ACCRUED INTEREST Interest that accumulates and is to be paid in installments at a later time (usually when the principal becomes due) rather than being paid from the time the loan is made. Accrued interest may be compounded or simple.
ADJUSTED GROSS INCOME (AGI) Taxable income after all allowable deductions are made, such as IRA deductions, moving expenses, self-employment taxes and health insurance, Keogh retirement plans, and alimony paid.
ASSET PROTECTION ALLOWANCE A sum subtracted from a family's total assets when determining the "expected family contribution" to college costs. This provides a safety net for families, and the allowance increases with the age of the parents.
ASSETS  The amount a family has in savings and investments. This includes savings and checking accounts; a business; a farm or other real estate; and stocks, bonds, and trust funds. Cars are not considered assets, nor are such possessions as stamp collections or jewelry. The net value of the principal home is counted as an asset by some colleges in determining their own awards but is not included in the calculation for eligibility for federal funds.
BASE YEAR The twelve-month period ending on December 31 preceding the year in which a student will enroll. Applicants seeking aid for 2000-2001 will use 1999 as the base year.
BILLING SERVICER A company that manages the billing and collection of loans for lenders. BORROWER Any "legal entity" -- a person or group--that obtains funds from a lender for a particular period of time. A borrower signs a "promissory note" as evidence of indebtedness.
BUSINESS/FARM SUPPLEMENT An additional financial aid form required by some colleges for parents and students who own a business or farm. This form is processed by the College Scholarship Service as a supplement to the Financial Aid Profile.
CAMPUS-BASED FINANCIAL AID PROGRAMS Three major aid programs are funded by the federal government but the disposition of the funds is handled by colleges' financial aid offices: the Federal Supplemental Educational Opportunity Grant, the Federal Perkins Loan, and Federal Work-Study (FWS).
CITIZENSHIP/ELIGIBILITY FOR AID To be eligible to receive federally funded college aid, a student must be one of the following: a United States citizen a non-citizen national a permanent resident with an I-151 or I-551 without conditions a holder of an I-94 showing one of the following designations: "Refugee" "Asylum Granted" "Indefinite Parole" and/or "Humanitarian Parole" "Cuban-Haitian Entrant, Status Pending" "Conditional Entrant" (valid if issued before April 1, 1980) a participant in a suspension of deportation case pending before Congress Individuals in the U.S. on an F1 or F2 visa only or on a J1 or J2 exchange visa only cannot get federal aid.
COLLATERAL Something of value pledged as security for a loan. Banks do not require collateral for all loans.
THE COLLEGE BOARD A nonprofit membership organization of colleges, secondary schools, and education associations that administers the SATs and runs the College Scholarship Service.
COLLEGE SCHOLARSHIP SERVICE The arm of the College Board and one of the agencies that processes financial aid information and applications.
COMMERCIAL BANK An institution whose primary function is making loans to businesses.
COMPOUNDED INTEREST Interest that is periodically added to a principal sum, resulting in a new principal balance which then triggers a new interest assessment.
COOPERATIVE EDUCATION A program offered by many colleges in which students alternate periods of enrollment with periods of employment, usually paid, and which can lengthen the usual baccalaureate program to five years.
COSIGNER A second creditworthy party who signs a promissory note with a borrower who does not have collateral or good credit history. The second party guarantees that the loan will be repaid if the borrower fails to make payments.
COST OF EDUCATION (OR COST OF ATTENDANCE) The total amount it will cost a student to attend college for a year, including tuition and fees; housing and food for the period of enrollment; books and supplies for education; travel costs directly related to attendance; child care expenses; and costs related to a handicap. Other expenses may be added at the discretion of a college's financial aid administrator. Students are supported for the cost of their own education for the duration of one academic year.
CREDIT BUREAU An agency that compiles and distributes credit and personal information to creditors. This information may include payment habits, number of credit accounts, balance of accounts, and length and place of employment. Note: You have the right to examine your credit file and to explain or correct information. There is usually a fee for this, but there is no charge if you have been denied credit because of information in a particular credit bureau's file.
DEFAULT A failure to meet a financial obligation, especially a failure to make a payment on a loan. Defaults are recorded on permanent credit records and may result in prosecution and/or loss of future borrowing possibilities.
DEFERRED INTEREST Interest payments that are delayed while a borrower is not gainfully employed, as, for example, when the borrower is a student. This benefit is generally characteristic of federal and state guaranteed student loans.
DEPENDENT STUDENT A student claimed as a dependent member of household for federal income tax purposes.
DISCRETIONARY INCOME Income that is available to a person or family after all financial obligations, including taxes, have been accounted for.
ELIGIBLE NONCITIZEN A financial aid applicant who is not a U.S. citizen but is eligible to receive federal Title IV aid because he or she is a permanent resident, noncitizen national, or a resident of the Trust Territory of the Pacific Islands or Micronesia.
ENTRANCE INTERVIEW Required counseling session at which a college administrator, usually a financial aid officer, must inform student borrowers about their rights and responsibilities.
EXIT INTERVIEW A counseling session conducted when the student is leaving college at which the student's loan obligation and responsibilities are reviewed.
EXPECTED FAMILY CONTRIBUTION (EFC) or PARENTAL CONTRIBUTION A figure determined by a congressionally mandated formula which indicates how much of a family's resources should be considered "available" for college expenses. Factors such as taxable and nontaxable income and the value of family assets are taken into account to determine a family's financial strength. Allowances for maintaining a family and future financial needs are then taken into consideration before determining how much a family should be able to put toward the cost of college.
FAFSA (Free Application for Federal Student Aid) The official application students must use to apply for federal aid.
FEDERAL DIRECT LOAN A group of federal loan programs for which the lender is the federal government. Included in these programs are government-subsidized loans for students and unsubsidized loans for both students and parents.
FEDERAL EDUCATION LOAN PROGRAMS A group of federal loan programs for which the lender is a bank, savings and loan, credit union, or other private organization. Included in these programs are government-subsidized loans for students and unsubsidized loans for both students and parents.
FEDERAL METHODOLOGY A standard method of calculating how much a family should be expected to contribute toward college costs. All the federal funds are awarded based on this need analysis formula.
FEDERAL PELL GRANT Federal grant awarded to undergraduate students based on need.
FEDERAL PERKINS LOAN A 5% loan funded by the government but awarded by colleges to both undergraduate and graduate students.
FEDERAL PLUS LOAN A nonsubsidized loan program for parents of undergraduate students under the Federal Education Loan Program umbrella.
FEDERAL STAFFORD LOAN A Federal Education Loan Program for students. Stafford Loans can be either government-subsidized, in which case the government pays any interest while the borrower is attending college, or unsubsidized, in which case interest begins to accrue when the loan is made.
FEDERAL STATE STUDENT INCENTIVE GRANT Awards made as part of a state grant program utilizing both federal funds and state monies.
FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (FSEOG)A federal grant awarded by colleges to the most needy undergraduate students as determined by the federal need analysis formula.
FEDERAL WORK-STUDY PROGRAM A federal, need-based financial aid program through which eligible students can earn a portion of their college expenses. Work-study awards are made by colleges, but a portion of the funding comes from the federal government. Several states also have work-study programs that are similar to the federal program.
FINANCIAL AID AWARD LETTER Written notification to an applicant from a college that details how much and which types of financial aid are being offered if the applicant enrolls.
FINANCIAL AID PACKAGE The total amount of financial aid a student receives for a year of study.
FINANCIAL AID PROFILE A financial aid application developed by the College Scholarship Service that many colleges use to determine aid given from their own institutional funds.
FINANCIAL AID TRANSCRIPT A record of any financial aid a student has received at a given institution. To be eligible for federal financial aid programs, students must submit such a transcript from all previously attended postsecondary institutions.
FINANCIAL NEED The difference between a college's cost of attendance and a family's ability to pay (Expected Family Contribution) as calculated by the need analysis methodology.
FIXED INTEREST A rate of interest that is set at the time a loan is negotiated and that remains constant over the life of the loan.
FORGIVENESS LOANS Loans which do not have to be paid back if you provide the services you agreed to when you obtained the loans. If you do not provide the agreed-upon services, you are required to repay the loans, usually with interest.
GIFT AID Grant and scholarship money given as financial aid that does not have to be repaid.
GRACE PERIOD The length of time allowed by program specification when borrowers are no longer in school but do not have to begin repaying their student loans. Some loan programs have no grace period; others may not require repayment to begin for several months.
GROSS INCOME A family's or individual's total income before deductions.
GUARANTEE AGENCY The organization that administers the Federal Education Loan Programs in each state and insures lenders against losses due to a borrower's default, death, disability, or bankruptcy. The federal government sets loan limits and interest rate, but each state is free to set its own additional limits within the federal guidelines.
GUARANTEE FEE An insurance fee, usually paid by the borrower, that the guarantee agency charges a lender. The fee for a Federal Stafford or PLUS Loan is 1%.
IMMIGRATION AND NATURALIZATION SERVICE (INS) The federal agency responsible for administering immigration procedures and assigning citizenship status.
INDEPENDENT STUDENT A student who reports only his or her own income (and that of a spouse, if relevant) when applying for federal financial aid. Students who will be 24 or older by December 31, 2000, will automatically be considered "independent" for 2000-2001. Students who are under 24 will be considered independent if they are: married and not claimed as a dependent on their parents' 1999 federal income tax return the supporter of a legal dependent other than a spouse a veteran of the U.S. Armed Forces an orphan or ward of the court classified as independent by a college's financial aid administrator because of other unusual circumstances a graduate or professional student
INDIRECT COSTS All the non-tuition-related costs associated with attending college, including room, board, transportation, medical, and personal expenses.
INSTITUTIONAL METHODOLOGY A standard method of determining a student's or family's ability to pay for college used by individual colleges in awarding their own institutional funds for financial aid. However, colleges must use the Federal Methodology in awarding any federal funds.
INSURANCE FEE A fee charged to guarantee student loans against loss through default. The amount charged is usually deducted from the disbursement of the principal.
INTEREST SUBSIDY Interest payments made by the federal government to the lender of a Subsidized Federal Stafford or Direct Loan while the borrower is enrolled at least half-time or is in a grace period.
INTERNAL REVENUE SERVICE (IRS) The federal agency responsible for collecting income taxes. Student aid applications are often verified by their family's IRS forms.
LENDER One who provides money on the condition that the money be returned, usually with an interest charge.
LOAN DISCLOSURE STATEMENT A document that shows the amount of a loan; where, when, and what repayments must be made; the interest rate; and the cost of borrowing that loan.
MERIT-BASED AID Any form of financial aid awarded on the basis of personal achievement or individual characteristics without reference to financial need.
NEED ANALYSIS The method of calculating a family's expected level of financial contribution toward college costs, resulting in an estimate of the amount of financial assistance a student will "need."
OFFICE OF STUDENT FINANCIAL ASSISTANCE (OSFA) The U.S. Department of Education that has the responsibility for administering federal student financial aid programs and for developing aid policies and procedures.
ORIGINATION FEE A processing fee charged to a borrower by a lender to make a loan. This fee, like the guarantee or insurance fee, is usually subtracted from the amount of a loan.
OVERAWARD A situation that occurs when a student's family contribution plus any financial aid awarded exceeds the cost of attendance at a given college. Overawards result most often when a student's enrollment status changes or when additional resources (such as a private scholarship) become available to a student.
PRIME RATE The fluctuating interest rate that banks charge to their best business customers. Many commercial loans have interest rates that fluctuate based on the prime rate.
PROFESSIONAL JUDGMENT The legal authority of financial aid administrators to change a calculated Expected Family Contribution or any of the elements used in the calculation based on additional information or individual circumstances that would lead to a more accurate assessment of a family's financial condition.
PROMISSORY NOTE A contract that legally binds a lender and a borrower. The note details all the terms and conditions of a loan, including the amount, the interest rate, and repayment obligations.
REPAYMENT SCHEDULE A plan that sets forth for the loan recipient the amount due in each payment period, the number of payments required to pay back the loan in full, and the due date of each payment.
SATISFACTORY ACADEMIC PROGRESS As determined by each college for its own students, the level of academic achievement expected of a student in order to continue to receive financial aid.
SCHOLARSHIPS AND GRANTS These are gifts and require neither repayment nor performance of a service.
SECONDARY MARKET Institutions that buy loans from lenders, usually at a discount. This practice provides more capital for lenders to make additional loans. If a loan is sold, the secondary market is responsible for managing and servicing it. The sale of a loan does not affect the borrower since the terms of the loan remain the same.
SELF-HELP EXPECTATION The principle that students have an obligation to help pay for a portion of their own education. The expected amount of self-help is usually included in the analysis of a student's resources.
SELF-HELP AID Funds from jobs and from loan programs, such as the Federal Perkins Loan, Federal Stafford and Direct Loans, and Federal Work-Study Program.
SERVICE AWARDS These awards are based on a service you provide, such as as athletics or music.
SIMPLE INTEREST Interest computed only on the original amount of a loan.
SIMPLIFIED NEEDS TEST A formula used in the Federal Methodology for families whose Adjusted Gross Income (AGI) is less than $50,000 and who file either the 1040A or 1040EZ IRS forms. In this formula, a family's assets are not included.
STATEMENT OF EDUCATIONAL PURPOSE A separate form, or a statement on the FAFSA, that all students must sign in order to receive federal student aid. By signing you agree that: You are to use your student aid only for education-related expenses. You have complied with Selective Service requirements by registering with the Selective Service or indicating the reason why you are not required to register.
STUDENT AID REPORT (SAR) An official document that colleges create for each student applying for federal aid.
SUBSIDIZED LOAN A loan for which the borrower is not responsible for all of the interest payments. For Subsidized Federal Stafford and/or Direct Loans, the government pays interest to the lender on behalf of the borrower while the student is in college and during approved grace periods.
UNMET NEED When the combination of a student's financial aid package and the family contribution does not cover the costs of attending a particular college, the gap is called the Unmet Need.
VARIABLE INTEREST The rate of interest that changes during the life of a loan on a regular basis and is generally tied to an index. Some student and parent loan programs have variable interest rates that change annually based on the one-year Treasury Bill rate.
VERIFICATION A process by which a financial aid office substantiates the data that a financial aid applicant has reported on a financial aid application. Additional information from the student, a spouse, and the parents is used to confirm previously submitted data.
Financial Aid Page
Planning for College

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