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Terms to Know

Talking about student loans and financial aid can feel complicated. Below are definitions for some common words and phrases that you might encounter.


The act of interest or fees (if applicable) accumulating on your principle balance. NOTE: The U.S. Department of Education does not assess late or returned payment fees.

Adjusted Gross Income | AGI

The AGI can be found on a federal income tax return form (1040, 1040A, 1040EZ). This information is required when applying for programs such as IBR or ICR—it is your taxable income, which is calculated as your gross income from taxable sources minus deductions.

Aggregate Loan Limit

The maximum total outstanding loan debt you are allowed when you graduate or finish school.

Annual Percentage Rate | APR

The total annual interest cost of a loan.

Award Letter

An official document issued by your school's financial aid office listing all the financial aid awarded to you. The award letter details cost of attendance and terms and conditions for the financial aid.


The individual who applies for, receives, and is responsible for paying back a loan.

Campus-Based Aid

Financial aid programs, like Perkins Loans and Federal Work-Study, administered by the college or university. The federal government provides each university with a fixed annual allocation that's awarded by the financial aid administrator to students based on financial need.


Capitalization is the addition of unpaid interest to the outstanding principal balance of a loan. When your unpaid interest capitalizes, it increases the outstanding principal amount due on your loan. Then your interest is recalculated based on that higher principal balance, increasing the overall cost of your loan. And depending on your repayment plan, capitalization may also cause your monthly payment amount to increase.

Refer to our Interest Capitalization page for more information and examples.


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

Co-Borrower | Co-Signer

An individual who signs the loan promissory note with you and is equally responsible for repaying the debt.

Co-Borrower | Endorser

An individual who signs the loan promissory note with you and is secondarily responsible for repaying the debt if you do not.


Combining one or multiple loans reduces the monthly payment amount and/or increases the length of the repayment period. Learn more about consolidation.

Cost of Attendance | COA

The estimated total cost for a full time student to complete a full academic year at a college or university.

Credit Report

A report produced by a credit bureau and provided to a lender in order for the lender to determine your creditworthiness. The report includes a listing of your debts, including accounts past due. The credit report will also include information about bankruptcy, if applicable.

Credit Bureau

An agency that collects personal and financial information from various sources about consumers. The agency retains information about the types and amounts of credit you have obtained as well as your timeliness in making payments, as reported to the agency by the various lenders which have made loans to you.

Credit Score

A number, generally between 300 and 850, provided in a credit report and used by a lender as a predictive indicator of your likelihood to repay a loan. The credit score may be used by the lender to determine eligibility and set the terms of a loan, such as the interest rate and fees.

Current Amount Due

Generally, the minimum monthly payment you must make by your due date, not the total amount you owe.

Data Release Number | DRN

A four-digit number that appears on your Student Aid Report (SAR). You will need this number if you contact the Federal Student Aid Information Center to make corrections to your mailing address or to the schools you listed on the FAFSA ®. Your DRN allows you to release your FAFSA and SAR data to additional schools not listed on your FAFSA.


The failure of a borrower to repay a loan according to the terms of the promissory note. For federal student loans default occurs at 270 days delinquent, and has a negative effect on your credit score.


A period during which you may postpone loan payments. For certain types of loans, the federal government pays the interest that accrues during a deferment period. For unsubsidized loans, you are responsible for paying the interest that accrues during a deferment period, and any unpaid interest is added to the loan balance when the deferment ends (this is called capitalization).


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

Department of Education (Department)

The agency of the federal government that is responsible for administering the federal financial aid programs. The Department funds all Direct Loans, owns some FFELP loans, and utilizes various servicing companies, one of which is Nelnet.

Dependent Student

An undergraduate student whose parents provide over half of his or her financial support. If you are single, under 24 years of age, have no legal dependents, are not an orphan or ward of the court, and are not a veteran of or serving on active duty in the U.S. Armed Forces, you are a dependent student. Parents of a dependent student must submit parental information on the FAFSA ® for their child to be considered for financial aid.

Direct Consolidation Loan

Offered by the Department of Education, this program lets you combine one or more eligible federal student loans into one new Direct Consolidation Loan, with the Department of Education as your new lender. If you have multiple loans with multiple lenders, this option gives you the opportunity to make only one monthly payment to one servicer.


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

Due Date (Payment Due Date)

The month, day, and year your next payment is due.

Effective Date

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

Enrollment Status

Indicates whether you are enrolled full-time or part-time. Generally, you must be enrolled at least half-time to qualify for financial aid. Schools may have differing criteria for half-time and full-time enrollment.

Entrance Counseling

If you have federal education loans, you are required to receive counseling before your first loan disbursement is made. During this counseling, your rights, responsibilities, and loan terms and conditions are reviewed. This session may be conducted online, by video, in person with the FAA, or in a group meeting.

Exit Counseling

If you have federal educational loans, you are required to receive counseling before graduation or if you cease to be enrolled at least half-time. During this counseling, your rights, responsibilities, and loan terms and conditions are reviewed. This session may be conducted online, by video, in person with the FAA, or in a group meeting.

Expected Family Contribution | EFC

Amount your family is expected to contribute to your cost of education based on your family's income, net assets, savings, size, and number of children in college.

Financial Aid Administrator | FAA

A college employee involved in the administration of financial aid.


An online tool designed to help you financially plan for college and get an early estimate of your federal student aid eligibility.

Federal Direct Loan Program | FDLP

The William D. Ford Federal Direct Loan Program offers Stafford, PLUS, and Consolidation loans directly from the federal government. The lender is the Department of Education. These are often referred to as Direct Loans, and are serviced by companies like Nelnet.

Federal Family Education Loan Program | FFELP

The Federal Family Education Loan Program offered Stafford, PLUS, and Consolidation loans financed by private lenders and guaranteed by the federal government. New loans under this program ceased being made on June 30, 2010.

Federal Perkins Loan Program

The Federal Perkins Loan Program offers low-interest loans funded by the federal government and administered by the school to undergraduate and graduate students. The loan amount you can receive depends on your financial need and the availability of funds at the school.

Federal Student Aid PIN | Personal Identification Number | PIN

A number that serves as your identifier to allow access to personal information in various Department of Education systems, such as the National Student Loan Data System (NSLDS). You will use your PIN to electronically sign your online FAFSA ®, consolidation loan application, promissory note, and deferment or forbearance forms.

Federal Work-Study Program

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

Finance Charge

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

Financial Aid

Financial assistance to pay for education expenses, which can include scholarships, grants, work-study, and loans.

Financial Aid Award Letter

A letter detailing the total amount of financial aid for which you are eligible.

Financial Aid Package

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

Financial Need | Eligibility

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


Forbearance allows you to temporarily postpone making payments, or to make lower payments, on a loan for a specific length of time.

Free Application for Federal Student Aid | FAFSA

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

General Education Development Certificate | GED

Certificate you receive if you pass the approved high school equivalency test. If you do not have a high school diploma, but have a GED, you can qualify for federal student aid.

Gift Aid

Financial aid, such as grants and scholarships, that does not need to be repaid.

Grace Period

Specified period of time, usually six months, between the date you graduate or drop below half-time status and the date loan repayment begins. You do not have to make payments during this time, but you can to get started in order to pay less interest.

Grade Point Average | GPA

An average of your grades, where the grades have been converted to a numerical scale, such as 4.0 being an A, 3.0 being a B, 2.0 being a C, 1.0 being a D, and 0 being an F.

Graduate Student

A student who has obtained a bachelor's degree and is seeking an advanced degree.


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

Gross Income

Your income from all sources prior to deductions for taxes and other elections like 401k contributions.


An agreement between a FFELP lender and a guarantor that states the guarantor will reimburse the lender for some portion of a loan if you fail to repay a loan and the lender has met all servicing requirements.

Guarantor | Guaranty Agency

State agency or private non-profit organization that administers the FFEL Program and guarantees student loans for lenders made under this program on behalf of the federal government.

Half-Time Enrollment

An academic workload, as determined by the school, that includes at least half of the academic workload required by federal regulations for full-time enrollment in a program of study. You must attend school at least half-time to be eligible to receive federal student loans. The number of classes you must take to be considered half-time is determined by your school.


Your status when enrolled on at least a half-time basis.


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

Income-Based Repayment | IBR

Monthly payments are based on your income and family size, rather than the amount of the loan. Any debt remaining after 25 years of qualifying payments under IBR is forgiven (FFELP and Direct loans).

Income-Contingent Repayment | ICR

Monthly payments are based on your income, family size, and total amount of Direct loans. Any debt remaining after 25 years of qualifying payments under ICR is forgiven (Direct loans only).

Independent Student

If you are married, 24 years of age or older, enrolled in a graduate or professional education program, have legal dependents other than a spouse, are an orphan or ward of the court, currently serve active duty in the U.S. Armed Forces for purposes other than training, or are a veteran of the U.S. Armed Forces, you are an independent student.

Institutional Loan

Loans made by a school to its students. The school is the lender, and the funds must be repaid to the school.


An amount, calculated as a percentage of the principal loan amount, that is charged for borrowed money. Learn more about interest.

Interest Rate

The rate at which interest is calculated on your loan(s).


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


A bank, agency, or school that loans money to a borrower. The Department of Education is also a lender.

Lifetime Learning Tax Credit

A federal income tax credit that can be claimed for qualifying tuition and education expenses paid by you during the tax year. The credit is equal to 20% of your out-of-pocket expenses for qualifying tuition and education expenses of all eligible family members, up to a maximum of $10,000 in expenses. Only one credit may be claimed per tax year.

Loan Discharge

Federal student loans can be discharged (written off) in the event that your school closes while you are attending, the loan is falsely certified by a school official, the school fails to pay a refund to you, you are a victim of identity theft, you become totally and permanently disabled, or you die.

Loan Fee

A fee you pay. It is deducted proportionately from each loan disbursement.

Loan Servicer | Servicer

An organization that administers and collects education loan payments on behalf of the lender.

Master Promissory Note | MPN

The promissory note a student or parent borrower signs when taking out a Stafford or PLUS loan. You may obtain multiple loans under a single Master Promissory Note.


A means of determining eligibility for certain types of financial aid using merit, such as talents or accomplishments, as the determining factor.

National Student Loan Data System | NSLDS

A centralized database that stores information on all federal loans and grants. NSLDS also contains borrowers' school enrollment information.


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

Origination Fee

Fee payable by you and deducted from the principal of a loan prior to disbursement. For federal loans, the origination fee is paid to the federal government to offset the cost of your interest subsidy. For private loan programs, the origination fee is generally paid to the lender to cover the cost of administering and insuring the program.

Parent Borrower

Parents who have at least one Federal PLUS Loan to finance their dependent child's education.

Partial Financial Hardship

A calculation using the difference between your adjusted gross income (AGI) and the poverty guideline for your family size and state of residence. The result determines whether you are eligible for an IBR payment plan.

Pay As You Earn Repayment

Monthly payments are based on your income, family size, and total federal student loan debt. Any debt remaining after 20 years of qualifying payments under the Pay As You Earn Repayment Plan is forgiven (Direct Loans only).

Payment Schedule

Available on, this document lists basic loan information such as payment amount, disbursement dates, interest rates, and estimated interest charges.

Pell Grant Program

A federal program that provides need-based grants to low-income students in order to provide access to higher education. Grant amounts are dependent on your Expected Family Contribution (EFC), the Cost of Attendance (COA) as determined by the school, your enrollment status (full-time or part-time), and whether you attend for a full academic year or less.


FFELP and Direct loans available to graduate/professional students as well as parents of dependent students to pay education expenses. In the case of Parent PLUS loans, the parent is responsible for the debt, not the student.

Posting Date

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

Prepayment | Paid Ahead

If you receive a statement for $0 due, it may mean you have paid extra in the past that fully covered this month’s payment amount, or your current repayment plan requires no payment at this time. You can always pay more without penalty, which will reduce your total cost of borrowing and save you money in the long run. Learn more about how your due date advances.

Private Loan

Loans offered by banks, credit unions, state agencies, other financial institutions, and schools to parents and students to pay education expenses. Private loans are based on credit, and not guaranteed by the federal government.

Promissory Note

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


A person you list on a loan promissory note as someone who knows and can provide information about you. References are not co-borrowers and are not responsible for repaying the loan.


The total amount of funds returned to the loan program as unused for your education expenses.

Regular Monthly Payment

The smallest monthly payment amount that can be made in order for a loan account to remain in a current repayment status.


The process of bringing a loan out of default and removing the default notation on a borrower's credit report.


The period of time during which you are required to make payments on a loan. The repayment period can be lengthened if you make lower payments or postpone payments. The repayment period can be shortened if you make additional payments.

Repayment Incentive

A benefit that a lender offers borrowers to encourage them to repay their loans on time. For example, under a repayment incentive program, the interest rate charged on borrowers' loans might be reduced if they make automatic monthly payments, or the principal balance on the loan might be reduced after making a certain number of on-time consecutive payments.

Repayment Plan

A schedule agreed upon by both a borrower and a lender regarding repayment of a loan. Changing repayment plans is a good way to manage your loan debt when your financial circumstances change to be less favorable. For example, you can usually lower your monthly payment by changing to another repayment plan, if eligible, that has a longer term in which to repay the loan. There are no penalties for changing repayment plans.


Financial aid awards that do not have to be repaid. Scholarships are typically reserved for students with special qualifications, such as academic, athletic, or artistic talent or who are part of a cultural, ethnic, or geographic group.

Selective Service Registration

Registration with the federal agency that administers the military draft, which 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 United States citizens or eligible non-citizens, and are not currently on active duty in the U.S. Armed Forces.


An organization, like Nelnet, hired by a lender or the Department of Education to administer student loans. Loan servicing includes disbursing loan funds, monitoring your enrollment status, collecting payments, and assisting you during repayment of your loans.

Social Security Number | SSN

Unique nine-digit number assigned to you by the Social Security Administration. The SSN is used as an identifier for students and parents seeking any type of federal financial aid.

Stafford Loans

FFELP and Direct loans available to students to pay education expenses. The Department of Education pays the interest that accrues during in-school, grace, and deferment periods on subsidized Stafford loans. You are responsible for the interest that accrues during any period on unsubsidized Stafford loans.

Student Aid Report | SAR

A report sent to you by the federal government, which summarizes financial and other information you reported on the Free Application for Federal Student Aid (FAFSA ®). The report includes the Expected Family Contribution (EFC).

Student Loan

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


Refers to the interest that the borrower is not responsible for paying on their student loan. While you are in school, the federal government pays the accrued interest on subsidized loans. Subsidized loans are awarded based on financial need.


A list of all the courses that you have taken at a particular high school or college with the grades that you earned in each course. Transcripts are usually required for college admission.

Total Amount Repaid

The total amount you are expected to pay over the life of the loan (the full repayment term), including principal and interest.

Truth in Lending Disclosure

A statement provided to you prior to or at the time of disbursement of a private loan that lists the lender name and contact information, amount financed, annual percentage rate (APR), finance charge, payment amount and schedule, and total repayment amount.


The amount charged by colleges for classroom and other instruction.

Undergraduate Student

A degree-seeking student at a college or university who has not earned a bachelor's degree.


Interest on unsubsidized loans will accrue interest from the time the loan is disbursed to the school. You have the option to pay the interest as it accrues.

For Nelnet account numbers beginning with “E”: If you don't pay on the interest while you're in school (and have not been in a repayment status [when payments are due] before), payments made when you enter a repayment status will be applied to any unpaid interest and then to the outstanding principal balance.

For Nelnet account numbers beginning with “D” or “J”: If you don't pay on the interest while you're in school (regardless of whether you’ve been in a repayment status before), it's added to your principal balance (capitalized) when you graduate or drop below half-time status. For more information about interest capitalization, refer to our Interest Capitalization page.

Variable Interest

The rate of interest charged on a loan. The rate changes annually and fluctuates with a stated index.


A process used by schools to ensure your information reported on the Free Application for Federal Student Aid (FAFSA ®) is accurate, such as requesting a copy of your or your parents' tax returns.


The federal form that lists an employee's wages and taxes withheld. The IRS requires employers to issue a W-2 for each employee generally by January 31.

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