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Glossary of Common Loan Terms

Financial aid has its own language/vocabulary. This list will help you with some of the most commonly used terms and acronyms and definitions.

• AGI – Adjusted Gross Income
• APR – Annual Percentage rate
• Accrued Interest – Interest that accumulates on the unpaid principal of a loan.
• Amortization – The process of gradually repaying a loan over an extended period of time through periodic installments of principal and interest.
• Award Offer Letter – An official document issued by a school’s financial aid office that lists all of the financial aid offered to the student.
• Campus-based Aid – Financial aid programs that are administered by the university.
• Capitalization – Adding interest to the principal balance of a loan rather than paying it as it accrues; future interest is than based on the higher loan amount.
• COA – Cost of attendance – also known as cost or education or budget.
• Consolidation Loan – A loan that combines several student loans into one bigger loan from a single lender. The consolidation loan is used to pay off the balances on the other loans.
• DL – Direct Loan – A federal program where the school becomes the lending agency and manages the funds directly with the federal government providing the loan funds.
• Default – Failure to make loan payments or otherwise honor a loan’s terms; because default is reported to credit bureaus, it can influence future credit and the ability to receive financial aid.
• Deferment – A temporary postponement of the loan payments that must be approved by the lender.
• Disbursement – The release of loan funds to the school for delivery to the borrower.
• Delinquency – Failure to make an installment payment when it is due, or failure to meet other terms of the promissory note; may lead to default.
• Disclosure Statement – A statement that reflects the actual costs of the loan-including interest and finance charges-to the borrower.
• EFT – Electronic funds transfer
• EFC-Expected Family Contribution – Based on a federal formula, the portion of your and your family’s financial resources that should be available to help pay education costs.
• FAFSA – Free Application for Federal Student Aid
• FAO – Financial Aid Office
• Federal Work-Study (FWS) – Program providing undergraduate and graduate students with part-time employment during the school year.
• FFELP – Federal Family Education Loan Program
• FICO – The version of your credit score developed by and named after the Fair Isaac Corporation. The FICO score is calculated using information from all three major credit bureaus, based on payment history, amounts owed, length of credit history, new credit, types of credit used.
• Forbearance – Permission from a lender to temporarily postpone repaying the loan principal; interest continues to accrue, even on subsidized loans, not an option for loans in default.
• Grace Period – The short time period after graduation during which the borrower is not required to begin repaying a student loan; six months Stafford’s loans and nine months on Perkins loans; no grace period on Grad Plus loans prior to July 1, 2009.
• Grad Plus – Graduate Plus loan for graduate/professional students.
• Guarantee Fee – A 1 percent fee that may be charged on student loans; deducted from the loan to help defray the cost of the student loan program.
• Guaranty Agency – The agency that insures against defaulted loans made under the Federal Family Education Loan Program (FFELP).
• IBR – Income Based Repayment – repayment option to help borrowers keep their loan payments affordable with payment caps based on income and family size.
• Interest – The fee charged to borrowers by lenders for using loan money.
• IRA – Individual Retirement Account
• ICR – Income contingent repayment
• ISIR – Institutional Student Information Report
• LDS – Loans for Disadvantage Students – A health Professions loan for Osteopathic students.
• MPN – Master Promissory Note
• NHSC – National Health Service Corps – Scholarship for primary care students enrolled in Osteopathic, Dental, Nursing or Physician Assistant programs.
• NSLDS – National Student Loan Data Service/where federal loan history is kept.
• Origination Fee – Fee collected by the federal government to partially offset the cost of a loan program; deducted from the loan amount before the borrower receives the money.
• PAYE – Pay As You Earn – a repayment plan
• PSLF – Public Service Loan Foriveness
• PCL – Primary Care Loan – A Health professions loan for Osteopathic students.
• Perkins Loan – Low interest, subsidized loan for students with exceptional financial need.
• Prepayment – Payment on a loan by the borrower sooner than it is due under the terms of the promissory note.
• Principal – The original or remaining amount of a loan before interest is added.
• Promissory Note – A written promise to repay a sum of money to the holder of the loan within a specified time period.
• REPAYE or PAYE plan – Pay as you earn
• Secondary Market – A private lending agency that buys loans from lenders.
• Servicer – The company hired by a lender or secondary market to manage the day-to-day details of loan tracking and collection.
• Student Aid Report (SAR) – Report that summarizes the information included in the FAFSA.
• Subsidized Stafford loan – Need based federal loan.
• Subsidized Interest – Interest paid by the federal government while the borrower is in school, or during grace and deferment periods.
• Unsubsidized Stafford loan – Not need based federal Stafford loan.
• Unsubsidized Interest – Interest paid by the borrower rather than the federal government.
• Untaxed Income – contributions to IRA’s, Keoghs, tax-sheltered annuities and 401k plans, as well as worker’s compensation and welfare benefits.
• Verification – is a review process in which the financial aid office determines the accuracy of the information provided on the student’s financial aid application.