Financial Aid Glossary

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What does it mean?

Borrowing money for college can be confusing, but understanding the language of educational loans can help you navigate the process. The following definitions clarify the meaning of terms related to educational loans.

| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |

A

Academic Year: for a program measured in credit hours, a period of at least 30 weeks of instructional time during which a full-time undergraduate student is expected to complete a minimum of 24 semester or trimester hours or 36 quarter hours. For a program measured in clock hours, the student is expected to complete at least 900 clock hours.

Accrual Date: the day interest begins to charge on a student loan.

Accrued Interest: the accumulated total of interest paid for the use of borrowed money, such as a student loan.

Alternative Loans: see non-federal alternative or private loans

C

Capitalization: the process of adding unpaid interest to the principal balance of a loan, increasing both the total amount to be repaid and possibly the monthly payment.

Consolidation: a loan program that allows borrowers to combine all of their federal education loans into one loan. The program allows borrowers to make a single monthly payment and extend the repayment period (up to 30 years depending on the loan amount). Consolidation loans can make loan repayment more manageable for borrowers with high loan balances.

D

Default: failure of a borrower to repay his or her loan according to the terms agreed upon when the promissory note (MPN) was signed. After a borrower defaults, action can be taken to recover the money. Defaulted accounts are reported to national consumer reporting agencies which may affect a borrower’s ability to get credit in the future.

Default Fee: an insurance premium that’s deducted from the borrower’s loan proceeds before disbursement. For FFELP loans (made before 7/1/10), this fee was collected by the guaranty agency that insured the loan unless it was paid on behalf of the borrower by the lender or guarantor. By law, the fee can’t exceed one percent of the loan amount.

Deferment: an authorized period of time during which a borrower may postpone principal payments and/or interest payments. Deferments are available while borrowers are in school at least half-time or enrolled in a graduate fellowship program or rehabilitation training program, as well as during periods of unemployment or economic hardship. Other deferments might be available for those who borrowed money before July 1, 1993. The federal government makes interest payments on subsidized and certain consolidation loans during authorized deferment periods.

Delinquency: failure of a borrower to make a loan payment on the scheduled payment due date.

Dependent Students: students who must report their parents’ income and assets, as well as their own, on the FAFSA. Federal student aid is based on the premise that a dependent student's parents have the primary responsibility for the student's education. A student is considered "dependent" if he or she doesn’t meet any of the criteria in the "independent students" definition.

Direct PLUS Loan (graduate and professional student loan): a non-need-based loan available to graduate and professional students, who are eligible to borrow up to their cost of attendance minus other estimated financial assistance. Applicants must complete the FAFSA and have a good credit history.

Direct PLUS Loan (parent loan): a non-need-based loan available to parents with a good credit history to help pay educational expenses of a dependent, undergraduate student who’s enrolled on at least a half-time basis.

Direct Subsidized Loan: a need-based education loan for which interest is paid by the federal government during the in-school, grace and deferment periods.

Direct Unsubsidized Loan: a non-need-based loan for which interest isn’t paid by the federal government. Borrowers are responsible for all interest accrued on unsubsidized loans from the date the loan is disbursed.

Disbursement: the release of loan funds to a school for delivery to the borrower. Disbursements for most loans are made in equal, multiple installments — usually co-payable to the borrower and school — and sent to the school.

E

Eligible Non-citizen: students must meet one of the following criteria to receive federal student aid:

U.S. citizen;
U.S. national (includes natives of American Samoa or Swains Island); or
U.S. permanent resident who has an I-151, I-551 or I-551C (Permanent Resident Card).

Students who aren't in one of those categories must have an Arrival-Departure Record (I-94) from the U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:

Refugee;
Asylum Granted;
Cuban-Haitian Entrant, Status Pending
Conditional Entrant (valid only if issued before April 1, 1980);
Victims of human trafficking, T-visa (T-2, T-3 or T-4, etc.) holder; or
Parolee (Must be paroled in the U.S. for at least one year and provide evidence from the USCIS that you’re in the U.S. for other than a temporary purpose and intend to become a United States citizen or permanent resident).

This definition for "eligible non-citizen" is used when determining federal student aid. Oklahoma financial aid programs may have different eligibility requirements. Additional information is available from your financial aid office.

Expected Family Contribution (EFC): the amount a student and his or her family are expected to pay toward college expenses for one academic year. This amount is calculated based on the information supplied by the student and parents on the FAFSA.

F

FAFSA: see Free Application for Federal Student Aid

Federal Family Education Loan Program (FFELP): a program authorized by Congress that ended on June 30, 2010, through which education loans were provided by private lenders and guaranteed by the federal government. Subsidized and unsubsidized Stafford loans and PLUS loans were included in the program.

Federal Work-Study (student employment): a program providing part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay educational expenses. The program encourages community service employment and work related to each student’s course of study.

Financial Aid: money provided to the student and/or parents to help pay for the student’s education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work-study).

Financial Need: the difference between the cost of attending a particular school and the calculated family contribution, minus any other financial aid a student is receiving. A student’s financial need determines the loan amount for which he or she qualifies.

Forbearance: an authorized period of time during which borrowers are allowed to temporarily postpone or reduce payment. Borrowers are still responsible for the interest during this period. Loan holders grant forbearance at their discretion if a borrower intends to repay his or her loan, but is experiencing temporary financial difficulties.

Free Application for Federal Student Aid (FAFSA): a federal form required each year to apply for federal student aid. Forms are available online at FAFSA.ed.gov. The information provided on this form is used to determine the student’s expected family contribution (EFC), which allows financial aid offices to identify the types of aid the student is eligible to receive.

G

Grace Period: a transition period – generally six months following the date a borrower leaves school or drops to below half-time status – during which the borrower isn't required to make loan payments. This period is designed to help the borrower prepare for repayment.

Graduate or Professional Student: a student who's enrolled in a program or course above the baccalaureate level at an institution of higher education, or enrolled in a program leading to a first professional degree at an eligible school.

Guaranty Agency (guarantor): an entity that acts as an agent for the federal government to administer and insure loans in the FFELP, which ended on June 30, 2010. Guarantors insured loans in the event of borrower default, bankruptcy, disability or death and assisted borrowers experiencing problems with student loans. If borrowers don’t pay loans, the guaranty agency purchases the loan from the lender and works with the borrower directly. Currently, guarantors hold guarantees for loans issued before June 30, 2010. In Oklahoma, the Oklahoma Guaranteed Student Loan Program (OGSLP), a division of the Oklahoma State Regents for Higher Education, served as the federal government’s guaranty agency.

I

Independent Students: students who meet one of the following criteria:

at least 24 years old as of Jan. 1 of the academic year;
married;
a graduate or professional student;
has a legal dependent other than a spouse;
serving on active duty in the U.S. Armed Forces for purposes other than training;
a veteran of the U.S. Armed Forces; or
an orphan or ward of the court (or was a ward of the court until the age of 18)

The student reports only his or her own income and assets (and those of a spouse, if married). Students don’t qualify as "independent" just because they aren’t living with a parent or aren’t claimed by parents on tax forms.

In-school Status: the enrollment status assigned to a student who's either attending school at least half-time or who’s in a grace period. The federal government pays the interest on subsidized loans while a student is in this status.

Interest: a fee charged for the use of borrowed money. Interest is calculated as a percentage of the principal loan amount. The rate may remain constant throughout the life of the loan (fixed rate) or it may change at specified times (variable rate).

L

Lender: a financial institution (e.g. bank, savings and loan or credit union) or other agency that provides loan funds to students and parents for educational costs. As of June 30, 2010, all federal education loans are funded by the U.S. Treasury through the Direct Loan program. Some lenders use servicers to perform the administrative tasks associated with education loans.

Loan: borrowed money that must be repaid with interest.

M

Master Promissory Note (MPN): The MPN is a legal agreement that lists conditions under which the money is borrowed and the terms under which the borrower agrees to repay the loan with interest. It allows a borrower to receive loans for either a single academic year or multiple academic years. Borrowers should always keep copies of their MPN(s) until loans are fully repaid.

N

Non-Federal Alternative or Private Loans: loans you can borrow to cover the gap between the cost of your education and the amount of financial aid you receive (like grants, scholarships, work-study and federal student loans). Terms and conditions and eligibility requirements for these loans vary by lender. Since alternative or private loans can have higher interest rates and may offer less payment flexibility, you should consider them only after you've exhausted all of your federal loan options.

O

Origination Fee: a fee charged by the federal government and deducted from federal loan proceeds before disbursement. The fee partially offsets administrative costs of the education loan program.

P

PLUS Loan: see Federal PLUS loan

Principal: the amount of money borrowed or loan proceeds. Interest is charged based on the principal. Loan fees are deducted from the principal prior to loan disbursement.

Private Loan: see non-federal alternative or private loans

Proceeds: see principal

R

Repayment Schedule: a schedule listing a borrower’s monthly payment, interest rate, total repayment amount, payment due dates and the repayment period.

S

Secondary Market: an organization established to purchase loans from lenders who participated in the FFEL Program. The purchase allowed lenders to replenish capital to fund new loans. Selling loans was a common practice among FFEL Program lenders and didn’t affect the terms and conditions under which the loan was originally made.

Servicer: a company employed to perform the administrative tasks associated with education loans, such as processing payments. Loans administered by a servicer keep their original interest and repayment terms.

Stafford Loans: see Direct Subsidized loan or Direct Unsubsidized loan

U

Undergraduate Student: a student at an eligible school who's enrolled in a four- or five-year program that's designed to lead to an undergraduate degree.

U.S. Department of Education: the government agency that regulates education, oversees federal student aid programs and administers federal student loans.

W

Work-Study: see Federal Work-Study

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