Glossary of Terms

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

Borrower: The person responsible for repaying a loan who has signed and agreed to the terms in the promissory note.

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

Cost of Attendance: 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 promissory note.

Delinquency: This occurs when payments are late or missed, as specified in the terms of the promissory note and the selected repayment plan.

Disbursement: When loan proceeds are paid by the school to the student or parent borrower.

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

Eligible Program: In order to receive financial aid or 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.

Expected Family Contribution: The amount that you and your family are expected to contribute toward your 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 (FDLP): The William D. Ford Federal Direct Loan Program is a federal program that provides loans to student 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.

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

Forbearance: An arrangement to postpone or reduce a borrower’s monthly payment amount for a limited and specified period. The borrower is charged interest during a forbearance.

Grace Period: A 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.

Guaranty Agency: The organization that administers the FFEL 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.

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 principal amount borrowed.

Loan: Money borrowed that must be repaid.

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

Loan Principal: The total sum of money borrowed.

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

Promissory Note: The binding legal document that a student signs when he/she gets a student loan. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.

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.

Standards of Academic Progress: In order to qualify for financial aid, a student must be maintaining Standards of Academic Progress. For more information, select Standards of Academic Progress.

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