Financial Aid Dictionary
Financial Aid Dictionary
Academic Year
A period of at least 30 weeks of instructional time during which a full-time student is expected to complete at least 24 semester or trimester hours, or at least 36 quarter hours, at an institution that measures program length in credit hours; or at least 900 clock hours at an institution that measures program length in clock hours.
Accrual Date
The date on which interest charges for a loan begin to accrue.
Accrued Interest
Accrued interest is interest that accumulates on the unpaid principal balance of a loan.
Academic Transcript
This is an official copy of the courses taken and grades received at other institutions attended.
Award Letter
An award letter is an official document issued by the financial aid office that lists all of the financial aid awarded to a student. This letter provides details on the analysis of your financial need and the breakdown of your financial aid package according to amount, source, and type of aid.
Cancellation
Some loan programs provide for cancellation of the loan under certain circumstances. For example, if the student becomes a teacher in certain national shortage areas, they may be eligible for cancellation of all or part of the balance of their educational loans.
Capitalization
The practice of adding unpaid interest charges to the principal, increasing the size of the loan principal.
Citizen/Eligible Noncitizen
You must be one of the following to receive federal student aid:
U.S. Citizen
- U.S. national (includes natives of American Samoa or Swain's Island)
- U.S. permanent resident with an I-151, I-551, or I-551C (Alien Registration Receipt Card)
If you're not in one of these categories, you must have an Arrival-Departure Record (I-94) from the U.S. Immigration and Naturalization Service (INS) showing one of the following designations:
- Refugee
- Asylum Granted
- Indefinite Parole and/or Humanitarian Parole
- Cuban-Haitian Entrant, Status Pending
- Conditional Entrant (valid only if issued before April 1, 1980)
- Other eligible noncitizen with a Temporary Resident Card (I-688)
Previously, you could also be eligible based on the Family Unity Status category, with approved I-797s (Voluntary Departure and Immigrant Petition); however, the passage of the Welform Reform Act of 1996 has put this eligible category in question. You may also be eligible if you have a suspension of deportation case pending before Congress.
Permanent residents of the Trust Territory of the Pacific (Palau) may be eligible for federal student aid. Citizens of the Federated States of Micronesia and the Marshall Islands are eligible for Pell Grants, SEOG, or Work Study only. You are NOT eligible for federal financial aid if you only have a Notice of Approval to Apply for Permanent Residence (I-171 or I-464A), or if you are in the U.S. on an F1, F2, J1, J2, or G series visa.
COA (Cost of Attendance)
The cost of attendance (COA) is the total cost of education for the student, including tuition, fees, room and board, books and supplies, transportation, and miscellaneous expenses. COA is school-specific and is determined by the financial aid offices at each school.
Consolidation Loan
A consolidation loan combines several loans into one bigger loan. This sometimes results in a lower interest rate, as when a consumer loan is used to pay off credit card balances. Such loans often reduce the size of the monthly payment by extending the term of the loan. An extension of the term of the loan may also increase the overall cost of the loan. Consolidation loans also simplify the repayment process by allowing a single payment instead of several.
Default
A loan is in default when the borrower fails to pay a regular installment on time or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, and the government can take legal action to recover the money, including garnishing your wages. Defaulting on a government loan will make you ineligible for future federal financial aid. This ineligibility for financial aid remains in effect until such time as the defaulted loan is paid in full or until you have made at least 6 consecutive on-time reasonable monthly payments as determined by the holder of the loan.
Deferment
Deferment occurs when a borrower is allowed to postpone repayment of a student loan. For example, some federal loan programs allow students to defer their loans while they are in school. Other loan programs allow the student to defer the interest payments by capitalizing the interest.
Disbursement
The date on which the loan funds are released to the university for payment.
EFC (Expected Family Contribution)
The Expected Family Contribution (EFC) is the amount of money the federal government expects the family to be able to contribute to the student's education. The EFC is calculated according to a formula established by Congress. The difference between the COA and the EFC is the student's financial need.
EFT (Electronic Funds Transfer)
Electronic Funds Transfer is used by lenders to wire funds directly to participating schools without requiring an intermediate check for the student to endorse.
Entrance Interview
Counseling session borrowers are required to attend before receiving their first loan disbursement.
Exit Interview
Students with educational loans are required to meet with a financial aid administrator before they graduate or leave school or stop attending on at least a half-time basis. During this exit interview, the OSFA reviews the repayment terms of the loan and the repayment schedule with the student.
FAA
A FAA is a Financial Aid Administrator, a college employee who is involved in the financial aid process.
FAFSA
The FAFSA is the Free Application for Federal Student Aid. This application is the first step in the financial aid application process.
FFELP
The FFELP is the Federal Family Education Loan Program, and includes the Federal Stafford Loans and the Federal PLUS loans.
Forbearance
A forbearance is a condition where the lender allows the borrower to postpone repaying the principal of their loan, but requires the borrower to continue paying the interest charges.
FWSP (Federal Work Study Program)
The Federal Work-Study program is a form of cooperative education which provides students with on -campus employment while in school that is theoretically career-oriented (but general office and clerical positions are not uncommon). Eligibility is based on need. Essentially FWS pays a portion of the student's salary while the hiring departments and business pay the remainder.
Garnish
The practice of withholding a portion of a borrower's wages to repay his or her loan, often without their consent.
Grace Period
A short time period after graduation during which the borrower is not required to begin regular repayment of their student loan. The typical grace period is six or nine months depending on the type of loan program.
Grant
A grant is a kind of financial aid that the student does not have to repay.
Guarantee Agency
A guarantee agency agrees to pay back a loan if the borrower should default. For example, the federal government guarantees the Federal Direct Student Loans. Each state has a different guarantee agency that administers the Federal Stafford and PLUS loans under the FFELP programs for students in that state. A guarantee fee is a small percentage of the loan that is paid to the guarantee agency as a form of insurance against default. For the name, address, and telephone number of your state's guarantee agency, call the Federal Student Aid Information Center at 1-800-433-3243 (1-800-4-FED-AID).
Income-Contingent Repayment
Under an income-contingent repayment schedule, the size of the monthly payments depends on the income earned by the borrower.
Institutional Student Information Report
The Institutional Student Information Report (ISIR) is the name for the electronic version of the SAR delivered to schools by the FAFSA processors.
Interest
Interest is an amount charged to the borrower for the privilege of using the lender's money. Interest is usually calculated as a percentage of the principal. The percentage rate may be fixed for the life of the loan, or it may be variable, depending on the terms of the loan. All new Federal Stafford and PLUS loans use variable interest rates that are tied to the rates for federal treasury bills.
Lender
The bank or lending institution that provides the money to the borrower for the loan.
Need
The difference between the COA and the EFC is the student's financial need - the gap between the student's resources and the cost of attending the school. The financial aid package is often based on the amount of financial need. The process of determining a student's need is known as the need analysis.
Origination Fee
The origination fee is an upfront charge deducted from the loan to pay part of the loan's administrative costs.
Pell Grant
For undergraduate students, first baccalaureate degree only. Eligibility is based on federal methodology. The amount of the award ranges from $400 to $4050, subject to Congressional appropriations, and will be reduced for students who enroll less than full time.
Professional Judgment (PJ)
In some federal aid programs the financial aid administrator can override the amount of aid granted when extenuating circumstances exist.
Principal
Principal is the amount of money borrowed under the loan. Interest is charged as a percentage of the principal.
Promissory Note
A promissory note is the binding legal document signed by the student borrower before loan funds are disbursed by the lender. The promissory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy, and cancellations. The student should keep this document until the loan has been repaid.
SAR (Student Aid Report)
A SAR or Student Aid Report is an acknowledgement sent to the student after filing a FAFSA. The SAR summarizes the information included in the FAFSA and may be requested by your school's OSFA. The SAR will also indicate the amount of Pell Grant eligibility, if any.
Satisfactory Academic Progress (SAP)
A student must be making Satisfactory Academic Progress in order to continue receiving federal aid.
Scholarship
A form of financial aid given to undergraduate students to help pay for their education. Most scholarships are restricted to paying all or part of tuition expenses, though some scholarships also cover room and board.
Secondary Market
Loans are often bought and sold on the secondary market. Thus the bank you make your payments to may change during the lifetime of the loan. The terms of your loan do not change when it is sold to another lender.
SEOG
The Supplemental Education Opportunity Grant (SEOG) is a federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school's financial aid office.
Subsidized Loan
A need-based loan on which the interest is paid by the federal government during the in-school, grace, and deferment periods.
Unsubsidized Loan
A non need-based loan on which interest is not paid by the federal government. Borrowers are responsible for interest on all unsubsidized loans from the date the loan is disbursed.
Verification
A process of review to determine the accuracy of the information on a student's financial aid application. Students are selected by the Processing Agency of the Pell Grant Program.