Glossary of Financial Aid Terms

Tests required by some colleges to measure student achievement in specific areas of study such as English, math, or science.

A test published by American College Testing that measures a student's ability in math, verbal comprehension, and problem solving. This test is usually taken during the junior or senior year of high school.

A test used to earn college credit for subjects studied in high school which is scored on a scale from 1-5 (with 5 being the best possible score). This test is offered in the spring.

Credit cannot be granted to anyone under the age of compulsory school attendance in the State in which the institution is physically located, without a parent or guardian as a co-signer.

The combination of financial aid (loans, scholarships, grants, work-study) determined by the financial aid office of a college or university.

Generally, the minimum monthly payment you must make, not the total amount you owe.

The total annual cost of a loan, including all fees and interest.

The amount of your approved credit limit that is currently available for your use.

An official document issued by a school's financial aid office listing all the financial aid awarded to the student. The award letter includes information about the cost of attendance and terms and conditions for the financial aid.

A process by which the college, university, trade school, or vocation school verifies that a student is enrolled on at least a half-time basis, is making satisfactory academic process, and is therefore eligible for federal and private loans. Certification must be made prior to any disbursement of funds.

An individual who signs the promissory note in addition to the borrower and is equally responsible for the obligation.

The total cost of attending a post-secondary institution for one academic year. This usually includes tuition, fees, room, board, supplies, transportation, and personal expenses.

Combining several loans from multiple lenders into a single loan to reduce the monthly payment amount and/or increase the repayment period.

A person who signs the promissory note in addition to the borrower and is equally responsible for the obligation.

An agency that gathers and stores credit information on a consumer's creditworthiness. If a credit report is needed for a loan application, a credit bureau produces a report based on the gathered data. The lender also reports back to credit bureaus how much an individual borrowed and whether the individual makes payments when due.

Lenders use credit reports to determine if they should approve a loan and to set the terms (interest rate, fees, and length) of the loan.

A number, generally between 300 and 800, that reflects the credit history shown in a borrower's credit report. This score is considered predictive of the borrower's future credit performance.

A period during which a borrower who meets certain criteria may suspend loan payments. For some loans the federal government pays the interest during a deferment. On others, the interest accrues and is capitalized, and the borrower is responsible for paying the interest.

Failure to make monthly loan payments when due. Delinquency begins with the first missed payment.

According to the Department of Education's website, the U.S. Department of Education was created in 1980 by combining offices from several federal agencies. Their mission is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access.

An undergraduate student whose parents provide over half of his/her financial support. A dependent student is single, under 24 years of age, has no legal dependents, is not an orphan or ward of the court, nor a veteran of the U.S. Armed Forces. Parents of a dependent student must submit parental information on the FAFSA for their son/daughter to be considered for financial aid.

The release of loan funds to the school for delivery to the borrower. Disbursements are usually made in equal multiple installments co-payable to the borrower and the school.

A college admissions program that considers admission for high school juniors with enough credits (and remarkable academic and non-academic background) for admission (a year earlier than is typical).

A college admissions program that consists of earlier deadlines and notification dates than the regular admissions process, and that requires a binding commitment of the student if admission is offered. The student applying under this program should apply to only one school. The student will not know what financial aid will be awarded prior to committing.

Amount a family is expected to contribute to a student's education, based on family earnings, net assets, savings, size of family, and number of students in college.

A signer of a promissory note who is secondarily liable for a loan obligation, i.e. who agrees to pay if the borrower does not.

Indicates 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.

Students with federal education loans are required to receive counseling before they receive their first loan disbursement. During this counseling the borrower's rights and responsibilities and loan terms and conditions are reviewed with the student. This session may be conducted online, by video, in person with the FAA/FAO, or in a group meeting.

Students with federal educational loans are required to receive counseling before they graduate or withdraw (leave school). During this counseling the borrower's rights and responsibilities and loan terms and conditions are reviewed with the student. This session may be conducted online, by video, in person with the FAA or FAO, or in a group meeting.

The free form that must be completed by students and parents applying for federal student aid.

The William D. Ford Federal Direct Loan Program offers Stafford and PLUS loans available directly from the federal government. Selected colleges and universities participate in this program.

This federal program provides part-time jobs, generally on campus, for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.

The Federal Family Education Loan Program. Stafford and PLUS loans are financed by private lenders and guaranteed by the federal government.

The total amount of interest that will be paid over the life of a loan when the loan is repaid according to the repayment schedule.

Financial assistance including scholarships, grants, work-study, and loans for education.

A letter detailing total amount of financial aid for which a student is eligible.

The difference between the Cost of Attendance (COA) at a college and the Expected Family Contribution (EFC).

Forbearance allows temporary cessation of payments or allows smaller payments for a specific length of time.

Financial aid, such as grants and scholarships, that doesn't need to be repaid.

An average of a student's grades, where the grades have been converted to a 4.0 scale (4.0 being an A; 3.0 being a B; and 2.0 being a C).

Specified period of time between the date a student graduates or drops below half-time status and the date loan repayment begins.

Financial aid awards that don't have to be repaid. Grants are available through the federal government, state agencies, and colleges.

An agreement between a lender, a guarantor, and the federal government that states if a borrower fails to repay a loan and the lender has met all servicing requirements, the guarantor will reimburse the lender between 97 and 100 percent of the principal amount of the loan based on various factors. If the guarantor fails to honor the agreement, the federal government will honor the agreement with the lender.

State agency or private non-profit organization that insures student loans for lenders and helps administer the FFELP.

The amount of money received from employment, profit, or other sources (welfare, disability, child support, Social Security, and pensions).

A student who is either married, 24 years of age or older, enrolled in a graduate or professional education program, has legal dependents other than a spouse, is an orphan or ward of the court, currently serving on active duty in the U.S. Armed Forces for purposes other than training, or is a veteran of the U.S. Armed Forces.

A statement sent to the borrower, as a provision of the FFEL Program, that lists the lender name and contact information, the principal loan amount, interest rate, and amount of any federal origination fee and federal default fee collected by the lender.

Loan specific to a college, university, or other post-secondary educational institution.

An amount, calculated as a percent of the principal loan amount, that is charged for borrowed money.

Part-time job during the academic year or the summer months in which a student receives supervised practical training in a field of interest.

Some lenders will promise the borrower that it will never change the servicer on the loan even if the loan is sold, unless the servicer is failing in its duties. If the loan is sold, the buyer must warrant to the original lender that it also will not change the original servicer of the loan (i.e., the promise not to change servicers follows the loan even if it is sold). This ensures consistent service to the borrower, whose primary contact is with the servicer once the loan is disbursed.

A tax credit given to a family for post-secondary education courses. Only one credit may be claimed per tax year. To claim this credit, the individual (or in the case of a dependent child, the parents) must file a tax credit and owe taxes for that tax year.

A type of financial aid that is available to students and their parents. Student loan programs have varying interest rates and repayment provisions. Education loans must be repaid.

Student loans can be discharged (written off) by the federal government in the event that the borrower's school closes while he/she is attending, the loan is falsely certified by a school official, the school fails to pay a refund to the lender, the borrower is a victim of identity theft, the borrower becomes totally and permanently disabled, or the borrower dies.

The smallest monthly payment you can make to maintain your account in current status.

The promissory note a student or parent borrower signs when taking out a Stafford or PLUS loan. A student borrower may obtain both subsidized and unsubsidized Stafford loans for the same enrollment period under a single Stafford Master Promissory Note.

A means of determining eligibility for certain types of financial aid using financial need as the determining factor.

A federal loan available to undergraduate and graduate students. The loan is a campus-based, low-interest loan, funded by the federal government and administered by the school. How much you can receive under the program depends on your financial need and on the availability of funds at your school. If loans are necessary and a student qualifies for a Perkins loan, this loan should be taken before any others.

Federally insured loans for graduate/professional students as well as parents of dependent students.

The date that a purchase, cash advance, fee, service charge, or payment is recorded on your charge or credit account.

These loans (non-government) are offered by banks, or other financial institutions and schools, to parents and students.

The binding legal document a student signs for the student loan. It lists rights and responsibilities, and the terms and conditions of the loan. For federal loans, the promissory note is also known as the MPN (Master Promissory Note).

This test helps prepare students for the SAT test. It is usually taken as a high school sophomore or early in the junior year.

The time during which a borrower actively pays toward an education loan.

This statement is issued to a borrower by the lender when the borrower enters repayment. It gives information about the loan, including the first payment due date, payment amount, finance charge, and interest rate.

A report, summarizing financial and other information reported on the FAFSA, sent to a student by the federal government. The student's financial aid need is indicated by the Expected Family Contribution (EFC), which is printed on the document.

Test used to measure a student's ability in math, verbal comprehension, and problem solving. The SAT is administered during the junior and senior years in high school.

Offered in many areas of study including English, mathematics, many sciences, history, and foreign languages. Some colleges require students to take one or more SAT Subject Tests when they apply for admission.

Scholarships are funds used to pay for higher education that don't have to be repaid and are based on any number of criteria, such as academics, achievement, talents, discipline, need, or cultural and ethnic groups.

An entity that purchases education loans from eligible lenders in order to increase the amount of funds available for education loans.

Registration for the military draft is required to receive federal financial aid. The requirement to register applies to males who were born on or after January 1, 1960, are at least 18 years old, are citizens or eligible non-citizens, and are not currently on active duty in the U.S. Armed Forces.

The servicer is an organization hired by a lender or secondary market to help administer the student loan program because of its complexity. Loan servicing includes disbursing loan funds, monitoring loans while borrowers are in school, and assisting borrowers during repayment of their loans.

Unique nine-digit number assigned to individuals that identifies location of birth (or registration), is necessary to contribute or receive Social Security funds for retirement, and is used by the IRS in associating individual income for the purpose of assessing taxes.

A statement given to the borrower, prior to or at the time of disbursement of your private loan, that provides information about the cost of your credit that includes the name and contact information of the lender, the annual percentage rate, finance charge, amount financed, payment amount and schedule, and total amount of repayment.

The amount of money colleges charge for classroom and other instruction, and use of some facilities such as libraries.

Government agency that administers several federal student financial aid programs, including the Federal Pell Grant, the Federal Work-Study Program, the Federal Perkins Loan, the FFELP, and the FDLP.