administered by the US Department of Health and Human Services (HHS). It is now known as the Primary Care Loan (PCL).

Holder
The lender, institution or agency that holds legal title to a loan. The holder may be the bank that issued the loan, a secondary market that purchased the loan from the bank, or a guarantee agency if the borrower defaulted on the loan.

Home Equity
Current market value of a home less the mortgage's remaining unpaid principal. It is based on the market value, not the insurance or tax value. 

Horizontal Equity
The principle of horizontal equity is that families with similar financial circumstances should pay the same amount, regardless of how their assets, investments and income are defined.

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I

IM
Institutional Methodology

IRA 
Individual Retirement Account

IRS
Internal Revenue Service

ISIR
Institutional Student Information Report

ISLLC
Iowa Student Loan Liquidity Corporation

In-State Student
A student who has met the legal residency requirements for the state, and is eligible for reduced in-state student tuition at public colleges and universities in the state.

Income
The amount of money received from employment (salary, wages, tips), profit from financial instruments (interest, dividends, capital gains), or other sources (welfare, disability, child support, Social Security and pensions).

Income Contingent Repayment
Under an income contingent repayment schedule, the size of the monthly payments depends on the income earned by the borrower. As the borrower's income increases, so do the payments. The income contingent repayment plan is not available for PLUS Loans.

Independent
An independent student is at least 24 years old as of January 1 of the academic year, is married, is a graduate or professional student, has a legal dependent other than a spouse, is a veteran of the US Armed Forces, or is an orphan or ward of the court (or was a ward of the court until age 18). A parent refusing to provide support of their child's education is not sufficient for the child to be declared independent.

Individual Retirement Account (IRA)
One of several popular types of retirement funds. It is not legal to borrow money from your IRA to help pay for your children's education.

Installment Loan
A consumer loan in which the principal and interest are repaid on a regular (usually monthly) schedule. The payments are called "installments" and are all for the same amount.

Institutional Methodology (IM)
If a college or university uses its own formula to determine financial need for allocation of the school's own financial aid funds, the formula is referred to as the Institutional Methodology.

Institutional Student Information Report (ISIR)
The electronic version of SARs delivered to schools by EDExpress.

Insurance Fee
Fee passed on by the lender to the federal government as insurance against default. Insurance fees are charged as the loan is disbursed and typically run to 1% of the amount disbursed.

Interest
Amount charged to the borrower for the privilege of using the lender's money. Interest is usually calculated as a percentage of the principal balance of the loan. The percentage rate may be fixed for the life of the loan or it may be variable, depending on the terms of the loan. All federal loan issued since October 1992 use variable interest rates that are pegged to the cost of US Treasury bills.

Internal Revenue Service (IRS)
Federal agency responsible for enforcing US tax laws and collecting taxes.

Internship
Part-time job during the academic year or the summer months in which a student receives supervised practical training in their field. Internships are often very closely related to the student's academic and career goals and may serve as a precursor to professional employment. Some internships provide very close supervision by a mentor in an apprenticeship-like relationship. Some internships provide the student with a stipend, and some don't.

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J

K

L

LEAP
Leveraging Educational Assistance Partnership (formerly SSIG)

Lender

A bank, credit union, savings and loan association, or other financial institution that provides funds to the student or parent for an educational loan. Note: Some schools now participate in the Federal Direct Loan Program and no longer use a private lender, since loan funds are provided by the US Government.

Leveraging

if a school offers a talented student extra financial aid, regardless of need, the student is more likely to enroll. Leveraging is the controversial practice of figuring out how much it will take to attract such students and customizing aid offers to optimize the quality of the incoming class.

Line of Credit
Pre-approved loan that lets you borrow money up to a pre-set credit limit, usually by writing checks. A line of credit doesn't cost you anything until you write a check. Then you begin repayment just like a regular loan.

Loan
A type of financial aid which must be repaid, with interest. The federal student loan programs (FFELP and FDSLP) are a good method of financing the costs of your college education. These loans are better than most consumer loans because they have lower interest rates and do not require a credit check or collateral. The Stafford Loans and Perkins Loans also provide a variety of deferment options and extended repayment terms.

Loan Forgiveness
The federal government cancels all or part of an educational loan because the borrower meets certain criteria (e.g., is performing military or volunteer service).

Loan Interviews
Students with educational loans are required to meet with a financial aid administrator before they receive their first loan disbursement and again before they graduate or otherwise leave school. During these counseling sessions, called entrance and exit interviews, the FAA reviews the repayment terms of the loan and the repayment schedule with the student.

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M

MDE
Multiple Data Entry

MOHELA
Missouri Higher Education Loan Authority

MSLP
Missouri Student Loan Program

Master's Degree
One of several degrees granted by graduate schools.

Maturity Date
The date when a loan comes due and must be repaid in full.

Merit-based
Financial aid that is merit-based depends on your academic, artistic or athletic merit, or some other criteria, and does not depend on the existence of financial need. Merit-based awards use your grades, test scores, hobbies, and special talents to determine your eligibility for scholarships.

Mortgage
A loan of funds for purchasing a piece of property which uses that property as security for the loan. The lender has a lien on the property and will receive the property if the borrower fails to repay the loan.

Multiple Data Entry Processor (MDE)
A company that processes the FAFSA forms submitted by students. The College Scholarship Service (CSS) and PHEAA are both MDE Processors.

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N

NCHELP
National Council of Higher Education Program

NDEA 
National Defense Education Act (1958)

NDSL
National Defense Student Loan (next National Direct Student Loan, now Perkins)

NHSC

National Health Corps Scholarship

NMSQT
National Merit Scholarship Qualifying Test

NOG or NOLG
Notice of Loan Guarantee 

NSL or NPSL
Nursing Student Loan or Nursing Profession Student Loan

NSLC
National Student Loan Clearinghouse

NSLDS
National Student Loan Data System

National Health Corps Scholarship (NSC)
Scholarship program administered by the US Department of Health and Human Services (HHS). It is available to medical students studying allopathic and osteopathic medicine and to dental school students studying dentistry.

National Service Trust
President Clinton's national community service program. if you participate in this program before attending school, the funds may be used to pay your educational expenses. If you participate after graduating, the funds may be used to repay your federal student loans. Eligible types of community service include education, human services, the environment, and public safety.

Need
The difference between the COA and the EFC is the student's financial need - the gap between the cost of attending the school and the student's resources. The financial aid package is based on the amount of financial need. The process or determining a student's need is known as need analysis.

Need Analysis
The process of determining a student's financial need by analyzing the financial information provided by the student and his or her parents (and spouse, if any) on a financial aid form. The student must submit a need analysis form to apply for need-based aid. Need analysis forms include the Free Application for Federal Student Aid (FAFSA) and the Financial Aid PROFILE.

Need-Based
Financial aid that is need-based depends on your financial situation. Most government sources of financial aid are need-based.

Need-Blind
Under need-blind admissions, the school decides whether to make an offer of admission to a student without considering the student's financial situation. Most schools use a need-blind admissions process. A few schools will use financial need to decide whether to include marginal students in the wait list.

Need-Sensitive
Under need-sensitive admissions, the school does take the student's financial situation into account when deciding whether to admit him or her. Some schools use need-sensitive admissions when deciding to accept a borderline student or to pull a student off of the waiting list.

Net Income
Income after taxes, deductions and allowances have been subtracted.

Nursing Student Loan (NSL)
A low interest loan administered by the US Department of Health and Human Services (HHS) and available to students enrolled in nursing programs.

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O

OSFAP
Office of Student Financial Assistance Programs

Origination Fee
Fee paid to the bank to compensate them for the cost of administering the loan. The origination fees are charged as the loan is disbursed, and typically run to 3% of the amount disbursed. A portion of this fee is paid to the federal government to offset the administrative costs of the loan.

Outside Resource
Aid or benefits available because a student is in school and is counted after need is determined. Outside scholarships, prepaid tuition plans and VA educational benefits are examples of outside resources.

Outside Scholarship
A scholarship that comes from sources other than the school and the federal or state government.

Out-of-State Student
A student who has not met the legal residency requirements for the state, and is often charged a higher tuition rate at public colleges and universities in the state.

Overawards
A student who receives federal support may not receive awards totaling more than $400 in excess of his or her financial need.

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P

PC
Parent Contribution

PCL
Primary Care Loan

PHEAA
Pennsylvania Higher Education Assistance Agency

PJ
Professional Judgment

PLUS
Parent Loan for Undergraduate Students

PSAT
Preliminary Scholastic Assessment Test

Packaging
The process of assembling a financial aid package.

Parent Contribution (PC)
An estimate of the portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university, and other relevant factors. Students who qualify as independent are not expected to have a parent contribution.

Parent Loans for Undergraduate Students (PLUS)
Federal loans available to parents of dependent undergraduate students to help finance the child's education. Parents may borrow up to the full cost of their children's education, less the amount of any other financial aid received. PLUS loans may be used to pay the EFC. There is a minimal credit check required for the PLUS loan, so a good credit history is required. Check with your local bank to see if they participate in the PLUS loan program. If your application for a PLUS loan is turned down, your child may be eligible to borrow additional money under the Unsubsidized Stafford Loan Program.

Pell Grant
A federal grant that provides funds of up to $2,340 based on the student's financial need.

Perkins Loan
Formerly the National Direct Student Loan Program, the Perkins Loan allows students to borrow up to $3,000/year (5 year maximum) for undergraduate school and $5,000/year for graduate school (6 year maximum). The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The student must have applied for a Pell grant to be eligible. The interest on the Perkins Loan is subsidized while the student is in school.

PhD
One of several degrees granted by graduate schools.

PLAN
A test taken in the fall of the sophomore year in high school as practice for the ACT.

Prepaid Tuition Plan
A college savings plan that is guaranteed to rise in value at the same rate as college tuition. For example, if a family purchases shares that are worth half a year's tuition at a state college, they will always be worth a half year's tuition, even 10 years later when tuition rates will have doubled.

Prepayment
Paying off all or part of a loan before it is due.

Primary Care Loan (PCL)
A low interest loan administered by the US Department of Health and Human Services (HHS). It is available to medical students pursuing medicine, osteopathy, dentistry, veterinary medicine, optometry, and podiatry. Undergraduate pharmacology students are also eligible. To be eligible for this loan, you must commit to working in the field of primary care. It was formerly known as the Health Professions Student Loan (HPSL).

Principal
The amount of money borrowed or remaining unpaid on a loan. Interest is charged as a percentage of the principal. Insurance and origination fees will be deducted from this amount before disbursement.

Private Loans
Education loan programs established by private lenders to supplement the student and parent education loan programs available from federal and state governments.

Professional Degree
A degree in a field like law, education, medicine, pharmacy or dentistry.

Professional Judgment (PJ)
For need-based federal aid programs, the financial aid administrator can adjust the EFC, adjust the COA, or change the dependency status (with documentation) when extenuating circumstances exist. For example, if a parent becomes unemployed, disabled or deceased, the FAA can decide to use estimated income information for the award year instead of the actual income figures from the base year. This delegation of authority from the federal government to the financial aid administrator is called Professional Judgment (PJ).

Professional Student 
A student pursuing advanced study in law or medicine.

Promissory Note
The binding legal document that must be signed by the student borrower before loan funds are disbursed by the lender. The promissory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy and cancellations. The student should keep this document until the loan has been repaid.

Preliminary Scholastic Assessment Test (PSAT/NMSQT)
The PSAT is taken during the junior year as practice for the SAT. Scores on the PSAT are used to select semi-finalists for the National Merit Scholarship program.

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Q

R

RA
Research Assistantship

ROTC
Reserve Officer Training Corps

Reaching School
A school that the student would love to attend, but which isn't "guaranteed" to admit them. Every student should apply to at least one reaching school.

Renewable Scholarships
A scholarship that is awarded for more than one year. Usually the student must maintain certain academic standards to be eligible for subsequent years of the award. Some renewable scholarships will require the student to reapply for the scholarship each year; others will just require a report on the student's progress to a degree.

Repayment Schedule
the repayment schedule discloses the monthly payment, interest rate, total repayment obligation, payment due dates, and the term of the loan.

Repayment Term
The term of a loan is the period during which the borrower is required to make payments on his or her loans. When the payments are made monthly, the term is usually given as a number of payments or years.

Research Assistantship (RA)
A form of financial aid awarded to graduate students to help support their education. Research assistantships usually provide the graduate student with a waiver of all or part of their tuition, plus a small stipend for living expenses. As the name implies, an RA is required to perform research duties. Sometimes these duties are strongly tied to the student's eventual thesis topic.

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S

SAP
Satisfactory Academic Progress

SAR
Student Aid Report

SAT
Scholastic Assessment Test

SC
Student Contribution

SEOG
Supplemental Educational Opportunity Grant

SFA
Student Financial Assistance

SLMA
Student Loan Marketing Association (aka Sallie Mae)

SLRA
Student Loan Reform Act (8-10-93)

SLS
Supplemental Loan for Students (previous loan type)

SLSA
Student Loan Servicing Alliance

SSIG
State Student Incentive Grants (now LEAP)

Safety School
A school that will almost certainly admit the student. The college admissions process is not predictable. Even "sure admits" are sometimes rejected. Some students are admitted to all the schools to which they apply; others are rejected by all the schools. To protect yourself against the latter scenario, you should apply to at least one safety school.

Sallie Mae
(Formerly known as SLMA or the Student Loan Marketing Association) The nation's largest secondary market. Sallie Mae holds approximately one third of all educational loans.

Satisfactory Academic Progress (SAP)
A student must make this in order to continue receiving federal aid. If a student fails to maintain an academic standing consistent with the school's SAP policy, they are unlikely to meet the school's graduation requirements.

Scholarship
A form of financial aid given to undergraduate students to help pay for their education. Most scholarships are restricted to paying all or part of tuition expenses, though some scholarships also cover room and board. Scholarships are a form of gift aid and do not have to be repaid. Many scholarships are restricted to students in specific courses of study or with academic, athletic, or artistic talent.

Scholarship Search Service
A service that charges a fee to compare the student's profile against a database of scholarship programs. Few students who use a scholarship search service actually win a scholarship.

Scholastic Assessment Test (SAT)
One of two national standardized college entrance examinations used in the US. The other is the ACT. The SAT (previously known as the Scholastic Aptitude Test) is administered by the Educational Testing Service (ETS). Most universities require either the ACT or the SAT as part of an application for admission.

Secondary Market
An organization that buys loans from lenders, thereby providing the lender with the capital to issue new loans. Selling loans is a common practice among lenders, so the bank you make your payment to may change during the life of the loan. The terms and conditions of your loan do not change when it is sold to another holder. Sallie Mae is the nation's largest secondary market and holds approximately one third of all educational loans.

Secured Loan
A loan backed by collateral. If you fail to repay the loan, the lender may seize the collateral and sell it to repay the loan. Auto loans and home mortgages are examples of secured loans. Educational loans are generally not secured.

Selective Service
Registration for the military draft. Male students who are US citizens, have reached the age of 18 and were born after December 31, 1959 must be registered with Selective Service to be eligible for federal financial aid. If the student did not register and is past the age of doing so (18-25), and the school determines that the failure to register was knowing and willful, the student is ineligible for all federal student financial aid programs. The school's decision as to whether the failure to register was willful is not subject to appeal. Students needing help resolving problems concerning their Selective Service registration should call 1-847-688-6888.

Self Help Aid
Financial aid in the form of loans and student employment. If every financial aid package is required to include a minimum amount of self-help aid before any gift aid is granted, that level is known as the self-help level. 

Service Academy
The US Air Force Academy, US Coast Guard Academy, US merchant Marine Academy, US Military Academy, and US Naval Academy. Admissions are highly selective, as students must be nominated by their Congressional Representative in order to apply.

Servicer
An organization that collects payments on a loan and performs other administrative tasks associated with maintaining a loan portfolio. Loan servicers disburse loan funds, monitor loans while the borrowers are in school, collect payments, process deferments and forbearances, respond to borrower inquiries, and ensure that the loans are administered in compliance with federal regulations and guarantee agency requirements.

Simple Interest
Interest that is paid only on the principal balance of the loan and not on any accrued interest. Most federal student loan programs offer simple interest. Note, however, that capitalizing that interest on an unsubsidized Stafford loan is a form of compounded interest.

Simplified Needs Test
If the parents have an adjusted gross income of less than $50,000 and every family member was eligible to file an IRS Form 104A or 1040EZ (or wasn't required to file a federal income tax return), the Federal Methodology ignores assets when computing the EFC. If you filed a 1040 but weren't required to do so, you may be eligible for the simplified needs test. 

Stafford Loans
Federal loans that come in two forms: subsidized and unsubsidized. Subsidized loans are based on need; unsubsidized loans aren't. The interest on the subsidized Stafford Loan is paid by the federal government while the student is in school and during the six month grace period. The subsidized Stafford Loan was formerly known as the Guaranteed Student Loan (GSL). The unsubsidized Stafford Loan may be used to pay the EFC.

State Student Incentive Grants (SSIG)
A state-run financial aid program for state residents. The states receive matching funds from the federal government to help them fund the program.

Statement of Educational Purpose
A legal document in which the student agrees to use the financial aid for educational expenses only. The student must sign this document before receiving federal need-based aid.

Student Aid Report (SAR)
Report that summarizes the information included in the FAFSA and must be provided to your school's financial aid office. The SAR will also indicate the amount of Pell Grant eligibility, if any and the Expected Family Contribution (EFC).

Student Contribution
The amount of money the federal government expects the student to contribute to his or her education, which is included as part of the EFC.  Student contribution depends on the student's income and assets, but can vary from school to school. Usually a student is expected to contribute about 35% of his or her savings and approximately one-half of his or her summer earnings above $1,750.

Student Loan Marketing Association (SLMA)
The old name for Sallie Mae. See Sallie Mae in this glossary for more information.

Subsidized Loan
With a subsidized loan, such as the Perkins Loan or the subsidized Stafford Loan, the government pays the interest on the loan while the student is in school, during the six month grace period, and during any deferment periods. Subsidized loans are awarded based on financial need and may not e used to finance the family contribution. See also Unsubsidized Loan.

Supplemental Education Opportunity Grant
Federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school's financial aid office and provide up to $4,000 per year. To qualify, a student must also be a recipient of a Pell Grant.

Supplemental Loan for Students
Federal loans for financially independent students. This program was eliminated in 1994 with the creation of the unsubsidized Stafford Loan program.

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T

TA
Teaching Assistantship

TOEFL
Test Of English as a Foreign Language

Teaching Assistantship (TA)
A form of financial aid awarded to graduate students to help support their education. Teaching assistantships usually provide the graduate student with a waiver of all or part of tuition, plus a small stipend for living expenses. As the name implies, a TA is required to perform teaching-related duties.

Term
The number of years (or months) during which the loan is to be repaid.

Title IV Loans
Title IV of the Higher Education Act of 1965 created several education loan programs which are collectedly referred to as the Federal Family Education Loan Program (FFELP). These loans, also called Title IV Loans, are the Federal Stafford Loans (Subsidized and Unsubsidized), Federal PLUS Loans and Federal Consolidation Loans.

Title IV School Code
When you fill out the FAFSA you need to supply the title IV Code for each school to which you are applying. This code is a six-character identifier that begins with one of the following letters: O, G, B or E. 

Test Of English as a Foreign Language (TOEFL)
Most colleges and universities require international students to take the TOEFL as part of their application for admission. The TOEFL evaluates a student's ability to communicate in and understand English.
 
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U

USED
US Department of Education

Undergraduate Student
A student who is enrolled in a Bachelors program.

Unearned Income
Interest income, dividend income and capital gains.

Unmet Need
In an ideal world, the financial aid office (FAO) would be able to provide each student with the full difference between their ability to pay and the cost of education. Due to budget constrains, the FAO may provide the student with less than the student's need ( as determined by the FAO). This gap is known as the unmet need.

Unsecured Loan
A loan not backed by collateral, representing a greater risk to the lender. The lender may require a co-signer on the loan to reduce their risk. If you default on the loan, the co-signer will e held responsible for repayment. Most educational loans are unsecured loans. In the case of federal student loans, the federal government guarantees repayment of the loans. Other examples of unsecured loans include credit card charges and personal lines of credit.

Unsubsidized Loan
A loan for which the government does not pay the interest. The borrower is responsible for the interest on an unsubsidized loan from the date the loan is disbursed, even while the student is still in school. Students may avoid paying the interest while they are in school by capitalizing the interest, which increases the loan amount. Unsubsidized loans are not based on financial need and may be used to finance the family contribution. See also Subsidized Loan.

Untaxed Income
Contributions to IRAs, Keoghs, tax-sheltered annuities and 401k plans, as well as Worker's Compensation and welfare benefits.

US Department of Education (ED or USED)
Government agency that administers several federal student financial aid programs, including the Federal Pell Grant, Federal Work Study program,  Federal Perkins Loans, Federal Stafford Loans and Federal PLUS Loans.

US Department of Health and Human Services (HHS)
Government agency that administers several health education loan programs, including the HEAL, HPSL and NSL loan programs. 

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V

VA
Veterans Administration

Variable Interest
In a variable interest loan, the interest rate changes periodically. For example, the interest rate might be pegged to the cost of US Treasury Bills (e.g., T-Bill rate plus 3.1%) and be updated monthly, quarterly, semi-annually or annually.

Verification
Verification is a review process in which the financial aid office (FAO) determines the accuracy of the information provided on the student's financial aid application. During the verification process, the student and parent will be required to submit documentation for the amounts listed (or not listed) on the financial aid application. Such documentation may include signed copies of the most recent federal and state income tax returns for you, your spouse (if any) and your parents, proof of citizenship, proof of registration with Selective Service, and copies of Social Security statements and W2 and 1099 forms, among other things.

Financial aid applications are randomly selected by the federal processor for verification, with most schools verifying at least 1/3 of all applications. If there is an asterisk next to the EFC figure on your Student Aid Report (SAR), your SAR has been selected for verification. Schools may select additional students for verification if they suspect fraud. Some schools undergo 100% verification. 

If any discrepancies are uncovered during verification, the financial aid office may require additional information to clear up the discrepancies. Such discrepancies may cause your final financial aid package to be different from the initial package described on the award letter you received from the school. If you refuse to submit the required documentation, your financial aid package will be cancelled and no aid awarded.

Veteran
For federal financial aid purposes, such as determining dependency status, a veteran is a former member of the US Armed Forces (Army, Navy, Air Force, Marines or Coast Guard) who served on active duty and was discharged other than dishonorably (i.e., received an honorable or medical discharge). You are a veteran even if you serve just one day of active duty - not active duty for training - before receiving your DD-214 and formal discharge papers. (Note that in order for a veteran to be eligible for VA educational benefits, they must have served for more than 180 consecutive days on active duty before receiving an honorable discharge. There are exceptions for participation in Desert Storm/Desert Shield and other military campaigns.)

ROTC students, members of the National Guard and most reservists are not considered veterans. 

Since the 1995-96 academic year, a person who was discharged other than dishonorably from one of the military service academies (the US Military Academy at West Point, the Naval Academy at Annapolis, the Air Force Academy at Colorado Springs, or the Coast Guard Academy at New London) is considered a veteran for financial aid purposes. Cadets and midshipmen who are still enrolled in one of the military service academies, however, are not considered veterans. According to the US Department of Education's Action Letter #6 (February 1996), "a student who enrolls in a service academy, but who withdraws before graduating, is considered a veteran for purposes of determining dependency status."

Having a DD-214 does not necessarily mean that you are a veteran for financial aid purposes. As noted above, you must have served on active duty and received an honorable discharge.

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W

W2 Form
The form listing an employee's wages and tax withheld. Employers are required by the IRS to issue a W2 form for each employee before February 28.

Work Study
See Federal Work-Study.

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X

Y

Z


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