A Glossary Of Student Loan Terms
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A Glossary of Student Loan Terms and Definitions Ė The Loan Education

Are you a student, relying on student loans to get you through college or university? Or are you just applying for a student loan, looking forward to a higher education? The process of applying for any loan, let alone a student loan, can be confusing if you donít understand the terms that are fired at you. The accounting sector sometimes forgets that you havenít got our education yet Ė thatís why youíre applying for a student loan.

So weíve compiled this glossary of student loan terms and definitions to give you an education before your education. You need to know, just like the rest of your studies, exactly whatís going on. So read on, and learn.

  • Accrued interest
    Accrued interest is the amount of interest, calculated daily, thatís accumulated on the unpaid balance of your loan.
  • Amortization
    Amortization is the process that reduces your loan balance by making monthly payments.
  • Assets
    Assets refer to your financial worth, including your home, business, savings and checking account, bonds, stocks, trust funds, real estate, etc.
  • Award letter
    An award letter is issued by a collegeís Financial Aid Office (FAO), listing all the financial assistance offered to a student.
  • Borrower
    A borrower is a person to whom a loan is given with the condition that he repay it. A promissory note is signed as a formal promise to repay the loan.
  • Capitalization
    Capitalization occurs when unpaid interest is added to the principal balance of the loan, thus increasing the amount of the loan, and increasing monthly payments.
  • Co-borrower
    A co-borrower, a second or additional party, may receive part of the loan proceeds and agrees to repay the loan.
  • Co-signer
    A co-signer signs a promissory note, thus agreeing to pay the loan if the borrower defaults.
  • Cost of Attendance (COA)
    The cost of attendance is the total amount a student has to pay, determined by the collegeís FAO, to attend school for one academic year. It may include tuition, room and board, books, supplies, transportation and personal expenses.
  • Credit-based loans
    Credit-based loans are based on your credit worthiness as opposed to the Federal Stafford Loans and grants, which are determined by a need analysis process, based mostly on the cost of education.
  • Default
    Default occurs when you fail to pay your loan according to the terms on your promissory note.
  • Deferment
    Deferment refers to the period of time during your repayment in which you, after meeting certain criteria, arenít required to make your regular monthly payments.
  • Delinquent
    If a payment isnít received by the due date, itís considered delinquent.
  • Direct lending schools
    Direct lending schools are colleges or universities which have chosen to place all their studentsí federally-insured student loans through the Federal Direct Lending Program.
  • Disbursement notification
    A disbursement notification marks the successful completion of the loan application process. It informs you that your loan has been approved, and states when the money will be sent, as well as the amount of the loan, including any fees.
  • Disclosure statement
    A disclosure statement informs the involved parties of the actual cost and terms of a loan, including the interest rate and any additional finance charges.
  • Emergency loan program
    An emergency loan program provides for a student to get a short-term, low-interest loan, administered by the schoolís FAO.
  • Exit interview
    An exit interview is a counseling session conducted with the schoolís FAO before a student graduates or withdraws, to review the terms and obligations of a student loan.
  • Expected Family Contribution (EFC)
    The EFC refers to what a family is expected to pay toward the cost of the college loan. Itís determined by the FAFSA need analysis formula established by the federal government, and is found on the Student Aid Report (SAR).
    The FAFSA or, Free Application for Federal Student Aid, is a standard federal form that determines your eligibility for most types of financial aid. Your eligibility is determined by your income, asset, and tax information from you and/or your parents.
  • Federal Family Education Loan (FFEL) Program
    The FFEL program is authorized by the federal government in the Higher Education Act of 1965. The loans in this program are funded by lenders, and guaranteed by guaranty agencies; but theyíre ultimately insured by the federal government.
  • Forbearance
    Forbearance is temporary postponement of payments of the principal of a loan; interest only may be paid, or it may be added on to the end of the loan.
  • Financial aid package
    A financial aid package is the total amount of assistance available to the student, including all grants, scholarships, work-study and loans from school, state and federal programs, as listed in a collegeís financial aid award letter.
  • Financial need (or aid eligibility)
    Financial need is the difference between the total cost of attendance and the EFC.
  • Grace period
    The grace period is the amount of time before the principal loan repayment begins after a student graduates, leaves school or drops below half-time status. Payments donít need to be paid during this time.
  • Guarantee agency
    A guaranty agency is a state or non-profit organization, which insures student loans, pursuant to an agreement with the Secretary of Education under the Higher Education Act.
  • Interest
    Interest is a fee charged to borrow money, usually expressed as a percentage of the outstanding amount, which accrues over the life of a loan.
  • Late fee
    A late fee is charged by the lender if a student loan payment isnít received with 15 days of the due date.
  • Master Promissory Note (MPN)
    An MPN is an agreement the borrower signs that legally binds him to pay the loan, with interest, in periodic installments.
  • Multiple disbursements
    Multiple disbursements are paid in more than one transaction.
  • Origination fee
    An origination fee is charged by the federal government on FFEL loans to cover the cost of processing the loan.
  • Payoff balance
    The payoff balance refers to the total amount youíd owe if you paid off your entire loan, including the outstanding principal plus interest.
  • Principal
    The principal is the amount of the loan that has to be repaid; the interest is added to the principal and included in your payment.
  • Status
    Status refers to the condition of a student loan.
  • Student Aid Report (SAR)
    An SAR is sent to a student by the government 4-6 weeks after submitting an FAFAS. It lets the student know what heís eligible for as far as the EFC and other financial federal student aid is concerned.
  • Subsidized loan
    The government pays the interest on a subsidized loan while the student is enrolled in school at least half-time and during grace periods and deferment.
  • Unsubsidized loan
    With an unsubsidized loan, the borrower always has to pay the interest while heís in school, or during deferment, forbearance and grace periods.

So there you have a comprehensive list of relevant terms. Student loans donít have to be complicated. You have enough to learn once you start your studies. Make sure you understand these terms and you wonít have to worry when you apply for a student loan. Then, using that loan to get a good education, you can move out into the world and work towards your life goals Ė towards success!

About The Author

Gareth Marples is a successful freelance writer providing valuable tips and advice for students applying for direct college loans, as well as student credit cards or looking for quick cash til payday loans. His numerous articles offer moneysaving tips and valuable insight on typically confusing topics.

This "Glossary of Student Loan Terms & Definitions" reprinted with permission.

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