College Finance Glossary: Students & Parents

Below you’ll find definitions on all things student finance related. And there are a lot of them! To help you find what you need, use the following alphabet to jump to the correct section.

Notice that some are red? That’s a good thing; it means there are no terms in that section that you need to know.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A


Accrued Interest – The amount of interest earned based on the remaining balance of a loan. This is different from the Interest Rate, which is a percentage (see below).

Accreditation – Refers to the process or status of academic validation, in which colleges and universities go through an evaluation by peer review members. The review board members typically include faculty from other institutions.

Additional Eligibility – Additional requirements and documentation used to process a student’s financial aid request.

Adjusted Gross Income (AGI) – Your household’s wages, salaries, interest, and other forms of income, after qualified deductions have been applied on a federal income tax return.

Adverse Credit History – Any negative items, such as a default or excessive debt, on a parent or student’s credit report. These serve as a signal that the borrower is unreliable, and may impact qualification for some types of financial aid.

Annual Loan Limit – The total amount of money a student can borrow throughout the course of a single academic year.

Annual Percentage Rate (APR) – The combined interest and associated fees applied each year to a student loan or student’s credit card, expressed as a percentage; the price you pay for borrowing money.

Award Year – A school term for which financial aid is used to help fund the student’s education. Typically, the award year process is a 12-month period that begins on July 1 and ends on June 30 of the following year.

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B


Borrower – A person who accepts a loan from a bank or student lending organization, under an agreement to pay it back later, typically with interest or other fees attached to it.

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C


Cancellation – The act of the loan provider cancelling a student’s loan debt. In other words, the student is no longer expected to pay the money back that was borrowed. (Also see discharge)

Capitalization – When unpaid interest is incorporated into a student’s total amount; also called compounding, as future interest will be calculated on this new sum.

Chafee Education and Training Voucher – A $5,000 needs-based scholarship awarded to qualifying students who have been in the foster care system. More details on qualifications and limitations are available on the Foster Care to Success program website.

Co-borrower or Cosigner – A person, often a parent or someone with superior credit to the borrower, who agrees to take on the loan responsibility if the student fails to make their payments on time.

Collection Cost – The cost incurred to collect debt that is owed from either the parents or student. Typically added as a fee on top of the outstanding loan balance.

Cost of Attendance (COA) – This is the total amount it will cost you to go to school, usually listed as a yearly figure by the institution. The COA includes fixed items like a student’s tuition and fees, as well as overall costs of living associated with a given school.

Credit Score – A number that’s used by lenders to determine how much money you’re qualified for (creditworthiness) , and how much you’re able to pay back.

Creditworthy – Financially reliable. Whether or not a student and/or cosigner is responsible enough to take on loans, and to what extent.

Consolidation – A process used to merge multiple student loans (and the associated payments) into one big debt, payable to a single lender or institution. Sometimes known as refinancing, if the new consolidated loan carries a different, typically lower, interest rate.

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D


Default – The failure to repay a loan according to the terms agreed upon in the contract. In most cases, students who haven’t made a payment in 270 days (nine months) will automatically default. Defaults show up as negative credit history items on a borrower’s credit score.

Deferred Loan – When a student is allowed to delay payments on a loan without penalty, or accrual of additional interest. Also called deferment.

Delinquency – This term commonly refers to a borrower or loan which is overdue on a scheduled payment.

Dependent Student – Students who rely on financial help from their parent or guardian to qualify for financial aid support.

Direct Loan – A federal student loan program that allows eligible students and parents to borrow money directly from the U.S. Department of Education for participating schools.

Discharge – Discharge refers to the process of the loan provider canceling or forgiving the borrower of all debts.

Disclosure Statement – A statement that simply shows the terms and conditions of a student loan.

Disbursement – The process through which financial aid, grants, and/or scholarships are awarded out to the student’s account to help them enroll in classes.

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E


Educational Loans – These are loans that are borrowed by the student to help pay for their education. More commonly called student loans.

Electronic Deposit – Funds that are deposited directly into a student’s bank account electronically rather than checks being mailed out to a physical address.

Eligible Noncitizen – Students are generally considered an eligible noncitizen only if: he/she is a U.S. permanent resident, with a Permanent Resident Card (Alien Registration Receipt Card) or: has a Conditional permanent resident.

Endorser – An endorser is someone who does not have an adverse credit history and still agrees to repay the loan if the borrower for some reason does not repay. Similar to co-borrower/cosigner, but sometimes with different rules for liability.

Enrollment Status – Typically falls under one of three categories: full-time, half-time, or less than half-time. The enrollment can also affect a student’s financial aid. For instance, if a student is considered half-time, they may only receive half of their aid.

Estimated Family Contribution (EFC) – The exact amount that parents and students are expected to contribute toward the student’s college expenses.

Exit Counseling – Provides important federal loan information to prepare both the student and their parents for a repayment plan. Often required as part of a student loan agreement.

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F


Family Educational Rights and Privacy Act (FERPA) – A federal law that was enacted to protect the privacy of a student’s educational records. This includes personal financial aid information as well. Under this law, parents aren’t allowed to contact universities on their child’s behalf, even if they are paying academic expenses.

Federal Methodology (FM) – The formula used by the federal government to determine a student’s expected family contribution (EFC) for federal grants.

Federal Pell Grant – A federal grant that’s given to undergraduate students who are in need of financial help.

Federal Perkins Loan – A student loan, made by the recipient’s school, for undergraduate and graduate school expenses.

Federal School Code – An ID number that the U.S. Department of Education assigns to each university or career school that actively participates in Federal Student Aid programs. In order to send any information to a school, you must have the school’s Federal School Code on your application.

Federally Insured – The amount that meets the requirements to be covered or insured by the Federal Deposit Insurance Corporation (FDIC).

FFEL Program – Under this plan, private lenders are allowed to provide loans to students who qualify. This may include Subsidized Federal Loans, Parent Plus Loans, and Unsubsidized Stafford Loans.

Financial Hold – A financial hold on a student’s academic account indicates that there is an overdue balance. This means that the student won’t be able to register for classes, order transcripts, and won’t be able to receive their degree if they’ve graduated.

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G


Grants – A form of financial aid that does not need to repaid. The funds are usually awarded on the basis of financial need.

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I


Independent Student – Refers to students who meet at least one of the following criteria: You are over the age of 24; You’re working on a degree beyond a bachelor’s degree; You are married; You have a child, or other legal dependent, who receives more than half of their financial support from you; You are a Veteran or an Active Duty member of the U.S. Armed Forces; You were in the foster care system after the age of 13; You are or have been a legally emancipated minor, or if someone other than a parent or stepparent had legal guardianship of you as a minor; You are or were legally determined to be a homeless or unaccompanied youth at risk for homelessness.

Income Based Repayment – The most widely available income-driven repayment plan, this is a method by which federal student loan borrowers pay a percentage of their annual income, as opposed to a static minimum based only on their loan amount.

Income Tax Refund Offset – A debt collection tool that allows the government to withhold a parent cosigner’s or student’s income tax refund to apply toward repaying student loans.

International Taxation – Every international student is required to file a tax return as a condition of their visa. This is used to study or determine the tax laws in their native country.

Interest – A charge added to the balance of a loan for any parent or student borrowing money.

Interest Rate – The percentage at which interest is charged on a loan. A fixed interest rate, for example, does not change; a variable interest rate, on the other hand, is subjected to change overtime.

I-9 (Employment Eligibility Verification Form) – Used as a way to verify the identity and employment authorization of a student seeking employment within the United States. This form has to be completed by both the employer and the student in order for them to be hired.

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L


Late Charge – A fee assessed to students for failure to pay the minimum amount due on their student account by the deadline.

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M


Military Scholarships – A military scholarship is only offered to military personnel who have served in either the U.S. Army, Navy, Marines, Coast Guard or Air Force. These scholarships often cover tuition, fees, books and supplies, and pay a subsistence allowance.

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N


Net Price – The actual price of attendance that must be paid in a given year; calculated by taking the fees and tuition of a given school and subtracting any grants or scholarships awarded to the student at that time.

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P


Prepayment – The payment of a debt prior to it being due.

Principle – The sum of money borrowed by a student, not including any interest or fees that may be applied over the life of the loans.

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R


RehabilitationRepairing the credit score of a delinquent borrower by resuming payments on a loan formerly in default.

Repayment Schedule – Under this report, students are given anywhere from 10-20 years to repay the total amount of their loan. Usually, the loan provider (the company they borrowed the money from) determines the monthly billing.

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S


Satisfactory Academic Progress – A standard of student performance required in order to maintain eligibility of student aid. Each school is able to set its own standards, which generally include things like grades, attendance, progress toward graduation/degree completion, etc. Schools will also set standard for how often they measure academic progress, and what options are available for students who need remediation in order to re-qualify.

Scholarships – A type of grant payment made to support a student’s education. Scholarships are usually awarded on the basis of academic or athletic achievements.

Student Aid Report (SAR) – A summary of the information submitted by the student to the university they’re applying for. The full report is typically sent via e-mail a few days after they’ve completed their FAFSA. If there are no errors, the SAR will be used to determine how much money the student qualifies for. If the document does, however, contain errors, the school will then send the document back to the student for revision.

Subsidized Loans – Designed for undergraduate students, these help students with financial needs, which can be determined based on the overall cost of the institution. Subsidized loans do not accrue interest while students are in school or during their deferment grace period. (See Unsubsidized Loans)

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T


Tuition Loan – Generally speaking, there are two types of institutional loans: emergency cash loans (which have a maximum of $500) and tuition loans, which are based on the amount of tuition and fees for a given school. These loans are not intended for paying housing or other non-tuition expenses.

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U


Unsubsidized Loans – Loans for which interest begins accruing as soon as the loan is taken out, even while the student is in school or potentially looking for work.

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V


Verification – The process by which the federal government or a school ensures the accuracy of the information on a student’s FAFSA. Roughly one third of all FAFSAs are selected (usually at random) for verification by the government or a given school’s office of financial aid, and are required to submit additional documentation proving the information on their FAFSAs is all correct.
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