Glossary of Terms
The time period, from July 1 to June 30 of the following year, for which financial aid awards are made. The award year differs from the federal fiscal year (which is from October 1 to September 30 of the following year).
Adding accrued (accumulated) interest to the loan principal rather than having the borrower make monthly interest payments. Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan.
For federal student loans, a specific status wherein the borrower has failed to make payments and the loan is delinquent. (Specific terms vary by loan program.)
There can be serious legal consequences for student-loan defaulters.
Federal student loans may grant deferments for various reasons, such as returning to school, economic hardship, or disability, during which students do not have to make loan payments, and interest does not accrue.
For the purposes of applying for federal student aid, a student who does not meet any of the criteria for an independent student generally would be classified as a dependent student and would report parent information when applying for federal student aid.
Title IV institutions must offer loan counseling to first-time federal student loan borrowers before disbursing the loan. Entrance counseling covers the borrower’s rights and responsibilities, the terms and conditions of the loan, and the consequences of default. Compare exit counseling.
Estimated Financial Assistance (EFA)
The amount of federal, state, and private financial assistance a school estimates a student will receive.
Title IV institutions must offer loan counseling to federal student loan borrowers who are leaving school or dropping below half-time enrollment. Exit counseling covers the borrower’s rights and responsibilities, loan repayment, and the consequences of default. During the exit counseling, borrowers are also required to provide updated personal information, such as address, telephone number, and employer.
Federal Direct PLUS Loan
An education loan that parents can borrow on behalf of their dependent children. PLUS loans are also available to graduate and professional students. See DCL GEN-06-02 for additional information. As part of the Federal Direct Loan Program, Direct PLUS Loans are made directly by the Federal Government (rather than a private lender) through participating schools. Compare Federal PLUS Loan.
Federal Direct Subsidized Stafford Loan (Direct Subsidized Loan)
A federally subsidized, low-interest student loan awarded on the basis of financial need. The Federal Government does not charge interest on subsidized loans while borrowers are enrolled at an eligible school at least half-time, during the 6-month grace period, or during authorized periods of deferment. These loans are made directly by the Federal Government (rather than by a private lender) through participating schools as part of the Federal Direct Loan Program. Compare this with the Federal Stafford Loan.
Federal Direct Unsubsidized Stafford Loan (Direct Unsubsidized Loan)
A low-interest loan for students who do not meet the financial-need criteria for a subsidized loan. The borrower is responsible for all interest on the loan. As part of the Direct Loan Program, these loans are made directly by the Federal Government (rather than by a private lender) through participating schools.
Federal Pell Grant Program
A federal grant program for undergraduate students with financial need.
An approved time period when a borrower is willing, but financially unable, to make required payments on a federal student loan. Payments can be temporarily postponed, payment due dates can be extended, or smaller payments than were previously scheduled can be accepted.
Free Application for Federal Student Aid (FAFSA)
The form that must be completed in order to receive federal student aid. The FAFSA gathers data needed to calculate the expected family contribution (EFC) and to determine federal student aid eligibility. See also need analysis.
The FSA ID is a username and password combination that serves as a student’s or parent’s identifier to allow access to personal information in various U.S. Department of Education systems and acts as a digital signature on some online forms.
The time period before a federal student loan borrower must begin or resume repaying a loan.
To be classified as an independent student for Title IV aid, a student must meet one or more of the following criteria:
- be at least 24 years old by December 31 of the award year for which aid is sought;
- be married;
- be a graduate or professional student;
- be on active duty in the U.S. Armed Forces for purposes other than training;
- be a veteran of the U.S. Armed Forces;
- have children who will receive more than half of their support from the student during the award year for which the aid is sought;
- have legal dependents other than a spouse (and other than children as described above) who live with the student and who receive more than half of their support from the student at the time of application and continuing through the end of the award year for which the aid is sought;
- be or have been at any time since the age of 13 an orphan, a dependent or ward of the court, or a foster child;
- be or have been an emancipated minor or in legal guardianship as determined by a court in the student’s home state; or
- meet a special definition of an unaccompanied youth who is homeless, or is self-supporting and at risk of homelessness.
Master Promissory Note (MPN)
The legal document that requires a federal student loan borrower to repay the funds borrowed. It may be used for several loans.
National Student Loan Data System (NSLDS)
The ED database that collects and maintains student loan and grant data on Title IV federal student aid recipients.
A period of time when a federal student loan borrower is required to make payments on the loan according to a schedule agreed to by the lender.
The process a school follows to check the accuracy of information reported by a student on the Free Application for Federal Student Aid (FAFSA). If an application is selected for verification by the Central Processing System (CPS), it will be indicated on the resulting Student Aid Report (SAR): an asterisk will appear to the right of the applicant’s Expected Family Contribution (EFC). Schools may also choose to verify other applications. Whether the application is selected by the CPS or chosen for verification by the school, the school verifies the application information by comparing it to documentation provided by the student (and parents, if required).