A – B – C – D – E – F – G – H – I – J K – L – M – N – O – P – Q – R – S – T – U – V – W
Academic Year
The academic year is the portion of the year while classes are in session, typically from around August to May.
Acceleration
Loan acceleration is when your lender demands immediate repayment of the outstanding balance of your loan. This can happen in circumstances such as:
- If you receive loan money, but do not attend any classes at the school where the loan was disbursed.
- If you use the loan money to pay for things other than educational expenses at the school you agreed to attend.
- If you default on your loan.
- If you make a false statement which allows you to receive loan money you are not actually eligible for.
Age of Majority
The age of majority is the age at which a minor is considered an adult. The age of majority will vary based on the country and state you are located in. In most cases, the age of majority is 18.
Aggregate Limit
An aggregate limit, also called a cumulative limit, is the total amount you can borrow from a lender or loan program. For example, if a lender has an aggregate limit of $100,000, you cannot borrow more than $100,000 total from that lender.
Amortized
When a student loan is amortized, it means that a portion of the monthly payment is put towards the loan principal, while the other portion is put towards the interest. An amortization schedule is a record of loan payments that shows how the loan balance will decrease over time with regular payments.
Annual Taxable Income
Annual Taxable Income is the amount of gross income the Internal Revenue Service (IRS) deems subject to taxes.
Application Fee
An application fee is a one-time, up-front fee you pay to apply for a loan. Application fees are usually non-refundable.
APR
An Annual Percentage Rate, or APR, is the interest rate applied to a student loan, plus additional fees. APR is expressed as a percentage and is calculated on a yearly basis.
APR Cap
An APR cap is a limit on how high an interest rate can rise on a variable rate loan. For example, an APR cap may read, “18.00%.” This means that during the duration of your loan, your interest rate will never rise above 18.00%. APR caps provide borrowers with protection.
Autopay Discount
An autopay discount is a discount on your student loan interest rate for opting into automatic payments.
Award Year
An award year is the school year in which financial aid can be applied to fund your education. In most cases, the award year is July 1st to July 30th of the following year.
Borrower
A borrower is an individual who has taken out some type of loan (i.e. private student loan, federal student loan, etc.).
Borrower Benefits
Borrower benefits are cash “give-aways” sponsored by lenders. Scholarships, referral awards, or cash-back upon graduation are all types of borrower benefits. The terms of eligibility for the benefit are set by the lender.
Collection Agency
A collection agency is a company used by student lenders to collect debt that is in default or past due.
Collection Costs
Collection costs are fees incurred when your debt is recovered by a collection agency.
College Application
A process by which prospective students apply for acceptance at a college or university.
Consolidation
In terms of student loans, consolidation is the process of combining multiple student loans into one. This can be done through either a federal Direct Consolidation Loan or a private student loan refinance.
Cosigner
A cosigner is someone who agrees to sign a loan alongside the borrower, taking legal responsibility for paying back the loan if the borrower does not. A cosigner is often a family member or friend but can be anyone who is willing to cosign.
Cosigner Release
A cosigner release allows a cosigner to be removed from a loan after you prove you’re capable of making payments on your own. Lenders specify their own criteria of how you qualify for a cosigner release. If a cosigner is released from your loan, the loan will be removed from the cosigner’s credit report.
Cost of Attendance
The cost of attendance is the total amount it will cost to attend a school.
Credit Bureau
Companies that collect credit ratings on individuals from various creditors and make that information available to financial institutions. The three main credit bureaus are Experian, Equifax, and TransUnion.
Credit Check
A financial institution or company may examine a person’s credit history and financial behavior through a process called a credit check. The purpose of the credit check, in terms of student loans, is to determine an applicant’s eligibility for private loans as well as the interest rates they qualify for.
There are two types of credit checks: hard and soft. A soft credit check doesn’t affect your credit score. A hard credit check does affect your credit score. Soft credit checks occur when a borrower checks their rates with a lender. Hard credit checks occur after a borrower has seen their pre-approved rates and submits a formal application for approval.
Credit History
A record of an individual’s credit usage, activity, and bill payments. Credit history is used to indicate whether or not someone can responsibly make payments on their debt.
Credit Report
Credit bureaus prepare credit reports which contain a detailed description of a person’s credit history. This information is used by lenders to determine an individual’s overall creditworthiness.
Credit Score
A credit score is a number between 300 and 850 that represents an individual’s credit worthiness. Credit worthiness is used to describe the willingness of a lender to trust you to pay back your debts. The higher your credit score, the more a lender will consider you able and responsible enough to repay them back.
Creditworthiness
Creditworthiness is a lender’s ability to trust you to pay back your debt. A borrower deemed creditworthy is one that lenders deem able and responsible enough to may loan payments until the debt is paid off.
CSS Profile
When applying to college or university, you will likely utilize the College Board website. A CSS profile is an account with the College Board that includes all of your student information, family finance information, and more. This profile can help you qualify for institutional aid (aid that comes directly from the school you want to attend).
Debt Consolidation
Debt consolidation is the process of combining some or all of your student loans into one new loan. You can consolidate federal student loans through a Direct Consolidation loan or through student loan refinancing. You can consolidate private student loans through student loan refinancing.
Debt-to-Income Ratio (DTI)
An idea of how much monthly income goes towards debt. The DTI is typically calculated by adding up the monthly debt payments and dividing by the total pre-tax monthly income (gross).
Default
Default occurs on a student loan when payments are missed for 270 days (around 9 months). There are consequences associated with default such as the entire unpaid loan balance being due immediately, the default being reported to credit bureaus which can damage your credit score, and the lender pursuing legal action against you.
Deferment
When loan payments are postponed. Borrowers must apply for federal loan deferment, and it typically can only last for up to 3 years. If eligible for a deferment, the borrower may also not be responsible for paying the interest that accrues in the meantime while they are not making payments.
Delinquency
If a single student loan payment is missed, student loan delinquency occurs. The status will remain until the past-due balance is paid completely including any late fees.
Dependency Override
A process by which a dependent student can request to be classified as an independent student for financial aid purposes, given certain circumstances such as, but not limited to:
- An abusive family environment (ie. sexual, mental, or physical abuse)
- Incarceration or institutionalization of both parents
- Abandonment by parent(s)
- Parents lacking the mental or physical capacity to raise the child
- Parents location is unknown and they cannot be located
- Parents are hospitalized for an extended period
- An unsuitable household (ie. child is removed from the household and placed in foster care)
- A married student’s spouse dies
- A married student gets divorced
Dependent
Dependent students are those that rely on a parent or guardian for financial support.
Direct Consolidation Loan
A Direct Consolidation Loan is a federal loan consolidation option that combines multiple federal loans into one big loan and payment. These loans have fixed interest rates determined by averaging the interest rates on the loans being consolidated, rounded up to the nearest ⅛ of one percent.
Direct PLUS Loan
Direct PLUS Loans are broken into two categories: Grad PLUS Loans and Parent PLUS loans. A Direct PLUS Loan is commonly referred to as a Grad PLUS loan when made to a graduate student or Parent PLUS loans when made to a graduate student’s parent.
Disbursement/Disbursed
Disbursement occurs when student loan funds are sent to your school.
Disclosure
A disclosure is intended to reveal information about terms, lenders, rates, and more. A disclosure may inform prospective borrowers about how rates are calculated for a specific lender they are looking into.
Discounts
A discount is a benefit that lenders provide you to lower your monthly payment. Lenders provide discounts to encourage good borrowing behavior.
For example, some lenders offer a discount (0.25%) if you turn on ACH automatic payment. For you, this discount is great because it results in loan savings. For a lender, an automatic payment provides them with a greater guarantee that they’re going to get their payment on-time.
Discretionary Forbearance
Forbearance can also be referred to as a general forbearance or a discretionary forbearance.
Discretionary Income
In general, discretionary income is the amount of money you have left after taxes and necessary expenses.
When used to describe income-based repayment plans, the PAYE plan, and loan rehabilitation, discretionary income refers to the difference between your annual income and 150% of the poverty guideline for your family size and state of residence.
When used to describe income-contingent repayment plans, discretionary income refers to the difference between your annual income and 100% of the poverty guideline for your family size and state of residence.
Early Action
Early action allows you to apply well before a school’s normal application deadline, thus receiving a decision earlier than the traditional response date. Applying early action is not binding.
Early Decision
Early decision allows you to apply well before a school’s normal application deadline, thus receiving a decision earlier than the traditional response date. Applying early decision is binding. This means that if you apply early decision and are accepted, you are agreeing to commit to that school.
Educational Expenses
Educational expenses are school-related expenses such as tuition, enrollment fees, room and board, meal plans, etc.
Eligible Program
In terms of federal aid, an eligible program is one with organized instruction that meets the length requirements necessary to lead to an academic, professional, or vocational degree or certificate.
Eligible Noncitizen
You are considered an eligible noncitizen if you fall into one of the following categories:
- You’re a U.S. National or lawful permanent resident with a green card.
- You’re a conditional permanent resident.
- You have an Arrival-Departure Record from the U.S. Citizenship and Immigration Services, showing one of the following statuses:
- Refugee
- Asylum-granted
- Parolee
- Conditional entrant
- Cuban-Haitian Entrant
- You hold a T-nonimmigrant status or your parent holds a T-1 nonimmigrant status.
- You are a “battered immigrant-qualified alien” who is a victim of abuse by your citizen or lawful permanent resident spouse or parents, or you are the child of a person designated under the Violence Against Women Act.
- You are a citizen of the Republic of Palau, the Republic of the Marshall Islands, or the Federated States of Micronesia.
Eligibility
Eligibility refers to the requirements that a borrower must meet to be approved for a loan from a private lender. If the borrower meets the requirements, they may be eligible.
FICO score is an example of an eligibility requirement. Most lenders require that borrowers have above a certain FICO score to be eligible for a loan.
Emancipated Minor
An emancipated minor is someone who has been legally deemed an adult by the court of their state. Emancipated minors are considered independent students for student loan purposes.
Employment History
An employment history is a record of an individual’s past and current employment. Some private student lenders use employment history to determine eligibility for a loan.
Endorser
An endorser, sometimes required for federal PLUS loans, is someone who signs onto the loan alongside the borrower, agreeing to pay it back if the borrower fails to do so.
Enrollment Status
Enrollment status, often reported by the school you attend, indicates whether you are (or were) full-time, three quarter-time, half-time, less than half-time, withdrawn, graduated, etc.
Entrance Counseling
A federal program designed to ensure that borrowers understand the responsibility that comes with borrowing a student loan. The online program teaches borrowers what a loan is, how interest works, what the repayment options are, and how to avoid delinquency and default. Entrance counseling must be completed before loan money can be disbursed.
Exit Counseling
A federal program designed to ensure that borrowers understand their loan repayment obligations and are prepared for repayment. Exit counseling must be completed upon leaving school or dropping below half-time.
Extended Repayment Plan
An extended repayment plan includes a repayment term of up to 25 years. This can lower your monthly payments substantially, however, you will pay more in interest over time than you would with a shorter repayment plan such as a 10-year plan.
FAFSA
FAFSA stands for Free Application for Federal Student Aid. It is a form that the federal government and colleges use to determine how much aid a prospective college student is eligible for.
Federal Financial Aid
Federal financial aid is provided to you after completion and submission of your FAFSA. This aid can include grants and scholarships, work-study programs, and loans.
Federal Student Loans
The U.S. Department of Education is the government body overseeing all federal student loans. Federal student loan eligibility is determined by your FAFSA.
Federal Student Loans
Federal student loans are those issues by the U.S. Department of Education. These loans are granted after a prospective or current student fills out the FAFSA.
Federal Student Loan Repayment Plans
Federal student loans have 4 main repayment options:
- Standard Repayment
- Graduated Repayment
- Extended Repayment
- Income-Driven Repayment (IDR)
Federal Student Loan Servicer
A loan servicer is a company assigned to handle the billing on federal student loans on behalf of the federal government. There are 9 servicers that are most commonly used:
- Nelnet
- Great Lakes Educational Loan Services, Inc.
- Navient
- FedLoan Servicing
- MOHELA
- HESC/EdFinancial
- CornerStone
- Granite State
- OSLA Servicing
Financial Aid Award Letter
A financial aid award letter provides details on the monetary assistance a prospective student can receive, specifically in the form of federal aid. This letter comes from each specific institution that the student has applied to.
Financial Need
In general, financial need is the difference between the cost of attendance and your ability to pay. For federal aid, financial need is calculated by subtracting your Expected Family Contribution (EFC) from the overall cost of attendance (COA).
Fixed Rate
An interest rate that does not change over the life-time of your loan. Fixed rates remain the same for the entire length of a loan.
Forbearance
Forbearance allows borrowers to postpone student loan payments, however, it differs from deferment as the borrower is still responsible for paying the interest that accrues in the meantime. Borrowers can pay the interest as it accrues or allow it to be capitalized and added to the loan balance overall.
FSA ID
A username and password combination used to log in to U.S. Department of Education systems online.
Grad PLUS Loans
Grad PLUS Loans is a type of federal student loan for graduate or professional students.
Graduate Student Loans
Both federal and private student loans have options for graduate students. Federal loans for graduate students include Direct Unsubsidized Loans and Direct PLUS Loans. Eligibility for federal student loans is needs based. Eligibility for private student loans is credit based.
Graduated Repayment Plan
A graduated repayment plan starts your loan payments off at a lower amount and slowly increases them every 2 years. A graduated repayment plan will still land you with your loans completely paid off after 10 years, but you will pay more in interest over time in comparison to a Standard Repayment Plan.
Grant
Financial aid that doesn’t need to be repaid. Federal grants are given out based on financial need and a list of other requirements. State and school based grants are available as well, but vary by state and institution.
Gross Income
Money earned before taxes.
Half-Time Enrollment
When you are enrolled in half of the expected course load, often 6 credit hours per semester.
Income
The amount of money you make per year. Household income includes the amount married couples make together.
Income-Based Repayment Plan
IBR is an option for federal student loan borrowers who took out loans after July 1, 2014. It sets monthly payments at 10% of the discretionary income with a repayment term of 20 years.
Income-Contingent Repayment Plan
ICR sets payments at the lesser of either:
- 20% of discretionary income OR
- Whatever your fixed payment would be with a 12 year repayment period
Income-Driven Repayment Plan
Income-driven repayment options depend on your income and family size. This can reduce your monthly payment significantly if your income is low.
Independent Student
When used in terms of federal student aid, an independent student is someone who is at least one of the following:
- Born prior to January 1, 1999
- Married
- A graduate or professional student
- A veteran
- A member of the armed forces
- An orphan
- A ward of the court (an individual who is deemed by the courts to be unable to manage their own affairs and has been placed under the legal control or protection of a guardian by the courts)
- An individual with legal dependents other than a spouse
- An emancipated minor
- An individual who is homeless or at risk of becoming homeless
Interest
Interest is the amount of money a lender charges you for borrowing a loan. It is the “extra” money you pay the lender for the opportunity to use their funds.
Interest is typically expressed as an annual percentage rate (APR). You may see a lender differentiate between interest rate and APR. There is a subtle difference. APR is the annual cost of a loan to a borrower, including fees. Interest rate is the annual cost of a loan to a borrower, excluding fees.
Interest-Only Payment Plan
Under this payment plan, you’ll only pay the interest that accrues while you’re in school. After graduation, you’ll make full monthly payments. This plan saves you money in interest over time.
Interest Rate
Federal and private student loan interest rates are calculated differently.
Federal loan interest rates are set by Congress each year. Private lenders set their interest rates based on a variety of factors, typically including the creditworthiness of the borrower.
Iraq and Afghanistan Service Grant (IASG)
Iraq and Afghanistan Service Grant is a federal grant that provides money to students whose parent(s) or guardian(s) died as a result of military service in Iraq or Afghanistan.
Legal Guardianship
A court designation that authorizes an individual to care for someone in place of parents. If you have a legal guardian, you qualify as an independent for federal aid purposes, meaning you do not need to report your parents’ income on the FAFSA.
Lender
The organization or company you borrow money from.
Loan
Money given to an individual in exchange for repayment of the money, usually with interest.
Loan Discharge
Removal of the obligation to repay a loan, often granted for extenuating circumstances.
Loan Forgiveness
Removal of the obligation to repay a loan, often granted after working in a particular industry.
Loan Limits
The minimum and maximum student loan debt that private lenders are willing to refinance.
Loan Originator
Someone who takes a prospective student loan borrower’s application, reviews it, handles the approval process, provides the loan agreement, and disburses the funds. Lenders work with third-party loan origination services to provide borrowers digital lending experiences.
Loan Principal
Principal, also known as the principal balance, is the amount still owed on a student loan or refinance loan.
Loan Rehabilitation
The process by which a borrower can bring their student loan out of default by abiding by certain repayment requirements.
Loan Servicer
The company who handles loan collection, customer service, and loan maintenance.
Master Promissory Note
The Master Promissory Note (MPN) is a legal document in which borrowers agree to repay their federal student loans, including any interest that accrues, to the U.S. Department of Education.
Merit-Based
Merit-based aid is aid that does not factor in a student’s financial need. Rather, it is based on factors such as academic performance, extracurricular achievements, etc.
Monthly Payment After Graduation
After graduation, you’ll be expected to begin making full monthly payments on your student loans. The size of these monthly payments depends on your loan term, APR and principal balance. Some lenders provide a six month “grace period” before full payments begin. During the “grace period” payments aren’t due but interest accrues.
For loans with a fixed interest rate, monthly payments after graduation are set ahead of time. For loans with a variable interest, monthly payments after graduation are estimates, as the interest rate may increase or decrease during the duration of your loan.
Monthly Payment During School
During school, you may be expected to make payments on your student loans. The size of these monthly payments depends on your payment plan. If you don’t make monthly payments during school, your loan balance will rise. There are three popular types of in-school monthly payments.
You may only pay the monthly interest on your loan while you’re in school. This plan is called “Interest Only.” You may pay a fixed amount while you’re in school that only covers part of the monthly interest that you owe. This plan is called “Partial Interest.” You may pay full monthly payments while you’re in school. This plan is called “Immediate.”
Origination Fee
Fee charged by a lender to cover the cost of processing the loan. The fee is usually expressed as a percentage of the loan size. You will not have to explicitly pay the lender the origination fee. The fee is deducted from the amount of money the lender disburses to you.
For example, if a loan has a 1.00% origination fee and you’re looking to borrow $10,000, your origination fee will be $100. Assuming no other expenses, you’ll receive $9,900 ($100 deducted for the origination fee) but have to pay back the full $10,000.
Out-of-State Student
A student who is attending school outside of their state of legal residence.
Parent PLUS Loan
Student loans offered by the federal government to parents who want to borrow money for their child’s education.
Parent PLUS Loan Refinancing
Borrowing a private loan at a lower interest rate to cover the cost of your current Parent PLUS debt. The new loan, with a lower interest rate, allows you to save money.
Payment Plan
A payment plan is a way to pay back a loan over an extended period of time. For private student loans, there are four common payment plans: Deferred, Immediate, Interest Only, Partial Interest.
- Deferred payment: You’ll pay nothing during school but your loan balance grows.
- Immediate: You’ll make full monthly payments while in school.
- Interest Only: You’ll only pay the interest on your loan while you’re in school.
- Partial Interest: You’ll make a fixed monthly payment while you’re in school that only covers part of the interest that you owe.
As a guiding rule, the more you pay toward your loan today, the less you’ll pay in the future.
Pay As You Earn (PAYE)
A repayment plan in which your monthly student loan payments are reduced to 10% of your discretionary income and never more than your payment on a standard 10-year repayment plan.
Prepayment Penalty
Prepayment refers to paying off your full student loan balance earlier than scheduled. Some private lenders have a prepayment penalty, a fee charged for paying off debt faster than agreed upon. Note that student loan lenders are not allowed to charge a prepayment penalty.
Prequalification
The process a lender takes to determine if a borrower is eligible for a loan. If the borrower is eligible, the prequalification process will determine at what rates the borrower qualifies. Prequalification requires a soft credit check which does not impact a borrower’s credit score.
Principal
The amount you initially borrow and agree to pay back.
Private Student Lender
Banks, credit unions, or other financial institutions that lend money to students.
Private Student Loans
Loan funded by private lenders. Private student loans typically require a soft credit check to determine eligibility, as where federal loans do not.
Public Service Loan Forgiveness
A loan forgiveness program designed for people who pursue a career with the federal, state, local, or tribal government or for an eligible not-for-profit organization. Those who qualify and are accepted will receive forgiveness for their entire remaining balance after they’ve made 120 qualifying monthly payments on their loan.
Refinancing Student Loans
Refinancing is a process in which you take out a new private loan at a lower interest rate to replace all of your other loans. This typically also comes with a more favorable repayment term.
Repayment Term
A repayment term is the length of time a borrower has to repay their debt in full.
Revised Pay As You Earn (REPAYE)
Under REPAYE, the term of a borrower’s loan is extended. This typically means extending to a 20 year repayment term for undergraduate loans and a 25 year repayment term for graduate loans. Under REPAYE, the monthly payment is also usually capped at 10% of the discretionary income.
Satisfactory Academic Progress (SAP)
Successful completion of the coursework necessary to progress toward an eligible certificate or degree.
Scholarship
A type of financial aid that you don’t have to pay back. These can be based on merit, financial need, or a combination of both.
Spouse Loan Consolidation
A process that involves combining all of you and your spouse’s loans together into one new loan instead of keeping separate loan accounts. PenFed Credit Union is the only lender that offers this option of Spouse Loan Consolidation.
Standard Repayment Plan
Standard Repayment Plans are the default repayment plan for federal student loans that require a fixed monthly payment with the goal of paying off the loan in full in 10 years.
Student Loan Consolidation
Consolidation involves combining multiple student loans into one loan, typically through a Direct Consolidation Loan or a student loan refinance.
Student Loan Grace Period
When you initially take out a loan, you typically don’t have to start making payments on it immediately. Oftentimes, payments will be automatically deferred until 6 months after graduation, however, this grace period varies depending on the loan you have and your specific lender.
Student Loan Interest Tax Deduction
A tax deduction for student loan borrowers that allows them to deduct all or some of the amount they paid in interest on their student debt from their income.
Subsidized Student Loan
Direct Subsidized Loans are federal student loans available to students with financial need. There is no credit check for these loans, and interest does not accrue while you are in school and for the first 6 months after you leave school.
Total and Permanent Disability (TPD) Discharge
A form of student loan forgiveness given to borrowers who are unable to repay their debt due to a permanent mental or physical disability.
Total Interest Expense
Total interest expense is the amount of interest that accrues across the entirety of a borrowing period. It is the total cost of borrowing a loan, excluding one-time fees (i.e. origination fee).
For a fixed rate loan, total interest expense is set to a specific monetary amount (assuming the borrower makes minimum monthly payments on-time during their payback period). For a variable rate loan, total interest expense is an estimate. Because the interest rate of a variable rate loan either increases or decreases over time, it’s impossible to know exactly how much interest will accrue over a borrowing period.
Tuition
Fees associated with learning at a college or university.
Type of Interest Rate
There are two types of interest rates for student loans: fixed and variable. A fixed rate loan has the same interest rate for the entirety of the borrowing period, while variable rate loans have an interest rate that changes over time.
Borrowers who prefer predictable payments generally like fixed rate loans, which won’t change in cost. The price of a variable rate loan will either increase or decrease over time, so borrowers who believe interest rates will decline tend to choose variable rate loans.
In general, variable rate loans have lower interest rates and can be used for affordable short term financing.
Undergraduate Student
A student pursuing a degree at their first level of higher education. In other words, a student at a college or university who has not yet earned a degree.
Unsecured Loan
Unsecured loans are those that don’t require any form of collateral. These loans tend to have higher interest rates as they are riskier to the lender. Student loans are a type of unsecured loan.
Unsubsidized Student Loan
Direct Unsubsidized Loans are sponsored by the Department of Education and available to both undergraduate and graduate students. These loans are not needs based. There is no credit check requirement for these loans, however, the government does not cover the interest for you at any point. Interest starts accruing immediately after the loan is originated.
Untaxed Income
Income excluded from taxation by the Internal Revenue Service (IRS).
U.S. Department of Education
A Presidential cabinet-level department of the U.S. government that is administered by the U.S. Secretary of Education. The budget of this department supports the grants, loans, and work-study programs provided to students and families to pay for college education.
Variable Rate
Variable rates are interest rates that fluctuate over the life of a loan. The rate typically changes on a monthly, quarterly, or annual basis.
Work-Study Programs
Work-study programs are provided to students with financial need based on their FAFSA. The programs provide job opportunities to these students that are typically part-time and flexible, specifically designed to be easier to manage alongside a college education.