Glossary

Ability-to-Benefit

One of the criteria used to establish student eligibility in order to receive Title IV program assistance is that a student must have earned a high school diploma or its equivalent. Students who are not high school graduates (or who have not earned a General Education Development (GED) Certificate*) can demonstrate that they have the "ability to benefit" from the education or training being offered by passing an approved ability-to-benefit (ATB) test.

Academic Year

A period of time schools use to measure a quantity of study. For example, a school’s academic year  may consist of a fall and spring semester during which a full-time undergraduate student must complete 24 semester hours. Academic years vary from school to school and even from educational program to educational program at the same school.

Accreditation

The school must have accreditation from an accrediting body recognized by the U.S. Department of Education to be eligible to participate in the administration of federal student aid programs. Accreditation means that the school meets certain minimum academic standards, as defined by the accrediting body.

Accrue

The process where interest accumulates on a loan. When "interest accrues on a loan," the interest due on the loan is accumulating.

Agreement to Serve

An agreement under which a student receiving a TEACH Grant commits to the specific obligation to teach for four complete years in a designated highneed field at a low-income elementary or secondary school within eight years of completing or ceasing enrollment in a TEACH Grant-eligible program.

Award Letter

An award letter from a school states the type and amount of financial aid the school is willing to provide the student accepts admission and registers to take classes at that school.

Borrower

Individual who signed and agreed to the terms in the promissory note and is responsible for repaying a loan.

Capitalized

With certain loans, such as Subsidized Stafford Loans, the U.S. Department of Education pays the interest that accrues on the loan while the student is enrolled at least half-time and during periods of deferment. However, with subsidized loans in forbearance, unsubsidized loans, or PLUS Loans, the borrower is responsible for paying interest as it accrues on these loans. If the interest is not paid during the period of forbearance or during a deferment or in-school period for an unsubsidized loan, the interest is capitalized (added to the principal balance). Interest that is capitalized and, therefore, added to the original amount of the loan subsequently accrues interest, adding an additional expense to the loan.

The chart below shows the difference in the total amount you would repay on a $15,000 Direct Unsubsidized Stafford Loan if you paid the interest as it is charged during a 12-month deferment or forbearance period, compared to the amount you would repay if you did not pay the interest and it was then capitalized.

Consolidation

The process of combining one or more loans into a single new loan.

Cost of Attendance (COA)

The total amount it will cost you to go to school—usually expressed as a yearly figure. It’s determined using rules established by law. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care. It also includes miscellaneous and personal expenses, including an allowance for the rental or purchase of a personal computer. Costs related to a disability are also covered. The COA includes reasonable costs for eligible study-abroad programs as well. For students attending less than half-time, the COA includes tuition and fees and an allowance for books, supplies, transportation and dependent care expenses; but can also include room and board for up to three semesters or the equivalent at the institution, but no more than two of those semesters or the equivalent may be consecutive. Talk to the financial aid administrator at the school you’re planning to attend if you have any unusual expenses that might affect your cost of attendance.

Default

Failure to repay a loan according to the terms agreed to when you signed a promissory note. For the FFEL and Direct Loan programs, default is more specific—it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently). The consequences of default are severe. Your school, the lender or agency that holds your loan, the state and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This may affect your credit rating for as long as seven years. For example, you might find it difficult to borrow money from a bank to buy a car or a house. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. Also, you may be liable for loan collection expenses. If you return to school, you’re not entitled to receive additional federal student financial aid. Legal action also might be taken against you. In many cases, default* can be avoided by submitting a request for a deferment, forbearance, discharge or cancellation and by providing the required documentation.

Dependent student

A student who does not meet any of the criteria for an independent student. An independent student one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse.

Direct Loan

William D. Ford Federal Direct Loan (Direct Loan) Program. Loans made through this program are referred to as Direct Loans. Eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Loans include subsidized and unsubsidized Direct Stafford Loans (also known as Direct Subsidized Loans and Direct Unsubsidized Loans), Direct PLUS Loans, and Direct Consolidation Loans. You repay these loans directly to the U.S. Department of Education.

Disbursement

Payment of loan proceeds by the lender. During consolidation, this term refers to sending payoffs to the loan holders of the underlying loans being consolidated.

Eligible Noncitizen

You must be one of the following to receive federal student aid:

If you’re not in one of these categories, you must have an Arrival-Departure Record (I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:

The following documents are not considered in determining your eligibility for federal student aid:

Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau are eligible only for Federal Pell Grants, Federal Supplemental Educational Opportunity Grants, and Federal Work-Study. These applicants should check with their schools’ financial aid offices for more information.

Eligible Program

A program of organized instruction or study that leads to an academic, professional, or vocational degree or certificate, or other recognized educational credential. To receive federal student aid, you must be enrolled in an eligible program*, with two exceptions:

Expected Family Contribution

Your Expected Family Contribution (EFC) is 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. Your EFC is reported to you on your Student Aid Report (SAR).

Financial Aid Administrator (FAA)

An individual who works at a college or career school and is responsible for preparing and communicating information on student loans, grants or scholarships and employment programs. The FAA and staff help students apply for and receive student aid. The FAA is also capable of analyzing student needs and making professional judgment changes when necessary.

Financial Aid Package

The total amount of financial aid (federal and nonfederal) a student is offered by the school. The financial aid administrator at a postsecondary institution combines various forms of aid into a “package” to help meet a student’s education costs. Using available resources to give each student the best possible package of aid is one of the aid administrator’s major responsibilities. Because funds are often limited, an aid package might fall short of the amount a student needs to cover the full cost of attendance. Also, the amount of federal student aid in a package is affected by other sources of aid received (scholarships, state aid, etc.).

FFEL

As a result of the SAFRA Act, which was part of the Health Care and Education Reconciliation Act, beginning July 1, 2010, Stafford, PLUS and Consolidation Loans are no longer made by private lenders under theFederal Family Education Loan (FFEL^SM) Program.

General Education Development (GED) Certificate

This is a certificate students receive if they’ve passed a specific, approved high school equivalency test. Students who have a GED may still qualify for federal student aid. A school that admits students without a high school diploma must make available a GED program in the vicinity of the school and must inform students about the program.

Grace period

After borrowers graduate, leave school, or drop below half-time enrollment, loans that were made for that period of study have several months before payments are due. This period is called the "grace period."

During the grace period, no interest accrues on subsidized loans. Interest accrues on unsubsidized loans during grace periods, and this interest is capitalized when borrowers' loans enter repayment.

Guaranty Agency

The guaranty agency is an organization that administers the Federal Family Education Loan (FFEL) Program in your state. This agency is the best source of information on FFEL Loans. For the name, address and telephone number of the agency serving your state, you can contact the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

Half-time

At schools measuring progress in credit hours and semesters, trimesters, or quarters, “half-time” is at least six semester hours or quarter hours per term for an undergraduate program. At schools measuring progress by credit hours but not using semesters, trimesters or quarters, “half-time” is at least 12 semester hours or 18 quarter hours per year. At schools measuring progress by clock hours, “half-time” is at least 12 hours per week. Note that schools may choose to set higher minimums than these. You must be attending school at least half-time to be eligible for a Stafford Loan. Half-time enrollment is not a requirement to receive aid from the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work-Study and Federal Perkins Loan programs.

Independent Student

An independent student is one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse.

Interest

A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the unpaid principal amount (loan amount) borrowed.

National Student Loan Data System (NSLDS)

NSLDS is our database for federal student financial aid where you can find out about the aid you’ve received. If you’ve only just applied for aid, you won’t find any information on NSLDS yet. NSLDS receives data from schools, guaranty agencies and U.S. Department of Education programs. The NSLDS Web site is generally available 24 hours a day, seven days a week. By using your PIN, you can get information on federal loan and Pell Grant amounts, outstanding balances, the status of your loans and disbursements made. You can access NSLDS at www.nslds.ed.gov.

Need Analysis

The process of analyzing a student´s financial need, known as need analysis, focuses on determining how much the family reasonably can be expected to contribute towards the student´s education. Traditionally, determination of an applicant´s need is achieved by collecting information about the family´s income, assets, and living expenses. For the federal student aid programs, the law specifies a need analysis formula that produces the Expected Family Contribution (EFC). The EFC and the college´s cost of attendance are used by the postsecondary school to establish the student´s need as well as to award grants, campus-based aid, and subsidized loans. The college might ask you to complete other paperwork to determine your need for non-federal aid.

Principal

The amount of money borrowed by the student. Interest is charged on this amount.

Promissory Note

A promissory note is a binding legal document you sign when you get a student loan. It lists the conditions under which you’re borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what deferment and cancellation provisions are available to the borrower. It’s very important to read and save this document because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.

Regular Student

A regular student is one who is enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate or other recognized education credential offered by that institution. Generally, to receive federal student financial aid from the programs discussed in this guide, you must be a regular student. There are exceptions to this requirement for some programs.

Satisfactory Academic Progress

To be eligible to receive federal student financial aid, you must meet and maintain your school’s standards of satisfactory academic progress toward a degree or certificate offered by that institution. Check with your school to find out its standards.

Selective Service Registration

In order to be eligible for federal student aid you must register with the Selective Service if:

§             You are a male born on or after Jan. 1, 1960, and

§             You are at least 18 years old, and

§             You are not currently on active duty in the U.S. Armed Forces.

Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau are exempt from registering.

Student Aid Report

Your Student Aid Report (SAR) summarizes the information you submit on your Free Application for Federal Student Aid (FAFSA) and provides you with your Expected Family Contribution (EFC).

After you apply for federal student financial aid, you'll get your FAFSA results in an e-mail report by the next business day after your FAFSA has been processed or by mail within 7-10 days. This report is called a Student Aid Report or SAR. Your SAR details all the information you provided on your FAFSA. If there are no corrections or additional information you must provide, the SAR will contain your Expected Family Contribution (EFC), which is the number that’s used to determine your eligibility for federal student aid. Whether you applied online or by paper, we will automatically send your data electronically to the schools you listed on your FAFSA.

Subsidized

A loan for which a borrower is not responsible for the interest while in an in-school, grace, or deferment status. Subsidized loans include Direct Subsidized, Direct Subsidized Consolidation Loans, Federal Subsidized Stafford Loans and Federal Subsidized Consolidation Loans.

Unsubsidized

A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan. Unsubsidized loans include: Direct Unsubsidized Loans, Direct PLUS Loans, Direct Unsubsidized Consolidation Loans, and Federal Unsubsidized Stafford Loans, Federal PLUS Loans, and Federal Unsubsidized Consolidation Loans.

Verification

Verification is a process where your school confirms the data reported on your FAFSA. Your school has the authority to contact you for documentation that supports income and other information that you reported.