Glossary Terms

Aid Package

The total amount of financial aid that a student receives from various sources, including grants, scholarships, work-study, and loans. This package is typically determined by a student's financial needs and academic merit.

The process of paying off a debt over time, usually through regular payments that include both principal and interest. Amortization schedules show how much of each payment goes toward interest and how much goes toward reducing the principal balance.

Annual Percentage Rate (APR)

The annual interest rate charged on a loan, including any fees or other costs associated with borrowing. APR is important to consider when comparing different loan options, as it provides a standard metric to judge competing loans on.

A program of college-level courses and exams offered in high school that can lead to college credit or advanced standing. AP courses cover a range of subjects and are intended to provide high-achieving students with a more rigorous and challenging curriculum.

Anything that a person or organization owns that has monetary value, including savings accounts, investments, and property. Assets are typically divided into two categories: liquid assets (such as cash and public stocks) and non-liquid assets (such as real estate and artwork).

Community colleges, and some four-year colleges and universities, offer this two-year degree. Associate degrees may be designed for immediate entry into the workforce or for transfer to a four-year institution.

Award Letter

A letter sent by a college or university to a student detailing the financial aid they are eligible to receive for the academic year. This letter may include information on grants, scholarships, work-study, and loans, as well as any additional requirements for receiving the aid.

The process of moving debt from one credit card or loan account to another, typically to obtain a lower interest rate or better terms. Balance transfers may involve fees and should be carefully considered before being pursued.

Bankruptcy

A legal process in which an individual or organization declares that they are unable to repay their debts. Bankruptcy may result in the discharge of certain debts but can also have serious long-term consequences for credit and financial stability.

An individual or organization that receives money or other assets from a lender with the expectation of repaying the loan with interest. Borrowers may use loans for a variety of purposes, including buying a home, financing education, or starting a business.

An individual or firm that acts as an intermediary between buyers and sellers of financial assets, such as stocks, bonds, or real estate. Brokers typically earn a commission on transactions they facilitate.

A plan for managing income and expenses over a specific period of time. Budgeting is important for achieving financial goals and avoiding overspending.

A type of short-term loan that can be obtained using a credit card or other line of credit. Cash advances typically come with high interest rates and fees.

A type of savings account that typically offers a higher interest rate than a standard savings account in exchange for a fixed term and limited access to the funds. Banks or credit unions may issue CDs.

A co-signer is a person who signs a loan or credit application with another person, agreeing to be responsible for the debt if the primary borrower is unable to repay it. Co-signers are often required for loans or credit cards when the primary borrower has a limited credit history or poor credit score.

Co-signer releases

A co-signer release is a process by which a co-signer is released from their responsibility for a loan or credit account. This typically requires the primary borrower to demonstrate a history of responsible payments and meet certain other requirements, such as having a strong credit score.

Collateral

An asset that a borrower pledges as security for a loan, such as a home or a car. If the borrower defaults on the loan, the lender may seize the collateral to recover their losses.

A measure of the average annual rate of return on an investment over a specified period of time, taking into account the effect of compounding. CAGR is often used to compare the performance of different investments.

Interest that is calculated on the initial principal of a loan or investment, as well as any accumulated interest. Compound interest can significantly increase the total amount owed or earned over time.

The cost of attendance is the total cost of attending a college or university for one academic year. This includes tuition and fees, room and board, textbooks and supplies, and other expenses. The cost of attendance is used to calculate a student's financial need and determines the maximum amount of financial aid they may be eligible to receive.

The ability to borrow money or access goods and services with the expectation of paying for them later. Lenders or merchants typically extend credit and may involve interest or fees.

An organization that collects and maintains information on consumers' credit history and provides this information to lenders and other authorized parties. The three main credit bureaus in the United States are Equifax, Experian, and TransUnion.

Credit Report

A detailed record of a person's credit history, including their payment history, current debts, and other financial obligations. Credit reports are used by lenders and other authorized parties to assess a person's creditworthiness.

Credit Score

A numerical representation of a person's creditworthiness based on their credit history and other factors. Lenders use credit scores to determine the likelihood that a borrower will repay a loan on time.

Default

Failure to repay a loan according to the agreed-upon terms, resulting in penalties and negative impacts on the borrower's credit score.

Deferment

A temporary period during which a borrower is allowed to postpone making payments on their student loan, typically due to financial hardship or other qualifying circumstances.

Delinquency

A loan status indicating that a borrower has failed to make payments on time, leading to the risk of default if the situation is not resolved.

A federal loan program that allows borrowers to combine multiple federal student loans into one loan, simplifying repayment and potentially lowering monthly payments.

Direct Loan

A federal student loan program that includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Direct PLUS Loan

A federal loan available to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Borrowers must pass a credit check and can use the loan to cover tuition, fees, and other education-related expenses.

Direct Subsidized Loan

A federal student loan available to undergraduate students with demonstrated financial need, where the government pays the interest while the student is in school or during deferment periods.

Direct Unsubsidized Loan

A federal student loan available to undergraduate, graduate, and professional students without the requirement to demonstrate financial need. Borrowers are responsible for all accrued interest.

Disbursement

The process by which loan funds are released to the borrower, usually sent directly to the school to cover tuition and fees, with any remaining funds given to the borrower for other education-related expenses.

Discharge

The cancellation of a borrower's obligation to repay all or a portion of a student loan due to specific circumstances, such as permanent disability, school closure, or certain types of public service.

Discharge Due to Disability or Death

The cancellation of a borrower's obligation to repay a student loan in the event of the borrower's total and permanent disability or death. Documentation, such as a certified death certificate or proof of disability from a qualified physician, is required to process the discharge.

Disclosure Statement

A document provided by the lender to the borrower detailing the terms and conditions of a loan, including interest rates, fees, and other important information.

The amount of a borrower's income that remains after subtracting taxes and essential living expenses, which is often used to calculate income-driven repayment plan amounts for federal student loans.

An Earnings Withholding Order is a legal order that requires an employer to withhold a portion of an employee's wages in order to repay a debt, such as unpaid student loans. This is a common method used by the government or private lenders to collect on defaulted student loans. While federal lenders do not need a court judgment to impose an Earnings Withholding Order, private lenders do.

Economic Hardship Deferment

Economic Hardship Deferment is a temporary postponement of federal student loan payments granted to borrowers experiencing financial difficulty. To qualify for this deferment, borrowers must meet specific eligibility criteria, such as working full-time with an income below 150% of the poverty guideline or receiving public assistance.

Education Tax Credits

Education Tax Credits are financial incentives provided by the U.S. government to help offset the costs of higher education for eligible taxpayers. The two primary education tax credits are the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), both of which can be claimed on a taxpayer's federal income tax return.

Electronic Funds Transfer (EFT) is a digital method for transferring money between bank accounts, often used for making student loan payments. EFT payments are generally faster and more secure than traditional methods like checks, and they may also qualify borrowers for interest rate reductions on certain loans.

Eligible Educational Institution

An Eligible Educational Institution is a school that has been approved by the U.S. Department of Education to participate in federal student aid programs. These institutions typically include accredited public and private colleges, universities, and vocational schools that meet specific regulatory requirements.

Entrance Counseling

Entrance Counseling is a mandatory information session for first-time borrowers of federal student loans, such as Direct Subsidized and Unsubsidized Loans. The session is designed to educate borrowers about the terms and conditions of their loans, repayment options, and the importance of responsible borrowing.

Exit Counseling

Exit Counseling is a required information session for borrowers who are graduating, dropping below half-time enrollment, or otherwise leaving school. This session provides important information about loan repayment, deferment, forbearance, and loan consolidation options, as well as borrower rights and responsibilities.

Expected Family Contribution (EFC)

Expected Family Contribution (EFC) is a financial index number calculated by the Free Application for Federal Student Aid (FAFSA) to determine a student's eligibility for need-based federal financial aid. The EFC considers factors such as family income, assets, and the number of family members attending college to estimate the amount a family can contribute toward educational expenses.

Extended Repayment Plan

The Extended Repayment Plan is a student loan repayment option for borrowers with more than $30,000 in outstanding Direct Loans or Federal Family Education Loan (FFEL) Program loans. This plan allows borrowers to extend their repayment term up to 25 years, resulting in lower monthly payments but potentially higher overall interest costs.

Extraordinary Circumstances

Extraordinary Circumstances refer to uncommon or exceptional situations that may impact a borrower's ability to repay student loans. These may include events such as natural disasters, medical emergencies, or other unforeseen hardships. In some cases, borrowers experiencing extraordinary circumstances may qualify for loan deferment, forbearance, or other forms of relief.

FAFSA (Free Application for Federal Student Aid)

FAFSA is the primary application form used to determine eligibility for federal financial aid programs, including grants, loans, and work-study opportunities. The form is completed annually by current and prospective college students in the United States and requires information about the student's and their family's financial situation.

Federal Family Education Loan (FFEL) Program

The Federal Family Education Loan (FFEL) Program was a federal student loan program that provided loans to students and parents through private lenders, which were then guaranteed by the federal government. The program was discontinued in 2010, and no new FFEL loans have been issued since then. Existing FFEL loans remain in repayment, and borrowers can still consolidate these loans into a Direct Consolidation Loan.

Federal Pell Grant

The Federal Pell Grant is a need-based grant program that provides financial assistance to eligible undergraduate students in the United States. Unlike loans, Pell Grants do not need to be repaid, making them a valuable source of financial aid for students with demonstrated financial need.

Federal Perkins Loan

The Federal Perkins Loan was a low-interest, need-based loan program for undergraduate and graduate students in the United States. The program was discontinued in 2017, and no new Perkins Loans have been issued since then. Existing Perkins Loans remain in repayment, and borrowers can still consolidate these loans into a Direct Consolidation Loan.

Federal Work-Study Program

The Federal Work-Study Program is a federally-funded financial aid program that provides part-time employment opportunities for eligible undergraduate and graduate students. Work-study positions can be on-campus or off-campus and offer flexible hours to accommodate a student's academic schedule. The earnings from work-study positions are intended to help cover educational expenses.

Financial Aid Package

A Financial Aid Package is an offer of financial assistance from a college or university that combines various forms of financial aid, such as grants, scholarships, loans, and work-study opportunities. The package is based on a student's financial need and eligibility for different types of aid, and is typically presented in the form of an award letter.

Financial Aid Probation

Financial Aid Probation is a status assigned to students who fail to meet the satisfactory academic progress (SAP) requirements for their financial aid. During the probationary period, students are given a specified timeframe to improve their academic standing and regain eligibility for financial aid.

Financial Need

Financial Need is the difference between the cost of attendance at a college or university and the expected family contribution (EFC), as determined by the FAFSA. This calculation is used to determine a student's eligibility for need-based financial aid programs, such as grants, subsidized loans, and work-study opportunities.

Fixed Interest Rate

A Fixed Interest Rate is an interest rate that remains constant over the life of a loan, such as a student loan or credit card. This means that the borrower's monthly payments and overall interest costs will not change during the repayment period, providing predictability and stability for budgeting purposes.

Form I-9

Form I-9, Employment Eligibility Verification, is a document required by the United States Citizenship and Immigration Services (USCIS) for verifying the identity and employment authorization of individuals hired for employment in the United States. While not directly related to college finance, Form I-9 may be relevant for college students who seek part-time or full-time employment, internships, or work-study positions while attending school. Both the employer and the employee must complete the form, with the employee providing documentation that establishes their identity and employment authorization.

G.I. Bill

The G.I. Bill is a collection of educational benefits available to U.S. military veterans and their eligible dependents. These benefits cover a range of educational expenses, including tuition, fees, housing, and supplies, and are designed to help veterans pursue higher education or job training programs after completing their military service.

Good Standing

Good Standing is a term used to describe a student's satisfactory academic and financial status at a college or university. To maintain good standing, students must meet certain academic performance standards, such as maintaining a minimum grade point average (GPA), and fulfill their financial obligations, such as timely payments on student loans.

Grace Period

A Grace Period is a set period of time after a student graduates, leaves school, or drops below half-time enrollment, during which they are not required to make payments on certain student loans, such as Direct Subsidized and Unsubsidized Loans. The grace period typically lasts for six months and is intended to give borrowers time to find employment and adjust to their new financial situation before beginning loan repayment.

Graduated Repayment Plan

The Graduated Repayment Plan is a student loan repayment option that starts with lower monthly payments that gradually increase over time, typically every two years. This plan is designed for borrowers who expect their income to increase over the course of the repayment period, and can be applied to Direct Loans and Federal Family Education Loan (FFEL) Program loans.

Grant

A Grant is a form of financial aid that does not need to be repaid and is usually awarded based on financial need, academic achievement, or other specific criteria. Grants can come from various sources, including federal and state governments, colleges and universities, and private organizations.

Gross Income

Gross Income is the total income earned by an individual before taxes and other deductions are taken into account. In the context of college finance, gross income is used to calculate adjusted gross income (AGI), which factors in certain deductions. AGI is used to determine a student's eligibility for financial aid and to calculate the expected family contribution (EFC) on the Free Application for Federal Student Aid (FAFSA).

Guaranteed Student Loan

A Guaranteed Student Loan refers to a student loan that is backed or insured by the federal government, such as loans issued under the Federal Family Education Loan (FFEL) Program. These loans are guaranteed by guaranty agencies and ultimately by the U.S. Department of Education, which means that if a borrower defaults on the loan, the government will reimburse the lender for the unpaid balance.

Guarantor

A Guarantor is an individual or entity that agrees to be responsible for another person's debt or loan obligations in the event the borrower fails to meet their repayment obligations. In the context of student loans, a guarantor can be a parent or other creditworthy individual who co-signs a loan, or it can refer to a state or nonprofit agency that guarantees Federal Family Education Loan (FFEL) Program loans.

Guaranty Agency

A Guaranty Agency is a state or nonprofit organization that administers the Federal Family Education Loan (FFEL) Program on behalf of the U.S. Department of Education. These agencies oversee the issuance of FFEL loans, ensure compliance with federal regulations, and are responsible for managing loan defaults and collections.

Income Share Agreement (ISA)

An Income Share Agreement (ISA) is an alternative financing option for college students, in which a student agrees to pay a percentage of their future income for a set period of time in exchange for funding their education. ISAs do not accrue interest like traditional loans and are typically designed to provide more flexible repayment terms based on a borrower's income. The specific terms, such as the repayment percentage and duration, vary by ISA provider and individual agreements.

Income-Based Repayment (IBR) Plan

The Income-Based Repayment (IBR) Plan is a student loan repayment option that calculates monthly payments based on a borrower's income and family size, rather than the amount of their loan. Under this plan, eligible borrowers can have their payments capped at a percentage of their discretionary income, which can make repayment more manageable for those with lower incomes or high loan balances.

Income-Contingent Repayment (ICR) Plan

The Income-Contingent Repayment (ICR) Plan is a student loan repayment option that sets monthly payments based on a borrower's adjusted gross income, family size, and the total amount of their eligible loans. This repayment plan is available for Direct Loans, including Direct Consolidation Loans, and may be a good option for borrowers with lower incomes who are seeking more affordable monthly payments.

Income-Driven Repayment (IDR) Plan

Income-Driven Repayment (IDR) Plans are a group of federal student loan repayment options that base monthly payments on a borrower's income and family size. These plans include the Income-Based Repayment (IBR) Plan, the Pay As You Earn (PAYE) Plan, the Saving on A Valuable Education (SAVE) Plan, and the Income-Contingent Repayment (ICR) Plan. IDR plans can provide more affordable payments for borrowers with high loan balances or lower incomes.

Independent Student

An Independent Student is a college student who meets specific criteria for financial aid purposes and is not required to provide parental information on the Free Application for Federal Student Aid (FAFSA). Factors that can qualify a student as independent include being at least 24 years old, being married, having dependents, being a veteran or active-duty military member, or being an orphan or ward of the court.

Inflation

Inflation is the general increase in the cost of goods and services over time, which can reduce the purchasing power of money. In the context of college finance, inflation can affect the cost of tuition, fees, and other educational expenses, as well as the real value of student loan debt and repayment amounts.

Institutional Financial Aid

Institutional Financial Aid refers to financial assistance provided by colleges and universities to help students cover the cost of attendance. This type of aid can include scholarships, grants, loans, and work-study opportunities, and is typically awarded based on factors such as financial need, academic merit, athletic ability, or other specific criteria.

Interest

Interest is the cost of borrowing money, typically expressed as a percentage of the principal loan amount. For student loans, interest accrues on the outstanding balance over time and can be either fixed or variable, depending on the terms of the loan. Borrowers are responsible for repaying both the principal and any accrued interest on their loans.

Interest Capitalization

Interest Capitalization is the process by which unpaid interest on a student loan is added to the principal balance, effectively increasing the total amount owed. This can occur at specific points during the life of the loan, such as when a borrower enters repayment or after a period of deferment or forbearance. Capitalized interest can result in higher monthly payments and increased overall interest costs.

Interest Rate

The Interest Rate is the percentage of a loan amount that is charged by a lender as the cost of borrowing money. Interest rates for student loans can be fixed or variable, and they can vary depending on factors such as the type of loan, the borrower's credit history, and market conditions.

International Student

An International Student is a student who is not a citizen or permanent resident of the country in which they are studying. These students often face unique challenges in financing their education, such as limited eligibility for government-sponsored financial aid and higher.

Late Fee

A Late Fee is a charge assessed by lenders or creditors when a borrower fails to make a required payment on time. Late fees can be applied to various types of loans and credit products, including student loans and credit cards, and can negatively impact a borrower's credit score if not addressed promptly.

Lender

A Lender is a financial institution, such as a bank, credit union, or government agency, that provides loans or credit to borrowers. In the context of college finance, lenders can offer federal loans and private loans to help students cover the costs of their education.

Line of Credit

A Line of Credit is a flexible borrowing option that allows a borrower to access funds up to a predetermined limit, as needed. Interest is only charged on the amount of credit used, and once the borrowed funds are repaid, the line of credit is replenished and available for future use. In the context of college finance, a line of credit may be used to cover educational expenses or serve as a source of emergency funds.

Loan Collection

Loan Collection refers to the process by which lenders or their designated loan servicers attempt to recover funds from borrowers who have defaulted on their loan obligations. In the case of student loans, collection efforts may include contacting the borrower by phone or mail, reporting the default to credit bureaus, garnishing wages, or withholding tax refunds. Borrowers in default may face additional fees, increased interest rates, and damage to their credit score, making it essential to address delinquencies or defaults as soon as possible.

Loan Consolidation

Loan Consolidation is the process of combining multiple student loans into a single new loan, often with a single monthly payment and a fixed interest rate. Federal student loan consolidation is available through the Direct Consolidation Loan program, while private student loan consolidation is typically referred to as refinancing.

Loan Discharge

Loan Discharge is the release of a borrower from their obligation to repay a loan under certain qualifying circumstances, such as total and permanent disability, death, or school closure. In the case of federal student loans, discharged loans are not considered taxable income, and the borrower is no longer responsible for repaying the principal or any accrued interest.

Loan Forgiveness

Loan Forgiveness is a process by which a borrower's outstanding loan balance is canceled or reduced under certain qualifying circumstances, such as working in a specific public service profession or meeting the requirements of an income-driven repayment plan. Forgiveness programs are typically available for federal student loans and can provide significant relief to borrowers who meet the eligibility criteria.

Loan Servicer

A Loan Servicer is a company or organization that manages the billing, collection, and administrative tasks associated with student loans on behalf of a lender. Loan servicers are responsible for communicating with borrowers, processing payments, and providing information about repayment options, deferment, forbearance, and other loan-related issues.

Loan Term

The Loan Term is the length of time over which a borrower is expected to repay a loan. For student loans, the loan term is typically expressed in months or years and can vary depending on factors such as the type of loan, the repayment plan selected, and any periods of deferment or forbearance.

Lump-Sum Payment

A Lump-Sum Payment is a single, large payment made toward the principal balance of a loan, often in addition to the borrower's regular monthly payments. Making lump-sum payments on student loans can help reduce the overall interest paid and shorten the loan term, potentially saving the borrower money over time.

Master Promissory Note (MPN)

A Master Promissory Note (MPN) is a legally binding document that outlines the terms and conditions of a federal student loan, as well as the borrower's rights and responsibilities. By signing an MPN, a borrower agrees to repay the loan and any accrued interest and fees. An MPN can be used to cover multiple loans for the same borrower over a period of up to 10 years, simplifying the borrowing process.

Maximum Loan Amount

The Maximum Loan Amount is the highest amount of money a student is eligible to borrow through a specific loan program, such as federal or private student loans. Maximum loan amounts are typically determined by factors such as the cost of attendance, the borrower's financial need, and annual or aggregate borrowing limits set by the loan program.

Merit-Based Financial Aid

Merit-Based Financial Aid is a type of financial assistance awarded to students based on their academic, athletic, or artistic achievements, rather than their financial need. Merit-based aid can include scholarships, grants, and other forms of support, and is typically provided by colleges and universities, private organizations, or state governments.

Minimum Payment

The Minimum Payment is the lowest amount a borrower is required to pay each month on a loan or credit card account. For student loans, the minimum payment depends on the loan type, outstanding balance, and selected repayment plan. Paying only the minimum payment can result in a longer repayment term and increased overall interest costs.

Missing Information Letter (MIL)

A Missing Information Letter (MIL) is a notification sent by a college or university's financial aid office to a student who has submitted an incomplete Free Application for Federal Student Aid (FAFSA) or other financial aid documents. The MIL typically outlines the missing information or documentation needed to complete the application and determine the student's eligibility for financial aid.

Monetary Award Program (MAP)

The Monetary Award Program (MAP) is a state-funded, need-based grant program for eligible Illinois residents attending approved Illinois colleges and universities. MAP grants are awarded on a first-come, first-served basis and do not need to be repaid. The grant amount is determined by the student's financial need, as calculated by the FAFSA.

Monthly Payment

A Monthly Payment is the amount a borrower is required to pay each month toward the principal, interest, and any applicable fees on a loan or credit card account. For student loans, the monthly payment depends on factors such as the loan type, outstanding balance, and selected repayment plan.

Moratorium

A Moratorium is a temporary suspension or delay of a specific action, such as loan payments or collections. In the context of student loans, a moratorium may be granted during periods of economic hardship, natural disasters, or other extenuating circumstances, providing borrowers with temporary relief from their repayment obligations.

Multiple Disbursements

Multiple Disbursements is a process by which the funds from a student loan are distributed in separate installments over the course of an academic year or program. This method helps reduce the risk of overborrowing and ensures that students receive the funds they need when they need them, such as at the beginning of each semester or term.

Need Analysis

Need Analysis is the process of determining a student's financial need for college by evaluating their family's income, assets, and other relevant factors. This analysis is used to calculate the Expected Family Contribution (EFC) and determine eligibility for need-based financial aid, such as federal and state grants, work-study programs, and subsidized loans.

Need-Based Financial Aid

Need-Based Financial Aid is a type of financial assistance awarded to students based on their demonstrated financial need, as determined by the information provided on the Free Application for Federal Student Aid (FAFSA) or other financial aid applications. This type of aid can include grants, scholarships, work-study opportunities, and subsidized loans, and is designed to help students cover the cost of college who may not otherwise be able to afford it.

Net Price

The Net Price is the actual cost of attending a college or university after accounting for financial aid, such as grants, scholarships, and other forms of assistance. This figure is determined by subtracting the total amount of financial aid awarded from the total cost of attendance, including tuition, fees, room and board, and other expenses.

Net Price Calculator

A Net Price Calculator is an online tool provided by colleges and universities that helps prospective students estimate their net price of attendance, taking into account their unique financial circumstances and potential financial aid awards. These calculators can be a useful resource for comparing the true cost of attending different schools and making informed decisions about college affordability.

Non-Subsidized Loan

A Non-Subsidized Loan is a type of student loan, such as the Federal Direct Unsubsidized Loan, that is not based on financial need and does not have the interest paid by the government while the borrower is in school or during grace periods. Borrowers are responsible for all interest that accrues on non-subsidized loans, even during deferment or forbearance periods.

Notice of Loan Guarantee and Disclosure Statement

A Notice of Loan Guarantee and Disclosure Statement is a document provided by a lender or loan servicer that outlines the terms and conditions of a student loan, including the interest rate, repayment schedule, and any fees associated with the loan. Borrowers should carefully review this document to ensure they understand their rights and responsibilities before accepting the loan.

NSLDS (National Student Loan Data System)

The National Student Loan Data System (NSLDS) is a centralized database maintained by the U.S. Department of Education that tracks information about federal student loans and grants. Borrowers can access the NSLDS to view details about their federal loans, including loan balances, loan status, and loan servicer information.

A loan origination Fee is a one-time charge assessed by a lender to cover the costs of processing and disbursing a loan. For federal student loans, the origination fee is a percentage of the loan amount and is deducted from the loan disbursement, reducing the total funds received by the borrower or the school.

Overaward

An Overaward occurs when a student receives more financial aid than they are eligible for, based on their financial need, cost of attendance, or other regulatory requirements. Overawards can result from changes in a student's financial circumstances, errors in the financial aid application process, or receipt of additional scholarships or grants. If an Overaward occurs, schools must take steps to correct it before disbursement takes place.

Overborrowing

Overborrowing refers to the practice of taking out more student loans than is necessary to cover the cost of attendance and other educational expenses. Overborrowing can lead to increased debt burdens and difficulty repaying loans after graduation, making it important for students to borrow only what they need and explore other financial aid options.

Overpayment

An Overpayment occurs when schools disburse more financial aid than a student is eligible for. This occurs if an Overaward happens and schools do not address the error before disbursing the financial aid.In some cases, Overpayments must be repaid by the student.

Parent PLUS Loan

A parent PLUS Loan is a federal loan program available to parents of dependent undergraduate students to help pay for their child's college education. These loans are credit-based, and the interest rate is fixed for the life of the loan. Parents are responsible for repayment, which typically begins after the loan is fully disbursed, although deferment options are available.

Pay As You Earn (PAYE)

Pay As You Earn (PAYE) is a federal income-driven repayment plan for eligible Direct Loan borrowers that bases monthly payments on a percentage of the borrower's discretionary income and family size. Under PAYE, monthly payments are generally set at 10% of the borrower's discretionary income, but never exceed the amount of the standard 10-year repayment plan. The repayment period for PAYE is 20 years, after which any remaining loan balance may be forgiven.

Pell Grant

A Pell Grant is a need-based federal grant program designed to help low-income undergraduate students pay for college. The maximum Pell Grant award amount varies each academic year and is determined by factors such as the student's financial need, cost of attendance, and enrollment status. Unlike loans, Pell Grants do not need to be repaid.

Perkins Loan

A Perkins Loan was a federal loan program for undergraduate and graduate students with exceptional financial need. The program was discontinued in 2017, and no new Perkins Loans have been issued since then. Borrowers who still have outstanding Perkins Loans are required to continue repaying them according to their loan agreement.

PLUS Loan

A PLUS Loan is a federal loan program available to graduate students and parents of dependent undergraduate students. These loans are credit-based, with fixed interest rates, and can be used to cover the cost of attendance not met by other financial aid. Repayment for graduate PLUS Loans typically begins after a six month grace period, while repayment for parent PLUS Loans begins after disbursement, with deferment options available.

Prepayment

Prepayment is the act of paying off all or part of a loan before the scheduled due date. By making prepayments on a student loan, borrowers can save money on interest and shorten the repayment term. There are typically no prepayment penalties for federal student loans, but borrowers should check with their private loan servicers to ensure there are no additional fees.

Prepayment Penalty

A Prepayment Penalty is a fee charged by some lenders if a borrower pays off their loan before the end of the loan term. Prepayment penalties are more common with private loans, including student loans and mortgages. Federal student loans do not have prepayment penalties, allowing borrowers to pay off their loans early without incurring additional fees.

Principal

The Principal is the original amount of money borrowed or still owed on a loan, not including interest or fees. As a borrower makes payments on a loan, the principal balance decreases, and the interest is calculated based on the remaining principal balance. Paying down the principal more quickly can result in lower overall interest payments and a shorter loan term.

Private Student Loans

Private Student Loans are non-federal loans issued by banks, credit unions, or other private lending institutions to help students pay for college expenses. These loans are typically used to supplement federal student loans and other financial aid when the cost of attendance exceeds the amount of available assistance. Interest rates, repayment terms, and eligibility requirements for private student loans vary by lender and may be less favorable than those of federal loans. Borrowers should exhaust federal loan options first, as they often have more flexible repayment plans and borrower protections.

Promissory Note

A Promissory Note is a legally binding document that outlines the terms and conditions of a loan, including the repayment schedule, interest rate, and any applicable fees. By signing a promissory note, a borrower agrees to repay the loan and any accrued interest and fees. Federal student loans use a Master Promissory Note (MPN) to cover multiple loans for the same borrower over a period of up to 10 years.

Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program is a federal program that forgives the remaining balance on Direct Loans for borrowers who work full-time in qualifying public service jobs and make 120 qualifying monthly payments under a qualifying repayment plan. PSLF is available to eligible borrowers who work for government organizations, non-profit organizations, or other qualifying public service employers.

Qualified Education Expenses

Qualified Education Expenses are costs directly related to a student's attendance at an eligible educational institution, including tuition, fees, books, supplies, and equipment.

Qualifying Payments

Qualifying Payments are on-time, full monthly payments made under a qualifying repayment plan while working for a qualifying employer. These payments are most commonly associated with the Public Service Loan Forgiveness (PSLF) program, which requires borrowers to make 120 qualifying payments to be eligible for loan forgiveness. Qualifying payments do not need to be consecutive, but any missed or partial payments will not count towards the required total.

Qualifying Repayment Plan

A Qualifying Repayment Plan is a student loan repayment plan that meets the requirements for a specific loan forgiveness or repayment assistance program. For example, in the context of the Public Service Loan Forgiveness (PSLF) program, a qualifying repayment plan includes income-driven repayment plans such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Saving on A Valuable Education (SAVE), and Income-Contingent Repayment (ICR).

Quarterly Interest Rate

A Quarterly Interest Rate is an interest rate that is applied to a loan or investment every three months, or four times a year. Some student loans, particularly private loans, may use a quarterly interest rate, which can impact the amount of interest paid over the life of the loan. Borrowers should be aware of how their loan's interest rate is applied and whether it is fixed or variable.

Quasi-Endowment

A Quasi-Endowment is a type of endowment fund established by a college or university to support specific programs or initiatives, often with a designated time frame. Unlike a true endowment, which is intended to provide funding in perpetuity, a quasi-endowment can be spent down over time, making it more flexible in terms of resource allocation. Quasi-endowments can impact the availability of financial aid and other resources for students.

Query

In the context of college finance, a Query refers to a request for information or clarification, typically regarding financial aid, student loans, or other education-related expenses. Students and their families may submit queries to financial aid offices, loan servicers, or other relevant parties to obtain the information they need to make informed decisions about financing their education.

Quick Ratio

The Quick Ratio, also known as the acid-test ratio, is a financial metric used to evaluate a college or university's short-term liquidity and financial health. It is calculated by dividing the institution's most liquid assets (cash, cash equivalents, and marketable securities) by its current liabilities. A higher quick ratio indicates that an institution is better able to meet its short-term financial obligations, which can impact its ability to provide financial aid and other resources to students.

Quotation

In the context of college finance, a Quotation refers to a written statement or estimate provided by a lender, detailing the terms and conditions of a potential loan, including interest rates, fees, and repayment terms. Quotations can help students and their families compare loan offers from different lenders to determine the best option for their financial situation.

Refinance

Refinancing is the process of obtaining a new loan with different terms, typically at a lower interest rate, to pay off existing student loans. This can help borrowers save money on interest payments and potentially lower their monthly payments. However, refinancing federal student loans with a private lender may result in the loss of certain benefits, such as income-driven repayment options and loan forgiveness programs.

Repayment Plan

A Repayment Plan is the arrangement made between a borrower and a lender, detailing the terms for repaying a student loan. There are several repayment plans available for federal student loans, including Standard, Graduated, Extended, and Income-Driven Repayment plans. Each plan has different requirements and payment structures, allowing borrowers to choose the one that best fits their financial situation.

Repayment Term

The Repayment Term is the length of time a borrower has to repay their student loan. Repayment terms for federal student loans typically range from 10 to 30 years, depending on the repayment plan chosen. Private student loan repayment terms may vary by lender and can also range from a few years to several decades.

Rollover

A Rollover, in the context of education savings accounts, is the process of transferring funds from one account to another, typically to maintain certain tax benefits. For example, a family might roll over funds from a Coverdell Education Savings Account to a 529 Plan. Rollovers must follow specific rules and guidelines to avoid tax consequences.

Room and Board

Room and Board refers to the cost of housing and meals for students living on or near a college or university campus. These costs are typically included in the total cost of attendance and can be covered by financial aid, including student loans, grants, and scholarships.

ROTC Scholarship

An ROTC Scholarship is a financial award provided by the Reserve Officers' Training Corps (ROTC) to help cover college expenses in exchange for a commitment to serve in the U.S. military after graduation. These scholarships can cover full or partial tuition, fees, and other expenses, and often include a monthly stipend for living expenses.

Satisfactory Academic Progress (SAP)

Satisfactory Academic Progress (SAP) is a set of standards that students must meet to remain eligible for federal financial aid. These standards typically include maintaining a minimum GPA, completing a certain percentage of attempted credit hours, and finishing an educational program within a specified time frame. SAP policies vary by institution, and students who fail to meet these requirements may lose their federal financial aid eligibility.

Scholarship

A Scholarship is a form of financial aid awarded to students based on merit, need, or a combination of factors, to help pay for college expenses. Scholarships do not need to be repaid and can be awarded by colleges, universities, private organizations, or government agencies. The eligibility criteria, application process, and award amounts for scholarships vary widely.

Secured Credit Card

A Secured Credit Card is a type of credit card that requires a cash deposit as collateral, which serves as the credit limit for the card. Secured credit cards can help college students or individuals with limited credit history build their credit score by demonstrating responsible credit usage over time.

Servicemembers Civil Relief Act (SCRA)

The Servicemembers Civil Relief Act (SCRA) is a federal law that provides certain protections and benefits to active-duty military personnel, including those serving in the National Guard and Reserves, during their period of active service. In the context of college finance, the SCRA offers a range of benefits related to student loans, such as interest rate caps, deferment options, and loan forgiveness in certain circumstances. These protections are intended to ease the financial burden on servicemembers and their families while they are on active duty, allowing them to focus on their military service.

Stafford Loan

A Stafford Loan was a type of federal student loan which has since been replaced by the Direct Loan program. Stafford Loans could be either subsidized, for students who demonstrated financial need, or unsubsidized, for those who did not. The interest rate and repayment terms for Stafford Loans were typically more favorable than those of private student loans.

Standard Repayment Plan

The Standard Repayment Plan is a federal student loan repayment plan that requires borrowers to make fixed monthly payments over a period of 10 years. This repayment plan is the default option for federal student loans and typically results in the lowest total interest paid over the life of the loan compared to other repayment plans. However, monthly payments under the Standard Repayment Plan may be higher than those under income-driven repayment plans.

Student Aid Report (SAR)

The Student Aid Report (SAR) is a document provided to students after submitting the Free Application for Federal Student Aid (FAFSA). It summarizes the information reported on the FAFSA and provides an estimate of the student's Expected Family Contribution (EFC), which determines eligibility for federal financial aid programs.

Student Loan Forgiveness

Student Loan Forgiveness is the process by which a borrower's student loan debt is partially or completely canceled, typically due to qualifying employment, volunteer service, or other specific circumstances. There are several federal student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness, as well as forgiveness options under income-driven repayment plans. Private student loans generally do not offer forgiveness programs.

Student Loan Servicer

A Student Loan Servicer is a company that manages the billing, payment processing, and customer service for student loans on behalf of the lender. For federal student loans, the U.S. Department of Education assigns a loan servicer to handle these tasks. Private student loan servicers are typically chosen by the lender. Borrowers interact with their loan servicer for tasks such as making monthly payments, requesting deferment or forbearance, and changing repayment plans. It's important for borrowers to maintain communication with their loan servicer and notify them of any changes in their contact information or financial circumstances.

A Subsidized Loan is a type of federal student loan available to undergraduate students with demonstrated financial need. The U.S. Department of Education pays the interest on subsidized loans while the student is enrolled at least half-time, during the six-month grace period after leaving school, and during any authorized deferment periods. This can result in significant savings for the borrower compared to unsubsidized loans.

Summary of Benefits

A Summary of Benefits is a document that outlines the specific terms, conditions, and benefits of a financial product, such as a student loan or credit card. For student loans, the summary of benefits may include information about interest rates, repayment terms, deferment options, and borrower protections. Reviewing the summary of benefits can help students and their families make informed decisions about financing their education.

Supplemental Educational Opportunity Grant (SEOG)

The Supplemental Educational Opportunity Grant (SEOG) is a federal grant program for undergraduate students with exceptional financial need who are enrolled in participating colleges and universities. SEOG grants are awarded based on availability of funds at each institution and do not need to be repaid. The amount of the grant depends on the student's financial need, the cost of attendance, and the availability of funds at the school.

Tax Deductible

Tax Deductible refers to expenses that can be subtracted from an individual's taxable income, thus reducing the amount of taxes owed. Certain expenses, such as student loan interest payments, may be tax deductible in the context of college finance.

Taxable Income

Taxable Income is the portion of an individual's income that is subject to income taxes. In college finance, certain types of financial aid, such as scholarships or grants, may be considered taxable income if used for expenses other than tuition, fees, and required course materials.

TEACH Grant

The TEACH Grant is a federal financial aid program providing grants to students pursuing teaching careers in high-need fields at low-income schools. In exchange, recipients must agree to teach for at least four years within eight years of completing their program, or the grant converts to a loan.

Teacher Loan Forgiveness

Teacher Loan Forgiveness is a federal student loan forgiveness program for eligible teachers who work in low-income schools or educational service agencies for at least five consecutive years. Qualifying teachers may receive forgiveness of up to $17,500 on certain federal loans.

Term

A Term, in college finance, refers to the length of time a loan is set to be repaid. The term can range from months to years and affects the monthly payment amount and the total interest paid over the life of the loan.

Total and Permanent Disability (TPD) Discharge

Total and Permanent Disability (TPD) Discharge is a federal student loan forgiveness program for borrowers who become totally and permanently disabled. If a borrower meets the eligibility criteria, their federal student loans may be discharged.

Total Loan Balance

The Total Loan Balance refers to the total outstanding amount of a borrower's student loans, including both the principal and any accrued interest. This balance is the sum of all individual loans the borrower has taken out to finance their education, including federal and private student loans. The total loan balance will change over time as payments are made, interest accrues, and, in some cases, additional loans are taken out. Keeping track of the total loan balance is important for managing repayment, understanding the overall cost of borrowing, and making informed decisions about future borrowing or refinancing options.

Transfer Credit

Transfer Credit refers to academic credits earned at one educational institution that are accepted by another institution, typically when a student transfers from one college or university to another. The acceptance of transfer credits can help reduce the time and cost required to complete a degree program.

Tuition

Tuition is the cost of attending classes and receiving instruction at a college or university. It is one of the primary expenses associated with higher education and varies depending on factors such as the type of institution, residency status, and the specific program of study.

Tuition Assistance

Tuition Assistance refers to any form of financial aid that helps cover the cost of tuition. This assistance can come from various sources, including federal and state governments, educational institutions, private organizations, and employers.

Tuition Repayment Plan

A Tuition Repayment Plan is an agreement between a student and their university that allows the student to pay their tuition in installments over the course of several months, rather than in one lump sum. This can be a valuable alternative or add-on to traditional student loans.

U.S. Department of Education

The U.S. Department of Education is a federal agency responsible for overseeing and implementing policies related to education, including federal student aid programs, such as grants, work-study, and student loans. It is also responsible for monitoring compliance with federal education laws and regulations.

Undergraduate Degree

An Undergraduate Degree is a post-secondary academic degree awarded upon the completion of a program of study, typically lasting four years. Examples include Bachelor of Arts (BA), Bachelor of Science (BS), and Bachelor of Fine Arts (BFA) degrees. Undergraduate degrees are required for entry into many graduate and professional programs.

Unmet Need

Unmet Need refers to the difference between a student's total cost of attendance at a college or university and the financial aid they receive. This gap can be filled through various means, such as scholarships, grants, work-study, or loans. Understanding Unmet Need is essential for students and their families when planning for college expenses.

An Unsubsidized Loan is a type of federal student loan available to both undergraduate and graduate students, regardless of financial need. Unlike subsidized loans, interest begins accruing on unsubsidized loans immediately after disbursement, and the borrower is responsible for all accrued interest.

Upromise

Upromise is a free-to-join rewards program that helps members earn cash back for college expenses by making everyday purchases. Cash back earned through the program can be used to contribute to a 529 plan, a tax-advantaged savings option for college.

Usury Laws

Usury Laws are state-specific regulations that limit the amount of interest a lender can charge on a loan. These laws can affect the interest rates on various types of loans, including student loans and credit cards. Borrowers should be aware of the usury laws in their state, as they can limit the cost of borrowing.

Utility Bill

A Utility Bill is a monthly statement from a utility company, such as a provider of electricity, water, or gas, that details the cost of services used by a customer. In college finance, utility bills can be a factor in determining a student's cost of living, particularly if living off-campus.

Veteran Readiness and Employment(VR&E)

Veteran Readiness and Employment (VR&E) is a program administered by the U.S. Department of Veterans Affairs that assists eligible veterans with service-connected disabilities in finding and maintaining suitable employment. The program offers a range of services, including career counseling, job training, and education assistance.

Veterans Affairs (VA) Loan

A Veterans Affairs (VA) Loan is a mortgage loan program offered by the U.S. Department of Veterans Affairs for eligible veterans, active-duty military personnel, and their surviving spouses. VA loans typically offer lower interest rates, relaxed credit requirements, and no down payment requirement, making homeownership more accessible for those who have served.

Veterans Education Benefits

Veterans Education Benefits are financial aid programs designed to help eligible veterans, active-duty military personnel, and their family members pay for higher education. Examples include the Post-9/11 GI Bill, the Montgomery GI Bill, and the Yellow Ribbon Program, which can be used to cover tuition, fees, housing, and other educational expenses.

Voluntary Forbearance

Voluntary Forbearance is a temporary suspension or reduction of student loan payments granted by a lender at the borrower's request. During forbearance, interest continues to accrue on the loan, and the borrower is responsible for paying it. Forbearance can help borrowers experiencing financial hardship, but it may increase the overall cost of the loan.

Volunteer Income Tax Assistance (VITA)

Volunteer Income Tax Assistance (VITA) is a free tax preparation service provided by IRS-certified volunteers for low-to-moderate-income individuals, persons with disabilities, and limited English-speaking taxpayers. VITA can help eligible individuals file their tax returns, ensuring they receive any tax credits and deductions they may qualify for, such as education-related tax benefits.

Voucher

A Voucher, in the context of education, is a certificate or coupon that can be redeemed for tuition or other education-related expenses at an eligible institution. Vouchers can be provided by governments, private organizations, or educational institutions to help cover the cost of education for qualifying individuals.

Waitlist

A Waitlist is a list of applicants to a college or university who have not been offered admission but may be considered for admission if space becomes available. Being waitlisted does not guarantee eventual acceptance, and students should continue exploring other options while awaiting a final decision from the institution.

The William D. Ford Federal Direct Loan Program is a federal student loan program in which eligible students and parents borrow directly from the U.S. Department of Education. The program includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans, all designed to help students and their families finance higher education.

Withdrawal

Withdrawal refers to the process of officially dropping out of a college or university, either temporarily or permanently. Withdrawing from school can have financial implications, such as the need to repay a portion of financial aid received or being responsible for outstanding tuition and fees. Students should consult their school's policies and financial aid office before withdrawing.

Work-Study

Work-Study is a federal financial aid program that provides part-time employment opportunities for eligible students to earn money to help pay for their education expenses. Work-study jobs are often on-campus and may be related to the student's field of study, allowing them to gain valuable work experience while earning money for college.

Write-off

A Write-off, in the context of student loans, is the process of removing a debt from a lender's books, typically due to the borrower's inability to repay the loan. Write-offs can occur in cases of loan forgiveness, discharge due to disability, or when the loan is deemed uncollectible. It is important to note that a write-off does not necessarily absolve the borrower of their obligation to repay the debt.

Zero-based Budgeting

Zero-based Budgeting is a financial planning method in which all expenses are justified for each new period, starting from zero. In the context of college finance, students and their families can use zero-based budgeting to allocate funds for tuition, living expenses, books, and other costs related to higher education. This approach helps ensure that every dollar is assigned a purpose, promoting careful spending and financial responsibility.

Zero-interest Loan

A Zero-interest Loan is a loan that does not accrue interest, making it a cost-effective option for financing education. These loans are relatively rare and often provided by specific institutions, non-profit organizations, or government programs. Zero-interest loans can significantly reduce the overall cost of borrowing and make it easier for students to manage their loan repayments after graduation.

1098-E

Form 1098-E is an IRS tax form that student loan borrowers receive from their loan servicer, which reports the total amount of interest paid on qualified student loans during the tax year. Borrowers may be able to deduct some or all of this interest on their federal income tax return, potentially reducing their taxable income and overall tax liability.

1098-T

Form 1098-T is an IRS tax form that eligible educational institutions send to students who paid qualified tuition and related expenses during the tax year. This form provides the necessary information for students or their families to claim education tax credits, such as the American Opportunity Tax Credit or the Lifetime Learning Credit, on their federal income tax return.

1099 Form

A 1099 Form is a series of IRS tax forms used to report various types of income other than wages, salaries, and tips. While not directly related to college finance, Form 1099 may be relevant for students or their families who receive certain types of income, such as interest, dividends, or self-employment earnings, which can impact their overall financial situation and ability to pay for college. There are multiple versions of the 1099 form, such as 1099-INT (for interest income), 1099-DIV (for dividends), and 1099-MISC (for miscellaneous income).

401(k) Plan

A 401(k) Plan is a tax-advantaged, employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax income toward retirement. Although not directly related to college finance, some 401(k) plans permit loans or withdrawals for education expenses, subject to taxes and potential penalties. It's essential to weigh the long-term impact on retirement savings before using 401(k) funds for educational purposes.

403(b) Plan

A 403(b) Plan is a tax-sheltered retirement savings plan available to employees of certain non-profit organizations, public schools, and universities. Similar to a 401(k) Plan, some 403(b) plans may allow loans or withdrawals for education expenses, but individuals should carefully consider the long-term effects on their retirement savings before using these funds for college expenses.

529 Plan

A 529 Plan is a tax-advantaged savings plan designed to encourage saving for future education costs. These plans, also known as Qualified Tuition Programs, are sponsored by states, state agencies, or educational institutions. Earnings in 529 plans are not subject to federal tax and, in most cases, state tax, as long as they are used for qualified education expenses such as tuition, fees, and room and board.