Glossary of Financial Aid Terms

The interest that accumulates and is payable on the unpaid principal balance of a loan.

A period of time schools use to measure a quantity of study. For example, a school's academic year may consist of a fall and spring semester during which a full-time undergraduate student must complete 24 semester hours. Academic years vary by school and even by educational program at the same school.

An award letter includes a school's offer - called a financial aid package - to help you pay to go there. Your package may include a combination of aid types: grants, scholarships, loans, work-study, and other programs. The award letter explains the type and amount of Title IV financial aid you will receive if you accept admission and register for classes at that school.

The individual responsible for repaying a loan. In borrowing a loan, the responsible individual has agreed to the loan's terms and conditions by signing the loan's Master Promissory Note(MPN) or Promissory Note.

The office that is usually responsible for the billing and collection of the school's charges. Also called Business, Student Account, or Comptroller's office.

The addition of unpaid accrued interest to the principal balance of a loan, which increases the outstanding principal amount due on the loan. Since interest accrues on the capitalized interest, it adds an additional expense to the loan.

Combining numerous federal education loans into a single loan with a new repayment schedule and interest rate.

The total cost of college, usually expressed as the amount for one academic year. The COA components are determined by federal law and include tuition and fees, on-campus room and board (or a reasonable allowance for off-campus students), and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care. COA also covers costs related to a disability and other personal expenses, including an allowance for the documented rental or purchase of a personal computer.

The failure to repay a loan according to the terms the borrower agreed to when signing the Master Promissory Note (MPN) for the loan. Default on a Federal Family of Education Loan Program (FFELP) loan occurs after 270 days of non-payment on the account.

An authorized temporary suspension of repayment, granted under certain circumstances. For subsidized Stafford loans, the federal government pays the interest during a deferment. For all other loans, the borrower is responsible for paying the interest that accrues during a deferment.

The failure to make scheduled monthly loan payments when they are due.

The transfer of loan funds from a lender to the school or borrower.

One component for determining a student's financial need for federal student aid. Using information from the FAFSA, Expected Family Contribution is a dollar amount calculated according to a formula established by the federal government. Commonly referred to as the family's “ability to pay,” schools may also use this number to calculate the student's need for school-based financial aid.

The form students must complete to qualify for federal financial aid and for most state grants, scholarships, student loans (including Stafford loans), work-study programs, and many school-based student financial aid programs. Students will need to include household financial information - such as income, taxes, and assets - to determine Expected Family Contribution.

The Federal Direct Loan Program. Eligible students and parents borrow FDLP loans, known as Direct Loans, directly from the U.S. Department of Education at participating schools.

Private lenders (banks, credit unions, savings and loan associations), provide funds for FFELP loans and the federal government guarantees them against default. The FFELP includes subsidized and unsubsidized Stafford loans and Parent PLUS, Graduate PLUS, and Consolidation loans.

The difference between the student's Cost of Attendance (COA) and the Expected Family Contribution (EFC).

A loan with a pre-established interest rate that does not change during a defined period of time. Currently, federal Stafford, Parent PLUS, and Graduate PLUS loans have interest rates that are fixed by law for the life of the loan.

An authorized temporary reduction or suspension of repayment, granted under certain circumstances. For both subsidized and unsubsidized FFELP loans, the borrower is responsible for paying the interest that accrues during the forbearance period.

A six-month period before the first payment on a subsidized or unsubsidized Stafford loan is due. The grace period begins the day after the student graduates, leaves school, or drops below half-time status and ends the day before the repayment period begins.

A postsecondary student enrolled in a program or course above the baccalaureate level - or in a professional degree program - and who has completed the equivalent of at least three years of full-time study prior to entering the program or as part of the program itself.

A FFELP loan for graduate or professional students to pay for their education.

Financial aid awards that may not have to be paid back and are generally awarded based on financial need. Grants are available through the federal government, state agencies, colleges, communities, and other organizations.

A state or private nonprofit organization that has an agreement with the U.S. Department of Education to administer a loan guarantee program under the Higher Education Act.

The charge for using a lender's money.

The bank or other institution that provides the money for FFELP loan borrowers.

A common form that serves as a legal and binding contract for borrowing Stafford, Parent PLUS, and Graduate PLUS loans - either in multiple academic years or for a single academic year. The MPN contains the loan's terms and conditions, including the borrower's responsibilities for repaying the loan.

For purposes of PLUS loan eligibility, a parent is defined as a student's biological or adoptive mother or father; or, the student's stepparent if the biological or adoptive mother or father has remarried at the time of the application. Please note that a grandparent is not included in this definition.

A FFELP loan for parents of dependent undergraduate students.

A PHEAA-administered program that provides grants to eligible Pennsylvania residents pursuing a postsecondary education.

A non-federal loan through a bank or credit union; also called an alternative or direct-to-consumer loan. A private student loan may have a variable interest rate, require a credit check, and may not provide the benefits of federal student loans.

Financial awards that usually do not have to be paid back. They are given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art, or other disciplines.

An entity that enters into a contract with a school or lender to administer any aspect of its participation in a Title IV program.

The report summarizing the results of the FAFSA, including Expected Family Contribution (EFC) and potential eligibility for federal student aid.

A federal Stafford loan on which the government pays the interest during in-school, grace, and authorized deferment periods.

A category of federal education loans established under the Higher Education Act of 1965, as amended. Title IV loans include loans made under the FFELP, FDLP, and Perkins loan program.

A postsecondary student enrolled in an undergraduate course of study that usually does not exceed four years, or a longer program that leads to a bachelor's degree.

A non need-based loan (such as unsubsidized Stafford, Parent PLUS, or Graduate PLUS loans) on which the borrower is responsible for paying the interest that accrues from the date of disbursement until the loan is paid in full.

Wages earned by students who work on or off campus to help pay for school costs.