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| Word |
Description |
| Accrued Interest |
Interest that accumulates on the unpaid principal balance of a loan. |
| Administrative Wage Garnishment |
A process by which a guarantor, under federal law, takes a portion of the wages earned from a borrower with a defaulted loan. |
| Annual Percentage Rate (APR) |
The interest maintained on a loan for a one-year period.
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| Capitalization |
The addition of unpaid interest to the principal balance of the loan. This increases the total cost of the loan. |
| Consolidation |
Combining multiple education loans into a new loan with a new payment schedule and interest rate.
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| Credit Rating |
A credit rating (credit score) is a measure of the likelihood that you pay your debt as agreed. The lower your score the less likely you are to make payments on time. Creditors use this score to determine whether you are a risk and to asses interest rates. |
| Default |
The failure of a borrower to make payments for 270 days. When you default you have violated your loan agreement, and the lender or servicer can request immediate payment in full.
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| Deferment |
A period in which you are entitled to postpone repayment of the principal balance of your student loan. The federal government pays interest that accrues during deferment on all subsidized Federal Stafford Loans.
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| Delinquency |
The failure to make payments when due as defined in the promissory note. Delinquency often leads to default.
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| Disbursement |
A financial transaction that occurs when a lender releases loan funds. |
| Economic Hardship |
Economic hardship occurs when a borrower’s monthly payments are equal to or greater than 20 percent of the total monthly income.
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| FDSLP |
Federal Direct Student Loan Program |
| FFELP |
The Federal Family Education Loan Programs formerly known as the GSL-Guaranteed Student Loan Programs.
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| Forbearance |
The approved temporary suspension of loan payments, due to a financial hardship, during which interest continues to accrue. |
| Free Application for Federal Student Aid (FAFSA) |
The application students must first complete in order to apply for virtually all forms of financial aid assistance. |
| Grace Period |
The period after a student either graduates or leaves school and before loan payments must begin.
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| Graduate Student |
A postsecondary student who possesses a bachelor's degree and is pursuing additional postsecondary education. |
| Grants |
Financial aid that does not have to be repaid; aid usually awarded to students based on financial need. |
| Guarantor |
The agency or institution that insures the loan against loss to lenders in the event of default.
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| Interest |
The dollar amount associated with borrowing money. |
| Lender |
The institution that provides the money to be borrowed through the student loan program.
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| Parent/Graduate PLUS Loan |
A Federal loan program through which parents of undergraduate students (Parent PLUS) or graduate students (Graduate PLUS) borrow funds to help pay for an education.
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| Principal Balance |
The outstanding amount of the loan, on which the lender charges interest. As the loan is repaid, a portion of each payment is used to satisfy interest that has accrued, and the remainder of the payment is used to reduce the outstanding principal balance.
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| Private Loan |
A loan that is created through a private lending institution, has a private guarantor, and is not part of the Federal Family Educational Loan Program. |
| Promissory Note |
A legally binding agreement between the borrower and the lender. The agreement includes the terms and conditions including how and when the loan must be repaid. By signing the Promissory note the borrower is agreeing to repay the loan under these terms. |
| Scholarships |
Financial awards that do not usually have to be repaid; monetary aid typically given to students who demonstrate or showpromise of high achievement in areas such as academics, athletics, music, art or other disciplines.
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| 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 students receive (after filing a FAFSA application) that notifies them of their eligibility for Federal student aid. |
| Subsidized Loan |
Loans for which the Federal Government pays the accrued interest during any approved deferment periods.
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| Title IV Loan |
A category of educational loans made, insured, and guaranteed as part of the Higher Education Act of 1965, and includedin the Federal Family Educational Loan Program (FFELP); specifically Stafford, Unsubsidized Stafford, SLS, PLUS, and Consolidation Loans. |
| Undergraduate Student |
A postsecondary student who has not yet received a bachelor's degree. |
| Unsubsidized Loan |
A non-need-based loan such as an unsubsidized Federal Stafford loan or a Federal PLUS loan. The borrower is responsible for paying the interest on these loans. |
