Financial Aid Glossary
Accredited - Colleges can be accredited by an agency that will verify that the school is providing a quality education. The U.S. Department of Education recognizes specific accrediting agencies and schools not accredited by one of these agencies cannot offer federal financial aid.
Award Letter - The financial aid award letter is sent by a school to a prospective student and lists what financial aid is being offered to the student. Although there is not a standard format, it typically includes the type and amount of federal aid, state aid and school-based aid and often includes school costs and the Expected Family Contribution (EFC) amount.
Campus-based – Federal financial aid programs that are administered by a college but funded at a fixed level by the federal government, are considered campus-based financial aid. They differ from programs that are not campus-based because there is a fixed amount allocated for the school to distribute and therefore, not everyone that could be eligible will receive aid. The Perkins loan, Federal Supplemental Education Opportunity Grant (FSEOG) and federal work-study are all campus-based programs.
College Board – A non-profit association comprised of more than 5400 schools, colleges and other educational organizations. The College Board runs the SAT and AP programs, among others.. The CSS/PROFILE® is another service they provide which is used by colleges to determine how to distribute financial aid.
Cost of Attendance – This is a school’s estimate of how much it will cost to attend their school for one academic year. It typically includes tuition, room & board, books & supplies, personal costs and transportation. It is used by schools in determining a student’s financial need.
Credit History – A person’s history of borrowing and making payments on their debts. Loan defaults and bankruptcy will result in a negative credit history, making it difficult to borrow in the future.
Credit Score - A number assigned to an individual that represents the likelihood of whether this person will pay back a debt as defined by the debt agreement. Used by lenders to determine whether to lend to a person and/or what interest rate to charge.
CSS/Profile® - The CSS/PROFILE® is an online financial aid application provided by the College Board. It is used by schools to make a determination of how to distribute non-federal financial aid. Over 600 schools use the CSS/PROFILE®.
Dependent Student – A student who is supported at least 50 percent by their parents. The student’s parent’s income and assets will be included as resources in financial aid calculations.
Disbursement – Refers to loan funds being given to the school or student. The date of disbursement is the date that interest will begin accruing. Typically, funds are sent directly to the schools to pay school expenses. The school then sends any remaining funds to the student.
Early Action – Dates for applications and acceptance in these programs are earlier than regular admissions but the student does not have to commit to one school when applying under this program. They can choose to wait until spring before making a decision.
Early Decision – An admissions option for students who are willing to commit to one school if they are accepted without knowing what other schools would accept them. Financial aid packages are not usually known before the student must commit.
Eligible non-citizen – Residents of the U.S. who are not citizens but are still eligible for federal financial aid. They include permanent residents, U.S. Nationals, a designation on the I-94 form of “refugee,” “asylum granted”, “Cuban-Haitian Entrant, Status Pending” and “Parolee” under certain circumstances.
Endowment – Money owned and invested by a college which earns income that is used to support the school and, often, their financial aid programs.
Expected Family Contribution (EFC) - This is the amount of money the student’s family is expected to contribute to their child’s college education for that year. It is calculated using the information provided on the Free Application for Federal Student Aid (FAFSA) and is reported on the Student Aid Report (SAR). The family’s size, number of children in college, income, and savings are all taken into consideration. It is used to help determine the amount of financial aid that will be offered.
Federal Direct Loan Program (FDLP) - Also referred to as the Direct Loan program, this program supports the federal Stafford, PLUS and Consolidated loans. The funding is provided directly from the U.S. Department of Education.
Federal Family Education Loan (FFEL) Program - This federal loan program is no longer offered, as of July 2010. It was one of two sources of federal Stafford and PLUS loans. The program offered loans through commercial lenders at terms set by the U.S. Department of Education. Each school was able to choose to offer Stafford and PLUS loans through either this program or the Federal Direct Loan Program (FDLP).
Federal Pell Grant – These grants are awarded to low-income undergraduate students and some post-graduate students working towards teacher certification.
Federal Perkins Loan – This loan is awarded to the neediest undergraduate and graduate students. The lowest-cost loan available, it has a low interest rate and does not begin accruing interest until after the student is no longer in school.
Federal Stafford Loan – Loan available to most undergraduate and graduate students for limited amounts. Subsidized Stafford loans are available based on financial need while unsubsidized loans are available to most other students. These loans have lower costs than private loans.
Federal Supplemental Educational Opportunity Grant (FSEOG) – Grants awarded to the neediest students who have already qualified for the Pell Grant. Available at only 4000 schools, the funding is provided in part by the school.
Federal Work-Study Program (FWS) – A financial aid program awarded to low-income students as part of a financial aid package. Students find work-study jobs and are typically paid an hourly rate until the award amount has been reached. The program is available at approximately 3400 schools.
Financial Aid Package – The financial aid awards offered to a prospective student that are itemized in the Award Letter.
Financial Need – Term used to reference the difference between the Cost of Attendance and the Expected Family Contribution (EFC).
Free Application for Federal Student Aid (FAFSA) – Application used to determine a student’s eligibility for federal financial aid including grants, loans and work-study programs. It is often used by schools to determine eligibility for state and school-based aid as well.
Grace Period – Period of time after a student stops attending school at least half time and before they are required to start paying back student loans.
Grant – A financial aid grant is money awarded to a student for purposes of paying college expenses. A grant does not need to be repaid. Grants are given by the federal government, state governments, schools, and sometimes, private institutions.
Half-time - Half-time attendance is defined as a minimum of six credit hours per term for undergraduate students and three credit hours for graduate students. Many federal financial aid programs require a minimum of half-time attendance.
Income Based Repayment (IBR) – Federal loan repayment schedule which is adjusted based on a person’s income. It is available to student borrowers but not parents. It includes a provision which forgives the remainder of a loan, under certain conditions, after 25 years.
Independent Student – Any of the following are qualifications for a student to be considered independent: at least 24 years old, married, a graduate or professional student, has a legal dependent who is not a spouse, is an Armed Forces veteran, is an orphan or ward of the court. Financial aid calculations for independent students will not include their parent’s income or assets.
Interest accrual – The accumulation of interest which is calculated based on the loan’s outstanding principal amount and the interest rate. For federal subsidized loans, there is no interest accruing while the student is in school and during the grace period. For all other federal and private loans, interest will accrue from when the loan money is disbursed.
Loan consolidation – Multiple school loans may be consolidated into one loan to simplify the repayment process. Consolidating also gives the borrower the option of choosing a longer repayment term which will result in a lower monthly payment.
Loan Default – A person is in default on a federal loan when they haven’t made any payments in 270 days. When this occurs, the government may offset tax rebates, garnish wages, charge for collection costs and take legal action. It will affect the person’s credit rating as well.
Loan Deferment – A period of time when the lender allows the borrower’s payments to be postponed due to a specific circumstance such as unemployment, returning to school or military active-duty service.
Loan Delinquency –To be late in making one or more payments.
Loan Forbearance –An agreement between the lender and borrower to temporarily change the terms of repayment. The payments may be decreased, the due dates extended or payments postponed.
Loan Forgiveness – When the lender cancels the loan and the borrower no longer needs to repay the remainder. There are certain circumstances when a federal loan will be forgiven. Those working as teachers in certain areas, public servants and military personnel are possible candidates for federal loan forgiveness.
Merit-based financial aid – Any type of financial aid that is awarded based on a student’s academic performance, special talent, leadership potential or other criteria that is defined by the awarding institution.
Needs-based financial aid – Any type of financial aid that is awarded based on a student’s financial situation. The intent is to make college affordable to students who do not have the resources to pay for college themselves.
Origination Fee – A fee charged by the lender of a loan to cover the cost of administering the loan. It is typically taken out of the disbursed amount of the loan.
Parent PLUS Loan – A federal loan program available to parents of dependent undergraduate students. The amount that can be borrowed is limited to the difference between the cost of attendance and other financial aid that has been awarded.
Private Loan – A loan obtained through a commercial lender where there is no government program defining the terms of the loan.
Professional Student – A student who is enrolled in an advanced program studying law or medicine.
Promissory Note – A legal document which the borrower must sign before the loan money is disbursed. It includes the terms of the loan including the interest rate, fees and other terms.
Repayment Schedule – Details how the loan is to be paid back. It includes the amount of principal and interest payments, frequency, number of payments and date of first payment.
Research Assistantship – Graduate student financial aid program which allows a student to work as a research assistant in return for a full or partial tuition waiver and sometimes, a living expense stipend.
Satisfactory Academic Progress – A requirement for a student to continue receiving federal student aid as well as other financial aid. Each school determines what qualifies as satisfactory academic progress.
Scholarship – Money awarded to a student to pay college costs. Scholarships do not need to be paid back. They are awarded by colleges and private institutions based on criteria specific to each scholarship.
Student Aid Report (SAR) – A report created as a result of submitting the Free Application for Federal Student Aid (FAFSA). It summarizes the financial information provided on the FAFSA and gives the student’s Expected Family Contribution (EFC). The student and the schools listed on the FAFSA will receive a copy of this report.
Student PLUS Loan - Federal loan program available to graduate and professional students. The amount that can be borrowed is limited to the difference between the cost of attendance and other financial aid that has been awarded.
Subsidized loan – A loan that is subsidized by the U.S. Department of Education. Interest on a subsidized loan is paid by the government while the student is in school and during the grace period and has a lower interest rate than an unsubsidized loan.
Teaching Assistantship – Graduate student financial aid program which allows a student to work as a teaching assistant in return for a full or partial tuition waiver and sometimes, a living expense stipend.
Title IV – Refers to the Higher Education Act of 1965 which covers the administration of the federal government’s student financial aid programs. The Act has been reauthorized and amended in the years since.
Unsubsidized loan – A loan that is not subsidized by the U.S. Department of Education. It will accrue interest from the date of disbursement and will have a higher interest rate than a subsidized loan.
Verification – Refers to the verification process of the Free Application for Federal Student Aid (FAFSA). Between 30 and 100 percent of FAFSA’s will be verified at any given school. Students and their parents will be asked to submit documentation such as tax forms that will confirm information provided on the FAFSA.
