Glossary of Terms

Below are some of the common terms and definitions used during the financial aid process.

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Academic Plan: A plan that is established by a SAP Appeal Committee which reestablishes a student’s financial aid eligibility. An academic plan is tailored to a student’s individual needs based on circumstances that the student described in the SAP appeal. Students are required to follow all requirements and meet with the appropriate academic personnel to register for classes while they are on an academic plan.

Academic Year: A period of time used to measure a quantity of study. For example, Baker College’s academic year consists of fall, winter, spring and summer terms.

Aggregate Loan Limit: The maximum lifetime amount a student can borrow in Federal student loan funds.

Annual Loan Limit: The maximum amount a student can borrow in Federal student loan funds within an academic year.

Award Letter: Official notification of a student’s awards including grants, scholarships, student loans, and/or Federal Workstudy.

Award Year: The period for which financial aid is requested; an award year runs from July 1 to June 30.


Borrower: The person responsible for repaying a loan that has signed and agreed to the terms in the Master Promissory Note.

Borrower Based (BBAY): A nontraditional academic year which may be used for awarding Stafford and PLUS loans; a BBAY is optional and the beginning and end dates of the loan eligibility depend on an individual student's enrollment and progress. This is awarded at the discretion of the Financial Aid Office.

Budget: see Cost of Attendance


Capitalizing Interest: Adding unpaid accumulated interest to the principal loan amount. Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan.

Census Date: The point in a quarter at which enrolled credit hours are locked for Pell Grant purposes.

Consolidation: A process of combining multiple federal student loans into one new loan to simplify and possibly lower the monthly payment and/or extend the repayment period. A loan consolidation will pay off the borrower's qualifying outstanding federal student loans, leaving the borrower with one loan and payment. Consolidation also offers an extended repayment period that can range from 10 to 30 years depending on the total amount of the educational loans.

Cost of Attendance (COA): The total amount it will cost a student to go to school for an academic year; this includes such costs as: tuition, fees, on-campus housing, books, supplies, transportation, loan fees (if applicable), and miscellaneous expenses.


Default: Failure to repay a loan according to the terms agreed to when a student signed his/her Master Promissory Note.

Deferment: Postponement of loan repayment (contact the lender for deferment options).

Delinquency: Payments which are late or missed according to the specified terms of the Master Promissory Note and selected repayment plan.

Direct Costs: Expenses the student/family pays to the college.

Direct Loan Servicing Center: The U. S. Department of Education’s agent contracted to collect Direct Loan payments and handle deferments, repayment options, and consolidation.

Disbursement: Loan proceeds that are paid to the students account.


Eligible Program: In order to receive financial aid which includes student loans, a student must be working toward completing an eligible program. This is a course of study that leads to a degree or certificate and meets the U.S. Department of Education’s requirements for an eligible program.

Enrollment Level: Level of the degree-granting program in which a student is enrolled. There are three basic levels of enrollment: undergraduate (students seeking an associate’s degree, certificate or a baccalaureate degree); graduate (students working on a master’s degree or professional degree); and post-graduate, students enrolled in a doctoral program. The amounts and types of financial aid a student is eligible for is determined, in part, by their enrollment level.

Enrollment Status: Indication on whether a student is full-time (12+ credits), three quarter-time (9-11 credits), half-time (6-8 credits), or less than half-time (5 or fewer credits).

Entrance Loan Counseling: Federal requirement in which a student borrower’s rights and responsibilities are explained. This is required prior to the student’s first loan disbursement.

Exit Loan Counseling: Federal requirement for any borrower who withdraws, graduates, or drops below half-time; a review of a borrower’s rights and responsibilities; provides useful information to help with the management of student loans.

Expected Family Contribution (EFC): The amount that a student and their family is expected to be able to contribute toward the students education. For a dependent student, the need analysis formula utilizes the parents’ income and assets (excluding home equity), savings, taxes, and other mandatory living expenses to determine the parents’ contribution. All students (dependent and independent) will have a student’s contribution which is derived by analyzing the student’s income and assets. The formula for calculating the Expected Family Contribution also takes into consideration parents’ ages, number of family members, and number of family members in college.


Federal Direct Loan Program: The William D. Ford Federal Direct Loan Program is a Federal program that provides loans to students and parent borrowers directly through the U.S. Department of Education.

Federal Family Educational Loan Program (FFELP): This loan program utilizes lenders (banks, credit unions and other agencies) to supply loan funds to eligible students and parents of eligible students. Under this program, a Guaranty Agency is also involved to guaranty the loan funds to the lender. Note: This program is not currently available to students.

Federal Graduate PLUS Loan: Federal loan that is available to students enrolled in a graduate degree program. Students must file the FAFSA to be considered for a Graduate PLUS loan. The Financial Aid Office must determine if eligible for any other type of Direct Loan before a Graduate PLUS loan can be processed. Applicants may borrow up to the cost of attendance minus other financial assistance. Students will receive an automatic deferment while enrolled at least half-time. The Graduate PLUS loan is not a subsidized loan; consequently, interest will accrue beginning with the first disbursement of the loan. Note: A credit check is required.

Federal Parent Loan (PLUS): Federal loan available to parents of a dependent undergraduate student. Parents may borrow up to the full cost of their child’s education, less other aid received. Note: A credit check is required.

Federal Subsidized Loan: A loan that the federal government pays the interest on while; the student is in school, during the grace period (usually six months grace) and during deferments (postponements of repayment). Students must demonstrate financial need, as determined by federal regulations.

Note: subsidized Stafford loans on and after July 1, 2012, and prior to July 1, 2014, must temporarily pay interest that accrues during the six months grace period provided the students are no longer enrolled on at least a half-time basis. If not paid, the accrued interest will be capitalized (added to the principal balance on the loan).

Federal Unsubsidized Loan: A loan that the federal government does not pay the interest while; the student is in school, during the grace period or in deferment. Eligibility is not based on financial need. The student is not required to make any payments while he/she is in school, but interest is charged during all periods. Students are responsible to pay the interest on this loan quarterly or may choose to capitalize the interest which is added to the unpaid balance of the loan once a quarter.

Federal Workstudy: The Federal financial need-based program which provides undergraduate and graduate students with half-time employment during the school year.

Financial Aid Appeal: Students who fall below the minimum Satisfactory Academic Progress (SAP) requirements to receive federal student aid have the option to submit a written appeal, based on mitigating circumstances, to the Financial Aid Office. Federal regulations allow an institution to use professional judgment on a case-by-case basis if the financial aid administrator determines that an unusual or extraordinary situation affected the student’s progression toward the successful completion of his or her program of study.

Financial Aid Package: The total amount of financial aid (federal and nonfederal) a student receives. This also includes work study and loans.

Financial Literacy: Provides tools and information to help students understand their financial aid and assist in managing finances.

First-Time Borrower: An undergraduate student with no prior loan history or established credit hours at Baker College; first-time borrowers are subject to a 30-day delay in the first disbursement of their student loan.

Forbearance: Temporary postponement of loan repayment; interest continues to accrue (contact the lender for forbearance options).

Free Application for Federal Student Aid (FAFSA): The form used to determine a student’s eligibility for financial aid including grants, loans, and Federal workstudy. Completing the FAFSA is the first step in the financial aid process and renewal of the FAFSA is required every year. The form can be completed online at


Gift Aid: Grants and scholarships which do not require repayment.

Grace Period: A consecutive six-month period before the first payment must be made on a Federal Stafford loan; the grace period starts the day after a borrower ceases to be enrolled at least half-time.

Grant: Type of financial aid based on need; does not have to be repaid; the most common grant is the Federal Pell Grant.

Guaranty Agency: The organization that administers the FFELP Program. The guaranty agency guarantees loan funds to the lender which supplies the student with FFELP loan funds.


Half-Time Enrollment: In order to receive most types of financial aid (including loans), the student must maintain at least half-time enrollment. This requires undergraduate students to take at least 6 credit hours and graduate students to take at least 4 credit hours.



Indirect Costs: Expenses the student/family may pay to a third party (merchant, landlord, etc.) other than the college.

Interest: A loan expense charged by the lender and paid by the borrower for the use of borrowed money; calculated as a percentage of the principal amount borrowed.


Loan Fee: An expense of borrowing deducted proportionately from each loan disbursement.

Loan Principal: The total sum of money borrowed.


Master Promissory Note (MPN): A legal document in which a borrower signs when he/she gets a student loan. The borrower is promising to repay loans and any accrued interest and fees to the U.S. Department of Education; terms and conditions of the loan are also explained. This is required prior to the student’s first loan disbursement.


Need: The difference between the COA and the EFC is the student’s financial need. The financial aid package is based on the amount of financial need. The process of determining a student’s need is known as need analysis.

Cost of Attendance (COA)

- Expected Family Contribution (EFC)

= Financial Need


Net Cost: Amount of direct and indirect costs’ remaining after all gift aid (scholarship and grant) is subtracted.

Net Price Calculator: Provides estimated net price information (defined as estimated cost (price) of attendance — including tuition and required fees, books and supplies, room and board (meals), and other related expenses — minus estimated grant and scholarship aid) to current and prospective students and their families based on what similar students paid in a previous year.


Out-of-Pocket Cost: Difference between the cost of attendance and all gift aid. Out-of-pocket cost can be covered through a variety of sources, including savings, income and educational loans.


Pell Grant: A Federal grant that provides up to $5550 in an academic year (based on 2012-2013). Students qualify for Pell grant based on the Expected Family Contribution from the FAFSA.

Personal Identification Number (PIN): Used to sign the FAFSA application electronically. Students and parents can apply for a PIN online at The PIN also allows the student access to their personal records. It is important that students keep their PIN number in a safe place and never share the PIN.

Prepayment: Any amount paid on a loan by the borrower before it is required to be paid under the terms of the Master Promissory Note. There is never a penalty for prepaying principal or interest on loans.

Private (Alternative) Loan: A non-governmental loan made by a private lender used for paying for college expenses such as tuition, room and board, and other associated costs. Private loans are credit-based, school-certified student loans for undergraduate and graduate student borrowers enrolled at least half-time in an eligible undergraduate or graduate program. In some circumstances, the loan is also available for less than half-time students. Private loans are also referred to as “alternative loans”. With private loans, qualified students may be eligible to borrow up to the full cost of their education, less other aid received, as certified by the Financial Aid Office at the school. Loan requirements can vary depending on the lender. Please see for additional information.

Professional Judgment: Adjustment to a student’s EFC, Cost of Attendance, or dependency status (with documentation) based on an extenuating circumstance; determined at the Financial Aid Offices discretion.


Repayment Plans: Each loan servicer can offer loan borrowers several different options for repaying student loans. Some repayment plans are based on income and family size. Contact the holder of the loans to determine what repayment options are available.

Repayment Schedule: A statement provided by a borrower’s lender or servicer providing the amount borrowed, the amount of monthly payments, and the date payments are due.


Satisfactory Academic Progress (SAP): The progress a student must maintain toward completion of their current academic program in order to receive federal, state or institutional aid. The standards required to maintain eligibility for financial aid are: Grade Point Average (GPA), Pace and Maximum Timeframe.

Scholarship: Form of gift aid that does not require repayment. Scholarships are awarded on various criteria examples include; merit, financial need, academic excellence or college-specific criteria.

Selective Service: Registration for the military draft; United States male citizens who have reached the age of 18 must be registered to receive financial aid. For additional information please visit

Self-Help Aid: Financial aid in the form of loans that must be repaid and workstudy funds that must be earned.

Student Aid Report (SAR): The report summarizing information provided on the Federal Application for Federal Student Aid (FAFSA); produced and sent to student financial aid applicants by the Federal Processor/Central Processing Service (CPS).

Student Loan: Type of financial aid; money borrowed that must be repaid.

Supplemental Educational Opportunity Grant: Federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school's Financial Aid Office, and provide up to $4,000 per year. To qualify, a student must also be a recipient of a Pell Grant.


Tax Transcript: IRS form that shows most line items from the Federal tax return (1040, 1040A, or 1040EZ) as it was originally filed, including any additional forms or schedules. This information is available for free from the IRS. Please visit our Tax Transcript website for additional information on how to obtain a copy.

Title IV: Part of the Higher Education Act of 1965 which covers the administration of Federal student financial aid programs.

Title IV School Code: When completing the FAFSA students will need to supply the Title IV Code for each school to which they are applying. Please visit our How to Apply for Financial Aid page for a list of Baker College campus codes.


U.S. Department of Education: Government agency that administers several federal student financial aid programs, including the Federal Pell Grant, the Federal Workstudy Program, the Federal Perkins Loans, the Federal Stafford Loans and the Federal PLUS Loans.


Verification: The review process completed by the Financial Aid Office to ensure the accuracy of information reported on a student’s FAFSA application. During the process the student and parent (if applicable) will be required to submit specific documentation requested by the Financial Aid Office. Financial aid applications are randomly selected by the Federal processor for verification.

Verification Worksheet: Item used to verify the size of a student’s household as well as the number of household members attending college.

For a more detailed glossary, select the web site indicated below:
The Financial Aid Information Page: Glossary of Financial Aid Terms

The Baker College System