Glossary of Financial Aid Terms
Accrued Interest: the interest that accumulates on the unpaid principal balance of a loan
Annual Percentage Rate (APR): the interest maintained on a loan for a one-year period
Capitalization: the addition of unpaid accrued interest onto the principal balance of a loan that increases the total outstanding debt.
Consolidation: combining multiple education loans into a new loan with a new payment schedule and interest rate
Default: the failure to repay a loan in accordance with the terms of the promissory note; occurs after 270 days of nonpayment on a federal loan account or 120 days of nonpayment on a private loan account
Deferment: an approved temporary suspension of loan payments based on certain events or criteria
Delinquency: the failure to make scheduled monthly loan payments when they are due
Disbursement: a financial transaction that occurs when a lender releases loan funds
Expected Family Contribution (EFC): the dollar amount that a family is expected to pay toward a student's educational costs; a Federal calculation based on family earnings, assets, students in college, and size of family
FDSLP: the Federal Direct Student Loan Program
Financial Need: the difference between the student's educational costs and the Expected Family Contribution
FFELP: the Federal Family Education Loan Programs formerly known as the GSL-Guaranteed Student Loan Programs
Forbearance: the approved temporary suspension of loan payments, due to a financial hardship, during which interest continues to accrue
Free Application for Federal Student Aid (FAFSA): the application students must first complete in order to apply for virtually all forms of financial aid assistance
Grace Period: the period after a student either graduates or leaves school and before loan payments must begin
Graduate (student): a postsecondary student who possesses a bachelor's degree and is pursuing additional postsecondary education
Grants: financial aid that does not have to be repaid; aid usually awarded to students based on financial need
Guarantor: the agency or institution that insures up-to-permissible limits against loss to lenders in the event of default
Interest: the dollar amount associated with borrowing money
Lender: the institution that provides the money to be borrowed through the student loan program
Parent/Graduate PLUS Loan: a Federal loan program through which parents of undergraduate students (Parent PLUS) or graduate students (Graduate PLUS) borrow funds to help pay for an education. Each year they may borrow, from a bank or other lending institution participating in this program, an amount up to the difference between the educational costs and other financial aid.
Private Loan: a loan that is created through a private lending institution, has a private guarantor, and is not part of the Federal Family Educational Loan Program
Promissory Note: the legal and binding contract signed between the lender and the borrower which states that the borrower will repay the loan as agreed upon in the terms of the contract
Scholarships: financial awards that do not usually have to be repaid; monetary aid typically given to students who demonstrate or showpromise of high achievement in areas such as academics, athletics, music, art or other disciplines
Servicer: an organization that acts on behalf of the lender to administer their student loan portfolio and is paid a fee to do so
State Grant Program: state funding coordinated by PHEAA that provides grants to Pennsylvania residents who meet the eligibility criteria and are pursuing postsecondary education
Student Aid Report (SAR): the form students receive (after filing a FAFSA application) that notifies them of their eligibility for Federal student aid
Subsidized Loans: loans for which the Federal Government pays the accrued interest during any approved deferment periods
Title IV Loan: a category of educational loans made, insured, and guaranteed as part of the Higher Education Act of 1965, and includedin the Federal Family Educational Loan Program (FFELP); specifically Stafford, Unsubsidized Stafford, SLS, PLUS, and Consolidation Loans
Title VII Loan: a Health Education Assistance Loan made or insured as part of the Public Health Service Act; specifically HEAL or HEALTH loans
Undergraduate (student): a postsecondary student who has not yet received a bachelor's degree
Unsubsidized Loans: loans for which the borrower is responsible for paying the interest that accrues on the loan from the date of disbursement until the loan is paid in full, regardless of enrollment status
Work-Study Payments: program in which students who work on-campus or off-campus earn funds to help pay for school costs