Accrued Interest
The interest that accumulates on the unpaid principal balance of a loan.
Annual Percentage Rate (APR)
The interest maintained on a loan for a one year period.
Cancellation
Some loan programs provide cancellation of the loan under certain circumstances, such as death or permanent disability of the borrower. Some of the Federal student loan programs have additional cancellation provisions. For example, if the student becomes a teacher in certain national shortage areas, they may be eligible for cancellation of some or all of their educational loans.
Capitalization
The addition of unpaid accrued interest applied to the principal balance of a loan which increase the total debt outstanding. Capitalizing the interest increases the monthly payment and the amount of money you will eventually have to repay. If you can afford to pay the interest as it accrues, you are better off not capitalizing it.
Consolidation
Consolidation combines several student loans into one bigger loan from a single lender. The consolidation loan is used to pay off the balances on the other loans. While the monthly payments may be less, there is usually a higher interest rate on a consolidated loan, and a longer life of the loan.
Cost of Attendance
The cost of attendance (COA) is the total amount it should cost the student to go to school. This amount includes tuition and fees, room and board, and allowances for books and supplies, transportation, and personal expenses. Loan fees, if applicable, may also be included in the COA. Child care and expenses for disabilities may also be included at the discretion of the financial aid administrator. Schools establish different standard budget amounts for students living on-campus and off-campus, married and unmarried students, and in-state and out-of-state students.
Default
A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 180 days) or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, the state, and the federal government can take legal action to recover the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged. Defaulting on a student loan can affect your credit rating, making it difficult to obtain credit cards, car loans and home mortgages.
Deferment
Deferment occurs when a borrower is allowed to postpone repaying the loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If you don't qualify for a deferment, you may be able to get a forbearance. You can't get a deferment if your loan is in default.
Delinquency
The failure to make scheduled monthly loan payments when they are due.
Disbursement
Disbursement is the release of loan funds to the school for delivery to the borrower. The payment will be made co-payable to the student and the school. Loan funds are first credited to the student's account for payment of tuition, fees, room and board, and other school charges. Any excess funds are then refunded to the student.
Enrollment Status
An indication of whether you are a full-time (at least 12 credits) or part-time (at least 6 credits) student. Generally you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.
Entrance Interviews
Students with educational loans are required to meet with a financial aid administrator before they receive their first loan disbursement and again before they graduate or otherwise leave school. During these counseling sessions, called Entrance and Exit Interviews, the Financial Aid Officer reviews the repayment terms of the loan and the repayment schedule with the student. You are fulfilling this requirement today.
Expected Family Contribution (EFC)
The dollar amount that a family is expected to pay toward a student's educational costs. This calculation is based on family earnings, assets, number of students in college and size of family.
FAFSA
The Free Application for Federal Student Aid must be completed by students in order to apply for virtually all forms of financial aid.
FFELP
The Federal Family Education Loan Programs (or Stafford Loan program), formerly known as the GSL - Guaranteed Student Loan Programs
Financial Need
The difference between the student's educational costs and the Expected Family Contribution (EFC).
Forbearance
During a forbearance the lender allows the borrower to temporarily postpone repaying the principal, but the interest charges continue to accrue, even on subsidized loans. The borrower must continue paying the interest charges during the forbearance period. Forbearances are granted at the lender's discretion, usually in cases of extreme financial hardship or other unusual circumstances when the borrower does not qualify for a deferment. You can't receive a forbearance if your loan is in default.
Garnishment
Garnishment is the practice of withholding a portion of a defaulted borrower's wages to repay his or her loan, without their consent.
Grace Period
The grace period is a short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period may also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. The grace period for a Stafford Loan is for six months.
Grant
Financial aid that does not have to be repaid is awarded to students based on financial need.
HESC
The New York State Higher Education Services Corporation acts as an intermediary between the student borrower and the bank holding the student loan. HESC mails out the promissory notes to students, and forwards them to the bank. HESC can assist students with more information regarding their Stafford Loans at their web site (www.hesc.com) or at 1/800/642-6234
Interest
Interest is the amount charged to the borrower for the privilege of using the lender's money. Interest is usually calculated as a percentage of the principal balance of the loan. 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 new federal loans use variable interest rates that are directly tied to the cost of US Treasury Bills.
Lender
The institution that provides the money to be borrowed through the student loan program
Prepayment
Paying off all or part of a loan before it is due
Principal
The principal is the amount of money borrowed or remaining unpaid on a loan. Interest is charged as a percentage of the principal amount. Insurance and origination fees will be deducted from this amount before disbursement.
Promissory Note
The legal and binding contract signed between the lender and the borrower, which states that the borrower will repay the loan as agreed upon in the terms of the contract.
Scholarship
A scholarship is an award that does not usually have to be paid back, and is usually awarded to students who demonstrate or show promise of high achievement in an area such as academics, athletics, music, art or other disciplines.
Servicer
An organization that acts on behalf of the lender to administer their student loan portfolio and is paid a fee to do so.
Student Aid Report (SAR)
The form a student receives after filing a FAFSA application. The SAR notifies the student of his eligibility for federal student aid.
Subsidized Loan
With a subsidized loan, the government pays the interest on the loan while the student is in school, during the six-month grace period, and during any deferment periods. Subsidized loans are awarded based on financial need and may not be used to finance the family contribution.
Unsubsidized Loan
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, even while the student is still in school. Students may elect not to pay the interest while they are in school by capitalizing the interest, which increases the loan amount. Unsubsidized loans are not based on financial need and may be used to finance the family contribution.
