Terms and Acronyms


1040 Form, 1040A Form, 1040EZ Form

A Federal Income Tax Return. Every person who has received income during the previous year must file a Federal Income Tax return with the IRS by April 15.


Academic Year

The period during which school is in session, typically August through May.

Accrued Interest

Interest calculated daily on the unpaid principal balance of your loan.

Adverse Credit History

If a recent credit report shows that

  • the borrower is 90 or more days delinquent on any debt, or
  • the borrower had a Title IV debt subject to a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off during the five years preceding the date of the credit report

*Note that the absence of a credit history is not considered an adverse credit history.

Aid Award

An official document issued by a school's financial aid office that lists all of the financial aid awarded to the student. The Financial Aid Award provides details on the analysis of your financial need and the breakdown of your financial aid package according to amount, source and type of aid.

Alternative Loans

See Private Loans


An item of value, such as a family's home, business, and farm equity, real estate, stocks, bonds, mutual funds, cash, certificates of deposit (CDs), bank accounts, trust funds and other property and investments

Asset Protection Allowance

The portion of your parents' assets that are not included in the calculation of the parent contribution part of the EFC as calculated on the FAFSA. The asset protection allowance increases with the age of the parents.

Award Year

The academic year for which financial aid is requested (or received).


Base Year

The tax year prior to the academic year (award year) for which financial aid is requested (i.e. for the 2008-2009 FAFSA year, the base year is tax year 2007).


The person who receives the loan and is responsible for repaying the loan.


Campus-based Aid

Financial aid programs that are administered by the university. Such programs include the Perkins Loan and Federal Work-Study.


Releasing a borrower from legal obligation to repay a loan, typically through death or permanent disability unless you meet other criteria of service (i.e. teacher in shortage area or military service).


The addition of unpaid interest charges to the principal balance of a loan, thereby increasing the balance of the loan. Interest is then charged on the new balance, including both the unpaid principal and the accrued interest.


Property that is used to secure a loan. If the borrower defaults on the loan, the lender can seize the collateral (i.e. home, or car).

Collection Agency

A company often hired by the lender or guarantee agency to recover defaulted loans

Compounded Interest

Interest that is paid on both the principal balance of the loan and on any accrued (unpaid) interest. Capitalizing the interest on an unsubsidized Stafford loan is a form of compounding

Consolidation Loan

A loan that combines several student loans into one bigger loan from a single lender. The consolidation loan funds are used to pay off the balances on the other loans


A second borrower on a loan - if the primary borrower stops making payments the co-signer becomes liable for the outstanding balance of the loan

Cost of Attendance (COA)

(Also known as the cost of education or 'budget') The total amount it should cost the student to attend a given year at a college institution including tuition and fees, room and board, books and supplies as well as personal and incidental expenses. Loan fees, if applicable, may also be included in the COA. Schools establish different standard cost of attendance amounts for in-state and out-of state students as well as undergraduate and graduate students.

College Work Study (CWS)

A part time job, also referred to as Federal Work Study. The Federal government pays 60% of the wage and the employer pays the remaining 40% of the wage.

Credit Bureau

An agency that complies and distributes your personal and credit history information to lenders when requested. Information may include personal demographics, payment habits, and number of credit accounts, balances of credit accounts and length of credit.



When the borrower fails to pay several regular installments on time (i.e., payments overdue by 180 days) or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, the state government and the federal government can take legal action to recover the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal aid


Occurs when a borrower is allowed to postpone repayment of a loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period.


When a borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default.

Dependency Status

Determines to what degree a student has access to parent financial resources

Dependent Student

Undergraduate student who receive more than half of their financial support from their parent.

Direct Loans

The William D. Ford Federal Direct Loan Program (a.k.a the Direct Loan Program) is a federal program where the school becomes the lending agency and manages the funds directly, with the federal government providing the loan funds

Direct Loan Servicer

The company that services and collects payments, deferments, forbearances etc.


The release of loan funds to the school for delivery to the borrower. Loan funds are first credited to the student's account for payment of tuition, fees, room and board and other school charges. Any excess funds are then paid to the borrower.


Eligible Non-Citizen

Someone who is not a U.S. citizen but is eligible for Federal student aid. Eligible non-citizens include U.S. permanent residents who are holders of valid green cards, U.S. nationals, holders of form I-94 who have been granted refugee or asylum status and certain other non-citizens. Non-citizens who hold a student visa or an exchange visitor visa are not eligible for Federal student aid.


When a child is released from the control of a parent or guardian. Declaring a child to be legally emancipated is not sufficient to release the parents or legal guardians from being responsible for providing for the child's education. More information About Dependency

Enrollment Status

determining if a student is enrolled full-time or half-time.

EFC - Expected Family Contribution

The number that's used to determine your eligibility for federal student financial aid. This number results from the financial information you provided in your FAFSA application and is impacted by the student and parents' assets, income, the number in the household, the number in college and the age of the older parent.


Federal Family Education Loan Program (FFELP)

The funds for these loans are provided by private lenders, such as banks, credit unions and savings & loan associations. These loans are guaranteed against default by the federal government.

Federal Processor

The organization that processes the information submitted on the FAFSA and uses it to compute eligibility for federal student aid.


A form of aid given to graduate students to help support their education.

Financial Aid

Money provided to the student and the family to help them pay for the student's education. Financial aid includes grants, scholarships, work-study, and student and parent loans.

Financial Aid Award

An official document issued by a school's financial aid office that lists all of the financial aid awarded to the student. The Financial Aid Award provides details on the analysis of your financial need and the breakdown of your financial aid package according to amount, source and type of aid.

Financial Aid Package

The complete collection of grants, scholarships, loans and work-study employment from all sources (federal, state, institutional and private) offered to a student to assist them in paying for their education.

Financial Need

The difference between the cost of attendance and the expected family contribution is the student's financial need -- the gap between the cost of attending the school and the student's resources. The financial aid package is based on the amount of financial need.

(Financial Need = Cost of Attendance - Expected Family Contribution)

First-Time Borrower

A first-year undergraduate student who has no unpaid loan balances outstanding on the date he or she signs a promissory note for an educational loan. Read more about Entrance and Exit Counseling.

Fixed Interest

The interest rate stays the same for the life of the loan.


A time when the lender allows the borrower to temporarily postpone repaying the principal, but the interest charges continue to accrue, even on subsidized loans. The borrower must continue paying the interest charges during the forbearance period. Forbearances are granted at the lender's discretion, usually in cases of extreme financial hardship or other unusual circumstances when the borrower does not qualify for a deferment.

FAFSA - Free Application for Federal Student Aid

Federal application to apply for grants, work study and Federal Loan programs. The application is free and needs to be completed every year. FAFSA deadlines can vary between schools. Visit the Official FAFSA Website (http://www.fafsa.gov).


Gift Aid

Financial aid, such as grants and scholarships, which does not need to be repaid.

Grace Period

A short time period after graduation or withdrawal during which the borrower is not required to begin repaying his or her student loans. The grace period may also begin if the student drops below half-time enrollment.

Grade point average (GPA)

An average of a student's grades, converted to a 4.0 scale (4.0 is an A, 3.0 is a B, and 2.0 is a C)

Graduate Assistantship

There are two types of graduate assistantships: teaching assistantships (TA) and research assistantships (RA). TAs and RAs receive a full or partial tuition waiver and a small living stipend.

Graduate PLUS Loan

A federal loan for graduate or professional students to supplement their Stafford Loans.

Graduated Repayment

A repayment schedule where the monthly payments are smaller at the start of the repayment period and gradually become larger.


A type of financial aid based on financial need that the student does not have to repay.

Gross Income

Income before taxes, deductions and allowances have been subtracted


Half-Time Enrollment

Undergraduate students need to be enrolled in 6 credits to be considered half-time and graduate students need to be enrolled in 5 credits to be considered half-time.

Health Profession Student Loan (HPSL)

A low interest loan administered by the U.S. Department of Health and Human Services (HHS) for students studying to become a health profession.


In-State Student

A student who has met the legal residency requirements for the state, and is eligible for in-state student tuition at public colleges and universities in the state.


The amount of money received from employment (salary, wages, tips), profit from financial instruments (interest, dividends, capital gains), or other sources (welfare, disability, child support, Social Security and pensions).

Income Contingent Repayment

The size of the monthly payment depends on the income earned by the borrower. As the borrower's income increases, so do the payments. Monthly payments are capped at 20% of discretionary income.

Independent Student

A student who can meet one of the following criteria: at least 24 years old as of January 1 of the academic year, is married when the FAFSA is completed, is a graduate or professional student, has a legal dependent other than a spouse, is a veteran of the U.S. Armed Forces, or is an orphan or ward of the court. A parent refusing to provide support for their child's education is not sufficient for the child to be declared independent. Read more about FAFSA Dependency .


The amount charged to the borrower for the privilege of using the lender's money. Interest is usually calculated as a percentage of the principal balance of the loan.



A bank, credit union, savings and loan association, or other financial institution that provides funds to the student or parent for an educational loan.


An interest rate that banks charge one another for a loan. The rate is officially fixed once a day by a group of large London banks and can impact financial markets and rates around the world. Private loan interest rates may be based on the LIBOR with an additional percentage added on based on the borrower's credit and the lender's choice.


A type of financial aid which must be repaid, with interest

Loan Forgiveness

The federal government cancels all or part of an educational loan because the borrower meets certain criteria (e.g., is performing military or volunteer service).


Maturity Date

The date when a loan comes due and must be repaid in full.

Merit-based Aid

Financial aid that is awarded based on academic, artistic or athletic merit or some other criteria, and does not depend on the existence of financial need


Need-Based Aid

Financial aid that depends on your financial situation. Most government sources of financial aid are need-based.

Net Income

Income after taxes, deductions and allowances have been subtracted.


Origination Fee

Fee paid to the bank to compensate them for the cost of administering the loan. The origination fees are charged as the loan is disbursed

Outside Scholarship

A scholarship that comes from sources other than the school and the federal or state government.

Out-of-State Student

A student who has not met the legal residency requirements for the state, and is often charged a higher tuition rate at public colleges and universities in the state.


When a student receives more financial aid than their cost of attendance



The process of assembling a financial aid package.

Parent Contribution

An estimate of the portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university and other relevant factors. Students who qualify as independent are not expected to have a parent contribution.

Parent PLUS Loan - Parent Loans for Undergraduate Students (PLUS)

Federal loans available to parents of dependent undergraduate students to help finance the child's education. There is a minimal credit check required for the PLUS loan.

Pell Grant

Federal grant based off of the EFC determined by the FAFSA and awarded to high need students

Perkins Loan

A federal loan in the name of the student that is awarded to high need students. It is subsidized while the student is enrolled at least half-time.

Prepaid Tuition Plan

A college savings plan that is guaranteed to rise in value at the same rate as college tuition.


An amount paid on a loan when nothing is required or an amount paid in excess of what is required

Prime Rate

The interest rate that banks charge their most credit worthy customers and is driven from the Federal Funds Rate set by the Federal Reserve. Private loan interest rate may be based on the prime rate with an additional percentage added based on the borrower's credit and the lender's choice.


The amount of money borrowed or remaining unpaid on a loan. Interest is charged as a percentage of the principal

Private Loans

Education loan programs established by private lenders to supplement the student and parent education loan programs available from federal and state governments.

Professional Judgment

Allows the financial aid administrator to adjust the EFC, adjust the COA, or change the dependency status (with documentation) when extenuating circumstances exist. Also see Special Conditions.

Promissory Note

The binding legal document that must be signed by the borrower before loan funds are disbursed by the lender. The promissory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy and cancellations.


Repayment Schedule

Discloses the monthly payment, interest rate, total repayment obligation, payment due dates and the term of the loan.

Repayment Term

The length of time given to pay off a loan, typically listed in months.


Satisfactory Academic Progress (SAP)

Federal regulations require the Office of Student Financial Aid to monitor the academic progress of students receiving financial aid to ensure they are making progress towards obtaining a degree.

Special Conditions Appeal

A formal request to have a financial aid administrator review your aid eligibility and possibly use Professional Judgment to adjust the figures on your FAFSA if you believe the financial information on your financial aid application does not reflect your family's current ability to pay (e.g., because of death of a parent, unemployment or other unusual circumstances).


A form of financial aid given to undergraduate students to help pay for their education, typically awarded on the basis of academic merit or financial need. Scholarships can be awarded by your university, college, department or an outside source. Scholarships do not need to be repaid.

Selective Service

Registration for the military draft. Male students who are US citizens and have reached the age of 18 and were born after December 31, 1959 must be registered with Selective Service to be eligible for federal financial aid.

Self Help Aid

Financial aid in the form of loans and student employment.


A company designated to track and collect information and payments on a loan on behalf of a lender.

Stafford Loans

Federal student loans that come in two forms, subsidized and unsubsidized.

Student Aid Report (SAR)

Summary of the information submitted on the FAFSA.

Subsidized Loan

A loan that the government pays the interest on while the student is in school enrolled half-time, during the six-month grace period and during any deferment periods. Subsidized loans are awarded based on financial need.


Teaching Assistantship

A form of financial aid awarded to graduate students to help support their education. Teaching assistantships usually provide the graduate student with a waiver of all or part of tuition, plus a small stipend for living expenses.


Unsubsidized Loan

A federal loan that is accrues interest. The borrower is responsible for the interest on an unsubsidized loan from the date the loan is disbursed, even while the student is still in school. Unsubsidized loans are not based on financial need

US Department of Education

Government agency that administers several federal student financial aid programs, including the Federal Pell Grant, the Federal Work-Study Program, the Federal Perkins Loans, the Federal Stafford Loans and the Federal PLUS Loans.


Variable Interest

The interest rate changes periodically


A review process in which the FAO determines the accuracy of the information provided on the student's financial aid application. During the verification process the student and parent will be required to submit documentation for the amounts listed (or not listed) on the financial aid application. Such documentation may include signed copies of the most recent Federal and State income tax returns for you, your spouse (if any) and your parents, proof of citizenship, proof of registration with Selective Service, and copies of Social Security benefit statements and W2 and 1099 forms, among other things. Financial aid applications are randomly selected by the Federal processor for verification, with most schools verifying at least 1/3 of all applications. If you refuse to submit the required documentation, your financial aid package will be canceled and no aid awarded


For Federal financial aid purposes such as determining dependency status, a veteran is a former member of the US Armed Forces (Army, Navy, Air Force, Marines or Coast Guard) who served on active duty and was discharged other than dishonorably (i.e., received an honorable or medical discharge). You are a veteran even if you serve just one day on active duty - not active duty for training - before receiving your DD-214 and formal discharge papers. ROTC students, members of the National Guard, and most reservists are not considered veterans.


W-2 Form

The form listing an employee's wages and tax withheld.

Ward of the Court

Someone under the protection of the courts.