Accrued Interest
Interest accumulating on the unpaid principal balance of a loan.

Auto Pay
During repayment, borrowers can make loan payments through automatic deduction from an account with their financial institution.

A person who is legally responsible for a loan obtained from a lender.

Capitalization of Interest
The addition of unpaid interest to the principal balance of a loan. This can increase the total outstanding principal amount.

Combining several loans into one account so that the borrower only pays one monthly bill. The loans' original terms still apply, such as payment and interest.

A lender pays off the borrower's current student loans and issues a new, single loan. The monthly payment is usually lowered due to a longer repayment term.

To cosign is the act of signing cooperatively with a borrower for a loan. A cosigner serves as an additional repayment source for the primary borrower.

Cost of Attendance
The total cost of attending a post-secondary institution for one year. The student's budget usually includes tuition, fees, housing, food, books, supplies, transportation and personal expenses.

A borrower who has no credit history or has a credit history that does not reveal excessive delinquencies on consumer loans and charge accounts, prior education loan defaults, foreclosures or bankruptcy, etc.

An individual without a negative credit history, according to the lender's criteria.

Failure to meet a financial obligation, such as a loan. Staying out of default will help protect a borrower's credit record.

A borrower is allowed to postpone payments on the loan principal. During deferment, the federal government will pay the interest on a Subsidized Loan. On others, the interest will accrue and be capitalized, and the borrower is responsible for paying it.

Failure to make loan payments when due. Delinquency can lead to default

Dependent Student
A student who does not meet any of the federal definitions under "independent student." For dependent students, the financial aid package is based on both student and parent income and assets. Dependent status is determined annually when the FAFSA is filed.

Direct Loan
A loan that is either subsidized (need-based) or unsubsidized (non-need based) and guaranteed by the federal government for students.

A release of funds to the school for delivery to the borrower. This is done either electronically or with a check.

Electronic Funds Transfer
Any transfer of funds that is an electronic-based transaction, such as automatic deduction.

Eligible, non-citizen
A U.S. national (includes natives of American Samoa or Swains Island), U.S. permanent resident (who has an I-151, I-551 or I-551C [Permanent Resident Card]), or an individual who has an Arrival-Departure Record (I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations: "refugee", "asylum granted", "Cuban-Haitian Entrant (Status Pending)", "Conditional Entrant" (valid only if issued before April 1, 1980), "Victims of human trafficking, T-visa (T-2, T-3, or T-4, etc) holder", "Parolee" (You must be paroled into the United States for at least one year and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose and that you intend to become a U.S. citizen or permanent resident.) 

Entrance/Exit Interview
Required counseling sessions that the federal student loan borrower must attend before receiving the first loan disbursement and again before leaving the post-secondary school.

Expected Family Contribution
Determined through the FAFSA process, this amount is calculated based on a congressionally-mandated formula. It indicates how much of a family's resources are available to contribute to the student's cost of education.

Financial Aid Package
The financial aid office of a college or university determines financial aid packages. The packages can include a combination of grants, scholarships, loans and work-study.

Financial Need
The difference between the cost of education and the expected family contribution.

A special agreement between lender and borrower to delay or reduce monthly loan payments because of financial hardship.

Free Application for Federal Student Aid (FAFSA)
The official application students must use to apply for federal aid. The Student Aid Report (SAR) is generated from the information the student/parents supply on the FAFSA form. The financial aid office then awards a financial aid package based on the Student Aid Report.

Grace Period
A specified period of time between graduation and the time loan repayment begins for the borrower.

Graduated Repayment
This repayment option initially lowers loan payments, but gradually increases the payments over the length of the repayment period.

Guaranty Agency
An organization that insures student loans for lenders and administers the student loan insurance program for the federal government.

Guarantee Fee
Insurance fee that the guaranty agency charges a borrower. This fee, usually one percent, is deducted from the loan principal amount before the borrower receives the loan funds.

Income-Sensitive Repayment
A borrower's monthly payments are adjusted annually, based on income level. Under this plan, the borrower selects payments between four and 25 percent of his/her gross monthly income.

Independent Student
A student who is either married, 24 years of age or older, enrolled in a graduate or professional program, supporting a legal dependent(s) other than a spouse, an orphan, or ward of the court. Dependent status is determined annually when the FAFSA is filed.

Institutional Grants
Grant programs funded and awarded by the school to students based on financial need.

An amount charged for borrowing money which is calculated as a percentage of the principal loan amount.

Legal Dependent
Any child of the student who receives more than half of their support from the student (the child does not have to live with the student), including a biological or adopted child. Also, any person, other than a spouse, who lives with the student and receives more than half of his or her support from the student now and will continue to receive more half of his or her support from the student through June 30 following the spring semester of academic year.   

An organization, financial institution, agency, or school that provides money to a student on the condition that it will be returned.

Merit-based Aid
Any form of financial aid awarded on the basis of merit, such as specific accomplishments or personal achievement, rather than financial need.

Need-based Aid
Any form of financial aid awarded with financial need as a determining factor.

Origination Fee
A fee charged to the borrower (usually three percent) by the federal government that is deducted from the principal of a loan prior to disbursement.

Pell Grant
Grant program funded by the federal government and awarded by schools to undergraduate students based on financial need.

Perkins Loan
Loan funded by the federal government and awarded by the school. These types of loans tend to have a very favorable interest rate.

A PLUS Loan is not need-based. On the student's behalf, parents or legal guardians can borrow through the PLUS program.

An amount borrowed from a lender for a specified period of time.

An amount of money that is paid by the borrower before it is due. There is not a penalty for prepayment of federal student loans.

Prompt Pay
Borrowers who have a history of making timely payments may be eligible to receive an interest rate reduction.

This is when the borrower takes on the responsibility of repaying the loans that helped pay for the cost of education.

Repayment Schedule
A repayment plan that alerts the borrower of the length of the repayment period, monthly repayment amount, number of payments required, and the due date of each payment.

Secondary Market
Organizations, like SLFA, that buy loans from lenders. This purchase of loans frees lender funds and allows lenders to make additional loans to students.

The organization that maintains the borrower's loan account records.

Standard Repayment
A repayment plan that gives a borrower the consistency of the same monthly payments for the entire repayment period.

State Grants
Grant programs funded by each individual state and awarded by the school to students based on financial need.

Subsidized Loan
A need-based loan. Interest is paid by the federal government while the borrower is enrolled in school at least halftime, or during grace and deferment periods.

Supplemental Educational Opportunity Grant (SEOG)
A grant program funded by the federal government and awarded by the school to undergraduate students based on financial need.

Unsubsidized Loan
A non-need based loan. Interest is paid by the borrower with the option of letting it accrue and paying it upon completion of school.

Verification is a process that is used to check whether the information provided by the students is correct. It prevents ineligible students from receiving aid if they have reported false information. Each year, a select group of applications are chosen, (at random or selected because certain information in FAFSA is inconsistent with other information reported in the application) and verified.