Select the first letter
of the word from the list above to jump to appropriate section of
the glossary. The process of awarding student financial aid has grown
more complex over the years, and as a result the process has developed
its own vocabulary. To help reduce confusion for students and parents,
this section presents common definitions for many of the words used
by financial aid adminstrators and scholarship providers.
- A -
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.
The date on which interest charges begin to accrue.
Interest on a loan that accumulates and is to be paid in installments
at a later time usually when the principal becomes due. Accrued
interest may be compounded or simple.
Advanced Placement Test (AP)
The Advanced Placement tests are used to earn credit for college
subjects while in high school.
American College Test (ACT)
A standardized college entrance examinations used in the United
The process of slowly repaying a loan over an extended period
of time through monthly installments of principal and interest.
A formal request to have a financial aid administrator review
your financial aid eligibility and possibly use Professional Judgment
to readjust the figures.
The amount a family has in savings and investments. This includes
savings and checking accounts; a business; a farm or other real
estate; and stocks, bonds, and trust funds.
A two-year undergraduate college degree.
An academic year in which a student will recieve or request financial
- B -
A four-year undergraduate degree offered by colleges and universities.
A larger payment used to pay off the outstanding balance of
a loan without penalty.
A company that manages the billing and collection of loans for
A person or group that receives a loan
A university's office that is responsible for the billing and
collection of university charges to students.
An additional financial aid form required by some colleges for
parents and students who own a business or farm.
Some loan programs provide for cancellation of the loan under
certain circumstances. The borrower may be eligible for cancellation
of all or part of the balance of his/her educational loans.
The process of increasing the size of the loan by adding unpaid
interest charges to the principal.
Citizenship/Eligibility For Aid
To be eligible to receive federally funded college aid, a student
must be one of the following: 1. a United States citizen, 2.
a non-citizen national, 3. a permanent resident with an I-151
or I-551 without conditions, 4. a holder of an I-94 showing
one of the following designations: "Refugee," "Asylum
Granted," "Indefinite Parole" and/or "Humanitarian
Parole," "Cuban-Haitian Entrant, Status Pending,"
"Conditional Entrant" (valid if issued before April
1, 1980), 5. a participant in a suspension of deportation case
pending before Congress Individuals in the U.S. on an F1 or
F2 visa only or on a J1 or J2 exchange visa only cannot get
Something of value used as security for a loan.
An outside agency used by the lender or guarantee agency to
recover defaulted loans.
College Scholarship Service
The College Board and one of the agencies that processes financial
aid information and applications.
interest that is paid on both the principal balance of the loan
and on any accrued (unpaid) interest, resulting in a new principal
balance which will have a new interest assessment.
This loan allows a borrower to combine several educational loans
into one new loan. This sometimes results in a lower interest
rate. Such loans often reduce the size of the monthly payment
by extending the term (up to 30 years depending on the loan
amount) of the loan and allowing a single monthly payment, consolidation
can make loan repayment easier for some borrowers.
A second creditworthy person who signs a promissory note with
a borrower who does not have collateral or a good credit history.
The cosigner guarantees that the loan will be repaid if the
borrower fails to make payments.
Cost Of Attendance (COA)
The total amount it will cost a student to attend college for
a year, including tuition and fees; housing and food for the
period of enrollment; books and supplies; and miscellaneous
expenses (travel costs, flight fees, lab fees etc.). Other expenses
may be added at the discretion of a college's financial aid
A program offered by many instutions in which students alternate
periods of enrollment with periods of employment (some provide
variuos pay rates). This program may extend the regular baccalaureate
degree program to five years. This program combines classroom
study with actual work experience.
- D -
Failure to repay a student loan installment on time (failure
to pay several regular installments, i.e. payments overdue by
180 days) according to the terms and conditions agreed to when
you signed a promissory note. If you default on a loan, the
university, the holder of the loan, and the government can take
legal action to recover the money, including garnishing your
wages. Defaulting on a government loan will make you ineligible
for future federal financial aid. Defaults are recorded on permanent
credit records and may result in prosecution and/or loss of
future borrowing possibilities.
A borrower is allowed to postpone repaying the loan. Deferments
are available while borrowers are in school at least half time,
enrolled in a graduate fellowship program or rehabilitation
training program, and during periods of unemployment or economic
hardship. Other loan programs allow the student to defer the
interest payments by capitalizing the interest. Other deferments
may be available depending on when and what you borrowed. This
benefit is generally characteristic of federal and state guaranteed
student loans. Contact your lender for additional details.
The borrower fails to make a payment on time, the borrower is
now considered delinquent and late fees may be charged. If several
installments are not paid, the loan goes into default.
A student claimed as a dependent member of household for federal
income tax purposes.
Direct Loan is a new federal program where the school becomes
the lending agency and manages the funds directly, with the
federal government acting as the guarantee agency. Not all schools
currently participate in this program. The William D. Ford Federal
Direct Loan Program also known as the Direct Loan Program.
The date on which the loan funds are released to the university
for payment. Disbursements for most loans are made in equal
multiple installments, and made co-payable to the borrower and
To release the borrower from his/her obligation to repay the
This 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 must provide the borrower with a disclosure statement
before issuing a loan.
Income that is available to a person or family after all financial
obligations, including taxes, have been accounted for.
The federal government requires the lender of the loan to make
numerous attempts to contact the borrower by telephone and mail,
if the borrower failed to make payments according to the terms
of the promissory note. This is to encourage the borrower to
repay the loan and make arrangements to resolve the delinquency.
- E -
- Eligible Noncitizen
A financial aid applicant who is not a U.S. citizen but is eligible
to receive federal Title IV aid because he/she is a permanent
resident, noncitizen national, or a resident of the Trust Territory
of the Pacific Islands or Micronesia.
Estimated Family Contribution (EFC)
The amount of money the financial aid office expects the family
to be able to contribute to the student's education. The EFC is
calculated according to a formula established by Congress. The
difference between the COA and the EFC is the student's financial
Electronic Funds Transfer (EFT)
This process is used by lenders to wire funds directly to participating
schools without requiring an intermediate check for the student
The number of credits a student is taking per semester or quarter.
The status is diveded into two caterogies: full-time (usually
12 credits or more) or part-time (usually 6 credits) status. A
student must be enrolled at least half-time or full-time to qualify
for financial aid.
A required counseling session at which a financial aid officer,
must inform the student borrowers about their rights and responsibilities.
Students with educational loans are required to meet with a financial
aid officer before they graduate. During this exit interview,
an adminstrator reviews the repayment terms of the loan and the
repayment schedule with the student.
- F -
- Federal Direct
The federal government is the lender for a group of federal loan
programs. Included in these programs are government-subsidized
loans for students and unsubsidized loans for both students and
Federal Education Loan Programs
A bank, savings and loan, credit union, or other private organization
is the lender for a group of federal loan programs. Included in
these programs are government-subsidized loans for students and
unsubsidized loans for both students and parents.
A standard method of calculating how much a family should be expected
to contribute toward college costs. All the federal funds are
awarded based on this need analysis formula.
Federal Pell Grant
Federal grant awarded to undergraduate students based on need.
Federal Perkins Loan
A 5% loan funded by the government which is awarded by colleges
to both undergraduate and graduate students.
Federal Plus Loan
A nonsubsidized loan program for parents of undergraduate students
under the Federal Education Loan Program umbrella.
Federal Stafford Loan
A Federal Education Loan Program for students. Stafford Loans
can be either government-subsidized, in which case the government
pays any interest while the borrower is attending college, or
unsubsidized, in which case interest begins to accrue when the
loan is made.
Federal State Student Incentive Grant
Awards made as part of a state grant program utilizing both federal
funds and state funds.
Federal Supplemental Educational Opportunity Grant (FSEOG)
A federal grant awarded by colleges to the most needy undergraduate
students as determined by the federal need analysis formula.
Federal Work-Study Program (FWSP)
A federal, need-based financial aid program through which eligible
students can earn a portion of their college expenses. Work-study
awards are made by colleges, but a portion of the funding comes
from the federal government. Essentially FWSP pays a portion of
the student's salary, making it cheaper for departments and businesses
to hire the student.
Federal Family Education Loan Program (FFELP)
This program includes the Federal Stafford Loans and the PLUS
A form of financial 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.
Financial Aid Administrator (FAA)
A FAA is an university employee who is involved in the financial
Financial Aid Award Letter
Written notification to an applicant from a college that details
how much and which types of financial aid are being offered if
the applicant enrolls.
Financial Aid Package
The total amount of financial aid a student receives. This is
a complete collection of grants, scholarships, loans, and work-study
program offered to a student to financially assist them to attend
the university for one school year.
Financial Aid Profile
A financial aid application developed by the College Scholarship
Service that many colleges use to determine aid given from their
own institutional funds.
Financial Aid Transcript (FAT)
A record of any financial aid a student has received at a given
institution. To be eligible for federal financial aid programs,
students must submit this transcript from all previously attended
postsecondary institutions, regardless of whether aid was received.
The difference between a college's cost of attendance and the
Expected Family Contribution) as calculated by the need analysis
Free Application For Federal Student Aid (FAFSA)
The official application students must use to apply for federal
Financial Aid Office (FAO)
The college's office that handles all matters affecting financial
A rate of interest that is set at the time a loan is negotiated
and that remains constant over the life of the loan.
An authorized period of time during which the lender agrees to
temporarily postpone a borrower's principal repayment obligation.
Interest continues to accrue and usually must be paid during the
forbearance period. Forbearance may be granted at the lender's
- G -
The process of withholding a portion of a borrower's wages to
repay his/her loan, usually without their consent.
Grant and scholarship funds given as financial aid that does not
have to be repaid.
A short time period after graduation or no longer in school during
which the borrower is not required to begin repayment. The typical
grace period is six or nine months. Some loan programs have no
Grade Point Average (GPA)
An average of a student's grades. Some schools uses the 4.0 scale
(4.0 = A, 3.0 = B, 2.0 = C, 1.0 = D) and others uses the 5.0 scale.
A type of financial aid award based on need or merit that is not
repaid by the student.
A family's or individual's total income before deductions.
A guarantee agency agrees to pay back a loan due to a borrower's
default, death, disability, or bankruptcy. The federal government
sets loan limits and interest rate, but each state is free to
set its own additional limits within the federal guidelines. Each
state has a different guarantee agency that administers the federal
Stafford and Plus loans for students in that state. A guarantee
fee is a small percentage of the loan that is paid to the guarantee
agency as a form of insurance against default. For the name, address,
and telephone number of your state's guarantee agency, call the
Federal Student Aid Information Center at 1-800-433-3243 (1-800-4-FED-AID).
An insurance fee, deducted from the borrower's loan proceeds prior
to disbursement, that the guarantee agency charges a lender. The
fee for a Federal Stafford or PLUS Loan is1%. By law the fee cannot
exceed 3% of the loan amount.
- I -
- Independent Student
A student who reports only his or her own income (and that of
a spouse, if relevant) when applying for federal financial aid.
Students who will be 24 or older by December 31, 1998, will automatically
be considered "independent" for 1998-1999. Students
who are under 24 will be considered independent if they are: 1.
married and not claimed as a dependent on their parents' 1998
federal income tax return; 2. the supporter of a legal dependent
other than a spouse; 3. a veteran of the U.S. Armed Forces; 4.
an orphan or ward of the court; 4. classified as independent by
a college's financial aid; 5. administrator because of other unusual
circumstances; 6. a graduate or professional student
All the non-tuition-related costs associated with attending college,
including room, board, transportation, medical, and personal expenses.
The legal resident of state, and the student is eligible for reduced
in-state student tuition at a public college or universitie in
the state. Certain requirments must be met.
A standard method of determining a student's or family's ability
to pay for college used by individual colleges in awarding their
own institutional funds for financial aid. However, colleges must
use the Federal Methodology in awarding any federal funds.
A fee charged to guarantee student loans against loss through
default. The amount charged is usually deducted from the disbursement
of the principal.
A fee charged to the borrower for the use of borrowed money from
the lender. Interest is calculated as a percentage of the principal
loan amount. The percentage rate may be fixed for the life of
the loan, or it may be variable, depending on the terms of the
loan. As of October 1, 1992, all federal education loans made
to new borrowers have variable interest rates.
Interest payments made by the federal government to the lender
of a Subsidized Federal Stafford or Direct Loan while the borrower
is enrolled at least half-time or is in a grace period.
Internal Revenue Service (IRS)
The federal agency responsible for collecting income taxes. Student
aid applications are often verified by their family's IRS forms.
A part-time job during the academic year or the summer months.
A student receives supervised work experience in a his/her career
field. Some internships provide the student with a mentor and
- J -
- K -
- L -
A financial institution (bank, savings and loan, or credit union)
that provides the money for students and parents to borrow educational
loans. The money borrowed usually have conditions that the money
be returned with an interest charge. Some schools are also lenders.
Loan Disclosure Statement
A document that shows the amount of a loan; where, when, and what
repayments must be made; the interest rate; and the cost of borrowing
- M -
- Merit-Based Aid
Any form of financial aid awarded on the basis of personal achievement
or individual characteristics without reference to financial need.
- N -
The difference between the COA and the EFC is the student's financial
need. The remaining amount is considered student need. The financial
aid package is often based on the amount of financial need. The
process of determining a student's need is known as the need analysis.
A process of reviewing a student's aid application to determine
the amount of financial aid a student is eligible for. Completing
a needs analysis form is the required first step in applying for
most types of financial aid.
A borrower who has no outstanding (unpaid) loan balances on the
date he/she signs the promissory note for a specific educational
loan. New borrowers may be subject to different regulations than
borrowers who have existing loan balances.
- O -
A processing fee charged to a borrower which is deducted from
the loan to pay part of the loan's adminstrative costs. This
fee is usually subtracted from the amount of a loan.
An award that recieved from sources (private scholarship, companies,
foundations, etc.) other than the school and the federal or
A student has not met the legal residency requirements for the
state. An out-of -state student is often charged a higher tuition
fee at a public college or university in the state.
A student's family contribution plus any financial aid awarded
exceeds the cost of attendance at a given college. Overawards
may result when a student's enrollment status changes or when
additional resources (such as a private scholarship) become
available to a student.
- P -
- Pell Grant
The Pell grant is a federal grant that provides funds of up to
$2,500 based on the student's financial need.
Formerly the National Direct Student Loan Program.
The Perkins Loan allows students to borrow up to $3,000/year (5
year max) for undergraduate school and $5,000/year for graduate
school (6 year max).
The fluctuating interest rate that banks charge to their best
The amount borrowed. Interest is charged on this amount as a percentage
of the principal, and guaranty and origination fees will be deducted
prior to disbursement.
Paying off all or part of a loan before it is due.
The legal authority of financial aid administrators to change
a calculated Expected Family Contribution or any of the elements
used in the calculation based on additional information or individual
circumstances that would lead to a more accurate assessment of
a family's financial condition.
The secondary application for financial aid processed through
the College Scholarship Service (CSS). This must be completed
by all students who wish to receive aid other than Federal Stafford
This is binding legal document signed by the student borrower
before loan funds are disbursed by the lender. The promisory 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
Parent Loans for Undergraduate Students (PLUS)
A federal loans available to parents of undergraduate students
to help finance the student's education. Parents may borrow up
to the full cost of their children's education, less the amount
of any other financial aid received.
- R -
- Repayment Schedule
A plan that discloses the borrower's monthly payment, interest
rate, total repayment obligation, due dates and length of time
for repaying the loan.
A number of installments or years the borrower is required to
make payments on his/her loans.
Research Assistantship (RA)
A form of financial aid given to graduate students to help support
their education. Research 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, an RA is required
to perform research duties. Sometimes these duties are strongly
tied to the student's eventual thesis topic.
A scholarship that is awarded for more than one year. Usually
the student must maintain certain academic standards or grade
point average to be eligible for subsequent years of the award.
Renewable scholarships may require the student to reapply for
the scholarship each year; others may require a report on the
student's progress in his/her career field.
- S -
- Satisfactory Academic Progress (SAP)
The level of academic achievement expected of a student in order
to continue to receive financial 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.
Student Aid Report (SAR)
A SAR is the sent to the student after filing a FAFSA. The SAR
summarizes the information included in the FAFSA and must be provided
to your school's FAO. The SAR will also indicate the amount of
Pell Grant eligibility, if any.
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.
Loans are often bought and sold on the secondary market. Institutions
that buy loans from lenders, usually at a discount. If a loan
is sold, the secondary market is responsible for managing and
servicing it. The terms of your loan do not change when it is
sold to another lender.
Funds from jobs and from loan programs, such as the Federal Perkins
Loan, Federal Stafford and Direct Loans, and Federal Work-Study
The principle that students have an obligation to help pay for
a portion of their own education. The expected amount of self-help
is usually included in the analysis of a student's resources.
Interest computed only on the original amount of a loan.
Simplified Needs Test
A formula used in the Federal Methodology for families whose Adjusted
Gross Income (AGI) is less than $50,000 and who file either the
1040A or 1040EZ IRS forms. In this formula, a family's assets
are not included.
Stafford Loans are federal loans that come in two forms, subsidized
and unsubsidized. Subsidized loans are based on need; unsubsidized
loans aren't. The Subsidized Stafford Loan was formerly known
as the Guaranteed Student Loan (GSL). Undergraduates may borrow
up to $23,000 ($2,625 during the freshman year, $3,500 during
the sophomore year, and $5,500 during each subsequent year) and
graduate students up to $65,500 including any undergraduate Stafford
loans ($8,500 per year).
Statement of Educational Purpose
A separate form, or a statement on the FAFSA, that all students
must sign in order to receive federal student aid. By signing
you agree that: 1. You are to use your student aid only for education-related
expenses, 2. You have complied with Selective Service requirements
by registering with the Selective Service or indicating the reason
why you are not required to register.
Supplemental Education Opportunity Grant (SEOG)
The SEOG is a federal grant program for undergraduate students
and first baccalaureate degree only with exceptional need. SEOG
grants are awarded by the school's financial aid office, and provide
up to $4,000 per year. Eligibility is based on the federal methodology
using the information provided on the FAFSA. Priority is given
to students who are eligible for Pell Grants, meet filing deadlines
and who demonstrate the greatest historical need.
A need-based loan on which the interest is paid by the federal
government during the in-school, grace, and deferment periods.
- T -
- Teaching Assistantship
A form of financial aid given 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 duties.
The term of a loan is the number of years (or months) during which
the loan is to be repaid.
- U -
- Unmet Need
The student's financial aid package and the family contribution
does not cover the costs of attending a particular college, the
difference is called the Unmet Need.
An unsubsidized loan is 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.
- V -
- Variable Interest
The rate of interest that changes during the life of a loan on
a regular basis and is generally tied to an index. Some student
and parent loan programs have variable interest rates that change
annually based on the one-year Treasury Bill rate.
Verification is a review process in which the FAO determines the
accuracy of the information provided on the student's financial
aid application. During verification additional information from
the student, a spouse, and the parents is used to confirm previously
submitted documentation for the amounts listed (or not listed)
on the financial aid application.
- W -
- X -
- Y -
- Z -
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