A period of time schools that use to measure a period of study (typically from on or about September to on or about May). You can contact your financial aid office for information on how your school defines Academic Year.
Demand for immediate repayment of your entire federal student loan. The entire unpaid amount of your federal student loan becomes due and payable if you:
Receive loan money, but do not enroll at least half-time at the school that determined you were eligible to receive the federal student loan;
Use your student loan money to pay for anything other than expenses related to your education at the school that determined you were eligible to receive the federal student loan;
Make a false statement that causes you to receive a federal student loan that you’re not eligible to receive; or
Default on your federal student loan.
The amount of student loan interest that accumulates on the unpaid principal balance of a student loan. Typically, accrued interest is calculated daily.
Adjusted Gross Income (AGI)
Adjusted Gross Income is an individual (or couple’s) total taxable income minus specific reductions. You can find your Adjusted Gross Income on your most recently filed IRS Form 1040, 1040A, or 1040EZ, or by requesting a tax return transcript online.
Aggregate Student Loan Limit (Cumulative Student Loan Amount)
A limit on the total amount of subsidized and/or unsubsidized student loans that you may borrow for undergraduate and graduate study. If the total student loan amount you receive over the course of your education reaches the aggregate student loan limit, you’re not eligible to receive additional student loans. However, if you repay some of your student loans to bring your outstanding student loan debt below the aggregate student loan limit, you could then borrow again, up to the amount of your remaining eligibility under the aggregate student loan limit.
The process of gradually decreasing the student loan balance through periodic payments of principal and interest over an extended period of time.
Annual Loan Limit
The maximum federal student loan eligibility per academic year. These amounts vary by type of loan and grade level. Your school will tell you how much you’re eligible to receive each academic year. You can learn more about the annual loan limit at StudentAid.gov.
Annual Percentage Rate (APR)
The actual yearly cost of borrowing money reflected as a percentage rate, including finance charges (interest, fees, and other charges).
Items of financial worth which may include your home, business, savings and checking accounts, stocks, bonds, real estate, trust funds, etc.
A letter from your school that details your federal, state, institutional and private student financial aid.
Books, Supplies, Transportation, and Miscellaneous Personal Expenses
Includes reasonable amounts, as determined by your school.
The individual who signed and agreed to the terms in the master promissory note and is responsible for repaying a student loan.
Borrower’s Rights and Responsibilities Statement
The Master Promissory Note contains a Borrower’s Rights and Responsibilities Statement that explains the terms and conditions of the student loan that you receive.
Capitalized Interest (Capitalization)
Unpaid interest that has been added to the principal balance of a federal student loan. Future interest is charged on the increased principal balance and this may increase your monthly payment amount and the total amount you repay over the life of the federal student loan.
Charged Off (written off) Account
A debt that a creditor has written off as a loss, but that is still subject to collection action.
Student loan consolidation is the process of combining one or more federal direct student loans into a single new federal direct student loan. To consolidate student loans, you work with the U.S. Department of Education.
A person who agrees to repay the loan in the event the primary borrower does not.
Consumer Reporting Agencies
See credit bureaus.
Cost of Attendance (COA)
The total cost to attend school for the academic year, as determined by your school.
A credit bureau collects the credit information of individuals and makes it available to financial institutions, credit card companies, etc. Credit bureaus are also known as consumer reporting agencies (CRAs). The three main credit bureaus are Equifax, Transunion and Experian.
A number reported by credit bureaus and used by lenders to determine whether to lend you money, and what interest rate to charge you. Lenders assess personal information, balances and credit limits to determine a person’s capability to repay loans and credit cards.
A collection of information about you and your credit history, kept by credit bureaus.
The approval, decline or counter-offer sent by their lender to the applicant.
Combining several unsecured debts into a single, new loan, usually with more favorable terms.
The amount of debt compared to your overall income. Lenders use this ratio when determining whether to lend you money. A low debt-to-income ratio is more desirable.
Failure to repay a loan according to the terms agreed to. For the FFEL and Direct Loan programs, your loan is in default if you fail to make a payment for 270 days, if you repay monthly (or 330 days, if your payments are due less frequently). Your lender is required to report the default to at least one national credit bureau.
A benefit of federal student loans that allows you to temporarily stop making payments. You’re not generally charged interest on subsidized loans during student loan deferment. Student loan nterest will continue to be charged on your unsubsidized student loans and PLUS loans.
A status of a loan that begins if you don’t make a payment when due. Your lender is required to report delinquency to at least one national credit bureau.
See William D. Ford Federal Direct Loan (Direct Loan) Program.
A portion of a federal student loan that the school pays out by applying the funds to the student’s school account or by paying the borrower directly. Students generally receive their federal student loans in more than one disbursement.
Your adjusted gross income minus the poverty guidelines for your family size.
A plan for paying back a loan for borrowers who have greater than $30,000 in overall education debt. This is to give a borrower a maximum term of 25 years to pay off their loans, as opposed to only 10 years.
Extended Repayment Rate
The maximum allowed length to repay a debt (for which the borrower is eligible). This rate can be anywhere between 10 and 30 years based on the amount of the loan.
Free Application for Federal Student Aid. The FAFSA® is a form that must be completed annually to help determine your eligibility for federal student aid. For more information, or to complete a FAFSA® online for free, visit FAFSA® on the Web.
The Fair Issac Corporation (FICO) created this model of credit scoring, which is used to determine the probability that a borrower will repay a loan. FICO is also the credit score utilized most often by lenders, including some student loan lenders. FICO scores are determined from credit report information.
A charge for the utilization of credit or in order to extend pre-existing credit. It could be a portion of the borrowings or a flat fee, with charges that are percentage-based occurring most often.
Financial Aid Package
The types and amounts of financial aid (federal and nonfederal) a student is offered by the school to help pay educational costs.
The cost of attendance minus your expected family contribution.
Fixed Interest Rate
A loan fee for the borrower to utilize borrowed money at a percentage rate that does not change.
A benefit of federal student loans that allows you to temporarily stop making payments or reduce your federal student loans’ monthly payment. Interest will continue to be charged on your subsidized, unsubsidized and PLUS student loans. Some student loan forbearances are required to be granted by your federal loan servicer; others are offered only at the discretion of your federal loan servicer.
A period of time that generally begins on the day after a borrower graduates, leaves school, or drops below half-time enrollment and usually ends six to nine months later. A borrower is not required to make payments during the grace period. Grace periods occur for:
subsidized and unsubsidized loans made under the Direct Loan and FFEL programs (six-month grace period); and
loans made under the Perkins loan program (generally nine-month grace period).
Graduated Repayment Plan
Under this plan, your monthly payments
start out low and increase every two years
are made for up to ten years (not including periods of deferment or forbearance)
will at least equal the amount of interest that accrues on your loan each month
won’t be more than three times greater than any other payment
Under the Graduated Repayment Plan, consolidation loans have repayment periods of 10 to 30 years based on your total education loan indebtedness. For example, if your total education loan indebtedness exceeds $60,000, your repayment period will be 30 years (360 months).
Student grants are monetary gifts to people who are pursuing higher education. Unlike student loans, grants don’t require repayment.
Your total income before deductions.
The minimum hours or credit hours you need to be enrolled to be eligible for a federal student loan. For information on half-time enrollment at your school contact your school’s financial aid office.
Head of household
You’re unmarried or ‘considered unmarried’ on the last day of the year.
You paid more than half the cost of keeping up a home for the year.
A ‘qualifying person’ lived with you in the home for more than half the year (except for temporary absences such as school). However, if the ‘qualifying person’ is your dependent parent, he or she does not have to live with you.
An entity that holds your loan promissory note and has the right to collect from you. Many banks sell loans, so the initial lender and the current holder could be different. The holder(s) of your Direct Loans is the U.S. Department of Education (the Department). The holder of your FFEL Program loan(s) may be a lender, secondary market, guaranty agency, or the Department. Your loan holder(s) may use a servicer to handle billing, payment, repayment options, and other communications on your loans.
Income-Based Repayment (IBR) Plan
IBR is a repayment plan with monthly payments that are limited to 15% (10% if you’re a new borrower) of your discretionary income. Discretionary income for this plan is the difference between your adjusted gross income and 150% of the poverty guideline amount for your state of residence and family size, divided by 12. To initially qualify for IBR and to continue making income-based payments under this plan, you must have a partial financial hardship (see definition).
You’re a new borrower for the IBR Plan if (1) you have no outstanding balance on a Direct Loan or FFEL Program loan as of July 1, 2014 or (2) have no outstanding balance on a Direct Loan or FFEL Program loan when you obtain a new loan on or after July 1, 2014.
Income-Contingent Repayment (ICR) Plan
ICR is a repayment plan with monthly payments that are the lesser of (1) what you would pay on a 12-year standard repayment plan multiplied by an income percentage factor or (2) 20% of your discretionary income divided by 12. Discretionary income for this plan is the difference between your adjusted gross income and the poverty guideline amount for your state of residence and family size.
Financial protection against loss or harm. Includes medical, renters, homeowner’s, vehicle and life insurance.
The cost to borrow money from a lender quoted often on an annual basis. Interest is calculated as a percentage of the outstanding (unpaid) principal balance.
The percentage charged when you borrow money. See also Annual Percentage Rate (APR).
A fee charged by a lender to the borrower if a portion or all of a mandatory payment is not given in a certain allotment of time post-due date.
An identification code of six numbers for a borrower’s lender
The London Interbank Offered Rate (LIBOR) is the average interest rate at which a selection of banks are prepared to lend money (in U.S. dollars) to other banks in the London market. LIBOR is used as an index rate in many loan transactions.
Money that you borrow and must repay.
The process of gradually decreasing the student loan balance through periodic payments of principal and interest over an extended period of time.
Loan Discharge (Cancellation)
Loan discharge is the removal of a borrower’s obligation to repay a loan when the loan is still outstanding. Loan discharge is granted on federal student loans only in limited circumstances.
Loan Fee (Origination Fee)
A fee charged for each federal student loan you receive that is a percentage of the total loan amount you’re borrowing (gross amount). The loan fee is deducted proportionately from each disbursement of your loan. This reduces the actual loan amount you receive (net amount). The specific loan fee that you’re charged will be included in a disclosure statement you’ll receive after the first disbursement of your federal student loan. You will be required to repay the gross amount.
Loan Modification Agreement
Temporary or permanent restructure of a loan.
The process to underwrite a loan, beginning with the application to borrow and ending with approval and disbursement of the loan
The approved financial organization (i.e., bank, marketplace lender, credit union, savings and loan, or school) from which a borrower receives a loan for education
The portion of the academic year that the loan is requested for.
An entity that collects payments on a federal student loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a loan holder. A federal loan servicer is a loan servicer for the U.S. Department of Education. If you have a Direct Loan, you’ll be assigned a federal loan servicer.
Direct Loan borrowers are assigned a federal loan servicer after the first disbursement of their loan. Your federal loan servicer will contact you directly after you receive your first disbursement.
This includes reporting to federal government and credit bureaus, customer service, payment processing, billing, record keeping, documentation, and related tasks. Loan servicing can be performed by the lender or a contracted third party.
Categories include default, paid-in-full, suspended, forbearance, repayment, deferment, grace, in-school, and in-military.
Master Promissory Note
A legal document in which you promise to repay your federal student loan(s) and any accrued interest and fees to your lender or loan holder. There is one Master Promissory Note for Direct Subsidized/Unsubsidized Loans and a different Master Promissory Note for Direct PLUS Loans.
Most schools are authorized to make multiple federal student loans under one Master Promissory Note for up to 10 years.
Maximum Deferment Period
A cap on the length of time a loan can be deferred before one is mandated to start paying monthly sums. (also see deferment)
Maximum Loan Amount
The upper limit of how much can be borrowed from lender based on a certain loan product and the lender’s underwriting criteria.
A delay in loan payments when one is serving on National Guard duty, or active duty, during a national emergency, a war, or military operation. This postponement starts when one begins active duty and stops 180 days after being demobilized.
Minimum Loan Amount
Lower limit that may be borrowed when utilizing a certain loan. Certain lenders offer varying rates and rewards for borrowers, depending on the loan size.
Minimum Monthly Payment
Smallest sum that can be repaid each month to pay back a loan. Any extra payment made by a borrower would be used to pay for principal, which would lower total cost and/or shorten the repayment period.
More than one equal installment of loan funds (PLUS or Stafford loan)
National Student Loan Data System (NSLDS)
The central database for student aid, which includes all Title IV grants or loans. NSLDS receives data from schools, guaranty agencies, and other Department of Education databases to aggregate its data.
Number of Disbursements
Loans may be disbursed, or distributed, to a student loan borrower in several ways. Typically, a borrower will borrow a loan amount for one year’s worth of tuition and expenses. However, a college or university often requires student loan sums on a semester basis (e.g., half year). In this scenario, the student loan is paid twice (half of the amount at the beginning of the fall semester and the other half at the beginning of the spring semester). The borrower is only charged interest on the sum that has already been disbursed.
Number of Payments
The approximate number of payments it would require to repay a loan. This might change when borrower rewards are also factored into the number.
Typically, this is a payment made within 15 days of the scheduled due date.
A charge upfront from the lender to process an application for a new loan.
Similar to a Parent PLUS Loan, a Parent Loan is an education loan offered by private student loan companies that can be applied toward undergraduate and/or graduate school programs. With a Parent Loan, the parent is the borrower and the parent (not the student) assumes full responsibility for the loan.
Parent PLUS Loan
Parent PLUS Loans are a good option for parents with strong credit who want to borrow the cost of their child’s graduate or undergraduate education. With a Parent PLUS Loan, the parent is the borrower and the parent (not the student) assumes full responsibility for the loan. Many lenders offer Parent PLUS Loan refinancing so parents who borrow loans on behalf of their children can refinance and obtain a lower interest rate on their Parent PLUS Loan.
Money your parents give you to help pay for educational expenses. Not the Expected Family Contribution (EFC) from your FAFSA®.
Partial Financial Hardship
A circumstance in which the annual amount due on all of your eligible loans or, if you’re married and file a joint federal income tax return, the annual amount due on all of your eligible loans and your spouse’s eligible loans, exceeds 10% (for the Pay As You Earn and Revised Pay As You Earn plans and for new borrowers under the IBR plan) or 15% of the amount by which your adjusted gross income (AGI) exceeds 150% of the annual poverty guideline amount for your family size and state of residence.
The payback period, or loan term, is the amount of duration of your student loan and the date by which loan repayment must occur.
The bare minimum amount which is periodically due, according to the student loan repayment plan, and is typically per month.
How frequently one would make payments to pay off one’s student loan (typically one month)
A detailed list of payments in the plan for loan repayment, showing number of payments, payment frequency, and payment due date. These are listed in the promissory note and governed by regulations.
The sum of what a borrower owes before the borrower has repaid a student loan completely. This may include any outstanding unpaid interest, late fees and unpaid principal.
Amount withheld by an employer from employee’s earnings. Some examples are: Federal Income Tax, Social Security, Medicare, State Taxes, Health Insurance, Retirement Plan, etc.
A grant given by the federal government to students who demonstrate the greatest financial need. This is determined through information given when completing the FAFSA forms.
A loan made under the Federal Perkins Loan Program for students with exceptional financial need. Perkins Loans are administered by the school.
Direct PLUS Loans and FFEL PLUS Loans are loans to eligible graduate or professional students and eligible parents of dependent undergraduate students to help pay for the cost of the student’s education at participating schools.*
Includes Direct PLUS Loans (made through the William D. Ford Federal Direct Loan Program) and FFEL PLUS Loans (made through the Federal Family Educational Loan Program.**)
Students’ loan information doesn’t include PLUS loans taken out by parents on their behalf.
*Graduate or professional students should exhaust unsubsidized and subsidized loans before taking out Direct PLUS Loans.
**The FFEL Program ended June 30, 2010 and no new loans have been made under the FFEL Program since that date.
Poverty guideline amount is the figure published annually by the U.S. Department of Health and Human Services (HHS) and differs by family size and state of residence. The HHS poverty guidelines are used for purposes such as determining eligibility for certain federal benefit programs. If you’re not a resident of a state identified in the poverty guidelines, your poverty guideline amount is the amount used for the 48 contiguous states.
A Section 529 plan. Prepaid tuition plans let you lock in future tuition rates at in-state public colleges at current prices and are usually guaranteed by the state.
A charge from the lender should the borrower not pay back part or all of a loan prior to the due date. There is no penalty for prepaying interest or principal on national loans for students, but there may be some on certain other types.
The interest rate banks charge their most creditworthy commercial customers.
The loan amount you borrowed plus any capitalized interest.
Private Student Loan Consolidation
Private student loan consolidation is student loan consolidation with a private student loan company (rather than the federal government) whereby a borrower take a new loan (in exchange for paying off the old student loan) with a lower interest rate to lower the borrower’s monthly student loan payments.
Private Student Loan Refinance
Private student loan refinance is student loan consolidation with a private student loan company (rather than the federal government) whereby a borrower take a new loan (in exchange for paying off the old student loan) with a lower interest rate to lower the borrower’s monthly student loan payments.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan (i.e. IDR or Standard Repayment plan) while working full-time for certain public service employers.
Qualifying employers include governmental organizations and many not-for-profit organizations.
A loan that was removed from default because the borrower made nine voluntary, reasonable, and affordable monthly payments within twenty days of the due date during ten consecutive months.
To pay back money you borrowed by making scheduled payments to a loan holder or servicer.
The maximum time period over which you must repay your federal student loan. The repayment period may range from 10 years to 30 years, depending on loan amount, loan type, and repayment plan.
A plan set up and agreed upon between a borrower and lender that determines the amount you pay each month and the number of payments you must make.
Room and Board
An allowance for the cost of housing and food while attending college or career school.
Satisfactory Repayment Arrangement
Agreement between the debtor and the account holder of a defaulted loan detailing the terms of repayment.
A fixed rate, federal loan for college graduate and undergraduates who attend a qualified education program at least half time to pay for qualified education expenses.
Standard Repayment Plan
Under this plan, your monthly payments are
a fixed amount of at least $50 each month
made for up to 10 years (not including periods of deferment or forbearance)
This repayment plan saves you money over time because your monthly payments may be higher than payments made under other plans, but you’ll pay off your federal student loan in the shortest time. For this reason, you’ll pay the least amount of interest over the life of your federal student loan.
Under the Standard Repayment Plan, consolidation loans have repayment periods of 10 to 30 years based on your total education loan indebtedness. For example, if your total education loan indebtedness exceeds $60,000, your repayment period will be 30 years (360 months).
A student loan is a type of education loan and is money that you borrow for school and must repay with interest.
Student Loan Consolidation
Student loan consolidation is the process of combining one or more federal direct student loans into a single new federal direct student loan. You can work with the U.S. Department of Education to consolidate student loans. Private student loan refinance is student loan consolidation with a private student loan company (rather than the federal government) whereby a borrower take a new loan (in exchange for paying off the old student loan) with a lower interest rate to lower the borrower’s monthly student loan payments.
Student Loan Debt Burden
Student loan debt burden is the portion of a student’s monthly income dedicated to their student loan payments. The Consumer Financial Protection Bureau (CFPB) has the following categories for student loan debt burden:
Low: Monthly payment less than 8% of monthly income
Medium: Monthly payment between 8% and 14% of monthly income
High: Monthly payment greater than 14% of monthly income
Student Loan Forgiveness
Student loan forgiveness is the removal of a borrower’s obligation to repay a student loan when the student loan is still outstanding. Student loan forgiveness is granted on federal student loans only in limited circumstances.
A federal student loan for which a borrower is not generally responsible for paying the interest while in an in-school, grace*, or deferment period. Includes Direct Subsidized Loans (made through the William D. Ford Federal Direct Loan Program) and Subsidized Federal Stafford Loans (made through the Federal Family Education Loan (FFEL) Program**.)
* Interest will be charged during your grace period, if your loan is first disbursed July 1, 2012 through June 30, 2014.
Reduces the taxes owed.
Tax – Tax Credit = Taxes Owed
$100 – $10 = $90
Reduces taxable income.
Income – Deduction = Taxable Income
$100,000 – $25,000 = $75,000
All income you’re receiving this year (i.e., income from employment, unemployment income, dividend income, interest income, tips, or alimony). Does not include untaxed income such as Supplemental Security Income, child support, or federal or state public assistance.
A form submitted to the Internal Revenue Service (IRS) and your state government on an annual basis reporting your income for the year.
Tax Withholding Allowances
An allowance an individual claims on a W-4 Form. A withholding allowance is mainly used to assist an employer in calculating the amount of income tax to withhold from an employee’s paycheck.
Teacher Loan Forgiveness
The goal of the Teacher Student Loan Forgiveness Program to encourage promising individuals to enter into the teaching profession and to give back to their communities in low income schools. You must be a full-time teacher for five consecutive years in a designated elementary or secondary school or educational service agency that serves students from low income families. Also, your loans must have originated after October 1, 1998. Federal direct loans and Stafford Loans are eligible for teacher loan forgiveness, whereas Parent PLUS loans are not eligible. If you are eligible, you can have up to $5,000 forgiven (up to $17,500 for elementary/secondary special education teachers and secondary math and science teachers). If you have a direct consolidation loan or FFEL consolidation loan, then only the portion used to repay the original Direct or FFEL Loan will qualify for student loan forgiveness. You can apply by using the Teacher Loan Forgiveness Application.
Title IV Aid
The programs authorized under Title IV of the Higher Education Act are the major source of federal student aid. Title IV programs include:
Federal Family Education Loan (FFEL)
Federal Perkins Loan
Federal Pell Grant
Academic Competitiveness Grant (ACG)
National SMART Grant
Federal Supplemental Educational Opportunity Grant (FSEOG)
Federal Work-Study (FWS)
Total Education Indebtedness
Total Education Indebtedness is the sum of a Direct Consolidation Loan, and other eligible education indebtedness (i.e. federal loans not eligible to be consolidated, private loans, or state loans) up to an amount equal to the Direct Consolidation Loan. Total Education Indebtedness is used to calculate the number of payments under the Standard and Graduated Repayment Plans.
A charge for teaching/instruction at an institution (e.g. the rental or purchase of equipment (including equipment for instruction by telecommunications), materials, or supplies required of all students in the same course of study).
A student who is enrolled in an undergraduate course of study at a college/university or career school that usually doesn’t exceed four years and that leads to an undergraduate degree or certificate.
A federal student loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Includes Direct Unsubsidized Loans (made through the William D. Ford Federal Direct Loan Program) and Unsubsidized Federal Stafford Loans (made through the Federal Family Education Loan (FFEL) Program*.)
* The FFEL Program ended June 30, 2010 and no new loans have been made under the FFEL Program since that date.
Income you don’t pay taxes on, such as Supplemental Security income, child support, or federal, or public assistance.
Includes electricity, gas, water, telephone, cable or internet.
Variable Interest Payment
A charge of a student loan fee to a borrower for the utilization of monies borrowed for a portion of the sum of borrowed funds that may change over the duration of the loan based on a movement in interest rates such as LIBOR or Prime, and as set by the lender.
Payment made directly by the borrower and does not include payments obtained by federal offset, garnishment of income or asset execution.
William D. Ford Federal Direct Loan (Direct Loan) Program
Student loans provided by the U.S. Department of Education to enable a student to pay for education after high school. Eligible students borrow directly from the U.S. Department of Education at participating schools. Direct Loans include the following types of federal student loans: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.
Amount deducted by an employer from employee’s earnings. Some examples include: Federal Income Tax, Social Security, Medicare, State Taxes, Health Insurance, and Retirement Plan.
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