Financial Aid Glossary

Academic Year:
A one-year period between July 1 and June 30.
Accrued Interest:
The additional amount of money you have to repay on a loan, on top of the original principal amount.
Annual Percentage Rate (APR):
A measure of how much interest will be accrued on an annual basis without taking into account compound interest, the interest which is calculated not only on the initial principle but also the accumulated interest
Assets:
Used when calculating the Expected Family Contribution (EFC), and includes: income, checking and savings accounts, stocks, bonds, trusts, real estate (doesn’t include a person’s home), and material goods owned.
Automated Clearing House (ACH):
An electronic network for financial transactions in the United States. Using ACH payments can help reduce errors, and organize the student loan repayment process.
Award letter:
A notice from a financial aid office to an applicant that specifies the financial aid programs and dollar amount of each financial aid award.
Cost of Attendance (COA):
The total cost a financial aid office estimates students will incur during attendance at that college or university.
CSS/Financial Aid PROFILE:
An application distributed by the College Board, the College Scholarship Service (CSS) is used by some private colleges and universities to determine eligibility for non-federal loans.
Department of Education:
The federal agency that establishes financial aid programs and processes applications.
Deferment:
A temporary period during which a borrower is not required to make loan payments. Deferments are more common in federal loan programs rather than alternative loans. For those with Direct Subsidized Loans (and Perkins Loans), deferments are often subsidized as well, meaning that the interest accrued on the loan during the deferment is paid by the government. For Direct Unsubsidized Loans, the borrower must pay the interest accrued during deferment.
Direct Loans:
A federal loan issued by the government and administered by the college or institution. Students attending a school that participates in this program are required to complete the application process directly with their school, as well as fill out the FAFSA.
Disbursement:
The act of sending federal loan money to the student. Loan payments are paid both to the student and his/her school. Any excess funds are also given directly to the student.
Expected Family Contribution (EFC):
The dollar amount that a student and family can be expected to contribute toward educational expenses for an academic year. The EFC is calculated when the student submits a financial aid application, and is reported on the Student Aid Report (SAR).
Federal Pell Grant:
The U.S. Department of Education provides student grants that are designed to help offset the unwieldy costs of college tuition. The Pell Grant is awarded to students who can prove the most financial need, and it does not require repayment.
Financial need:
The difference between a student’s Cost of Attendance (COA) and his/her Expected Family Contribution (EFC). It is the amount of financial aid the student needs to afford tuition at a particular college.
Fixed interest:
Refers to loan interest rates that will not change throughout the entire lifecycle of the loan.
Free Application for Federal Student Aid (FAFSA):
The FAFSA is the official application form for all federal financial aid programs, including loans and grants.
Grace period:
The time period between a student’s graduation (or termination) and the beginning of loan repayment. It usually lasts six to nine months.
Grants:
A type of financial aid award that does not have to be repaid. Grants are often awarded based on a student’s financial need or EFC.
Half-time enrollment:
Usually refers to when a student is taking at least six credit hours of class. In most cases, enrollment must be at least half-time to qualify for any financial aid.
Independent student:
Students that are any of the following: 24 years or older (as of 12/31 of the award’s year), a graduate or professional student, married, have legal dependents, a veteran of the U.S. Armed Forces, or if the student was an orphan, in foster care, or a ward of the court after age 13. Students are also considered independent if a court determined any of the following: the student was an emancipated minor, in a legal guardianship, or was an unaccompanied homeless youth (after July 1, 2012).
Interest rate:
Federal student loan interest rates are variable, adjusted annually and set by the Department of Education each July 1st for the subsequent 12 month loan period.
Lender:
The bank or lending institution from which a student loan is borrowed.
Pell Grant:
A need-based financial aid program funded by the federal government. The amount of the award is based on the student’s enrollment level and the cost of attendance.
PLUS Loan:
A federal loan that is borrowed by either parents of dependent undergraduate students or by graduate or professional degree students to help pay for education expenses. A credit check is required during the application process. This loan allows eligible parents and students to borrow the total cost of attendance (minus any other financial assistance) and has a fixed interest rate of 6.41%. There is also a loan origination fee of 4.204%.
Repayment (period):
The time period when payments need to be made. The repayment period excludes any months of authorized deferment or forbearance. During deferment, the federal government may pay the interest on Direct Subsidized Loans and Perkins Loans. During forbearance, interest will continue to accrue on all loan types, including Direct Subsidized Loans.
Student Aid Report (SAR):
The official summary of financial aid eligibility sent to the student by the government after a financial need analysis has been performed.
Variable interest rates:
Interest rates that can fluctuate. Most variable-interest loans have an annual or maximum cap, which prevents them from exceeding a set amount within a certain period of time.