Financial Aid Glossary
The amount of interest, calculated daily, that has accumulated
on the unpaid amount of your loan.
American College Testing (ACT) publishes the ACT Assessment
Test, commonly known as the ACT. It is a standardized, multiple-choice
test used by some colleges as part of the admissions process
that is administered five times a year. The ACT measures academic
achievement in four areas: English, Math, Reading, and Science.
Adjusted Gross Income:
Taxable income from all sources. (See your Federal Income
Tax Form 1040 EZ, line three, or Form 1040, line 31.)
The reduction of loan balance by your monthly payments.
Items of financial worth including home, business, savings
and checking accounts, stock, bonds, real estate, trust funds,
The person to whom a loan is made, and who agrees to repay
it. The borrower signs a promissory
note, unless he/she signed a master promissory note (MPN),
which serves as the formal promise to repay the loan.
A process of adding unpaid interest to the principal balance
of your loan. This will increase the balance due and may increase
Certificate of Indebtedness (COI):
A Certificate of Indebtedness (COI) provides verification
from the holder(s) of your student loan(s) regarding the payoff
balance on your loan(s).
A co-borrower is a second or additional party who received
the loan proceeds and agreed to repay the loan promise.
This person agrees to pay if the borrower does not.
Cost of Attendance (COA):
The total cost to attend school for one academic year, including
tuition, room and board, books and other related expenses.
This figure is determined by your Financial Aid Office.
Loans that are made based on your credit worthiness as opposed
to Federal Family Education Loans (FFEL) and grants, which
are determined through a need analysis process based on the
borrower's and/or co-signer's credit worthiness.
Default: Failure to pay your
loan according to the terms disclosed on your promissory note.
You are in default on an FFEL Program Loan if your payments
are more than 270 days past due or if you fail to comply with
other terms of the loan.
Deferment: A period of time
during repayment in which the borrower, after meeting certain
criteria, is not required to make their regular monthly payments.
Note: interest payments may or may not be postponed depending
on the type of loan. For Federal Family Education Loan Deferments,
check out the Deferment
If a payment is not received by the due date, it is considered
delinquent. Delinquencies greater than 30 days are generally
reported to national credit bureaus.
Direct Lending Schools:
Institutions of higher education which have chosen to place
all of their students' federally insured student loans through
the Federal Direct Lending Program. Such colleges or universities
may either participate exclusively in the Direct Lending Program
or allow students (borrowers) to choose the lending program
from which to borrow.
A letter that is sent to you acknowledging that your loan
has been approved and letting you know when the money will
be sent to your school, as well as the loan amount and any
fees (origination or guarantee). This marks the successful
completion of the application process.
A notification of the actual cost and terms of a loan, including
the interest rate and any additional finance charges.
Education Savings Account (IRA):
This newly established (1998) IRA allows a related taxpayer
to deposit up to $500 per year for each child under the age
of 18. Interest earned on this type of IRA will be tax-free.
In addition, withdrawals from an Education IRA will be tax-free
as long as the withdrawals are used for educational expenses.
The maximum contribution to an Education IRA is reduced on
a pro-rata basis for single taxpayers with income of $95,000-$110,000
and joint taxpayers with income of $150,000-$160,000. Above
the maximum income level, the allowed contribution is zero.
EFT (Electronic Funds Transfer):
The process whereby your bank wires the loan proceeds directly
to your school if the school participates in this program.
A United States citizen or U.S. national, or resident of certain
U.S. territories who qualify for borrowing in the FFEL or
FDL student lending programs.
A permanent resident of the United States who is able to present
evidence from the Immigration and Naturalization Service that
he or she is in the U.S. for other than a temporary purpose
with the intention of becoming a citizen or permanent resident.
Emergency Loan Program:
These are short-term, low-interest loans with a low interest
rate and are administered by your school's Financial Aid Director.
Many graduate schools provide loan funds for emergencies or
An in-person or online counseling session with the school's
Financial Aid Office before graduation or withdrawal to review
the terms and obligations of your student loan.
Expected Family Contribution:
The amount a family is expected to pay toward college costs.
This amount is determined by a need analysis formula established
by the federal government.
The Free Application for Federal Student Aid (FAFSA) is a
standard federal application which is used to determine your
eligibility for most forms of financial aid including federal
government backed loans. The FAFSA is typically completed
early in the year as it requires tax information from the
student and/or parents.
Federal Family Education Loan (FFEL) Program:
A loan program authorized by the federal government in the
Higher Education Act. This program includes federal Stafford,
PLUS, and Consolidation Loans. These loans are funded by banks,
guaranteed by guaranty agencies and ultimately insured by
the federal government.
Financial Aid Package:
A report from an applicant's college documenting the monetary
aid available to the student. This includes all grants, scholarships,
work-study, and loans available from school, state, and federal
programs. It does not include alternative, non federally guaranteed
loans such as CitiAssist® Loans.
The difference between the Expected Family Contribution and
the cost of attending school.
Federal Supplemental Educational Opportunity
Government grants distributed by colleges, at their discretion,
to students based on need.
A temporary postponement of principal and interest payments
during which the borrower may only pay the interest on the
loan. If the borrower chooses not to pay the interest, it
will be capitalized at the end of the period.
Good thru Date:
The date your payoff amount should arrive at The Student Loan
A period of time after you leave school during which no payments
for your student loans are required. Grace periods are not
available for all loans and are detailed in your promissory
A form of financial aid, similar to scholarships,
that do not have to be repaid.
Your income from employment and other sources, before taxes
A fee charged by the guaranty agency. The guarantee fee (sometimes
called an insurance fee) is deducted from the principal amount
of your loan and paid by your lender to the guaranty agency.
A state or non-profit organization, which has an agreement
with the U.S. Secretary of Education to administer a loan
guarantee program under the Higher Education Act.
HOPE Scholarship Tax Credit:
This tax credit is available to those taxpayers who are paying
education expenses for students enrolled in their first two
years of college. The Hope Tax Credit is available for up
to 100% of the first $1,000 of qualified tuition and related
expenses (i.e. tuition and fees, but not room and board and
books) and 50% of the second $1,000. The Hope Scholarship
Tax Credit is for expenses paid after December 31, 1997. It
will be reduced on a pro-rata basis for those who file a single
tax return with incomes of $40,000-$50,000 and for those who
file joint tax returns with incomes of $80,000-$100,000. (Single
return tax filers with incomes of $50,000 and joint return
tax filers with incomes of $100,000 and above will not be
eligible for a deduction.) The Hope Scholarship Tax Credit
is part of the Taxpayer Relief Act of 1997.
The fee charged to borrow money. Interest is typically computed
as an annual percentage of the principal amount outstanding.
Lifetime Learning Tax Credit:
The Lifetime Learning Tax Credit is available to people beyond
the first two years of undergraduate studies, graduate students,
or working U.S. citizens taking classes to improve or upgrade
their job skills. It can be used for qualified tuition and
related expenses (i.e. tuition and fees, but not room and
board and books) paid by the taxpayers. The tax credit equals
20% of the first $5,000 of expenses paid by the taxpayer after
June 30, 1998 through December 31, 2002 and 20% of the first
$10,000 after January 1, 2003. The tax credits are reduced
on a pro-rata basis for single return tax files with incomes
of $40,000-$50,000 and for joint return tax filers with incomes
of $80,000-$100,000. (Single return tax filers with incomes
of $50,000 and joint return tax filers with incomes of $100,000
and above will not be eligible for a deduction.) The Lifetime
Learning Credit is part of the Taxpayer Relief Act of 1997.
A sum of money usually borrowed for a specific reason (to
obtain an education, buy a car etc.). The entity lending the
money (i.e., a bank) usually charges interest
for the use of the money. The amount of money borrowed is
typically repaid with interest over a period of time.
Master Promissory Note:
The revised promissory note which the Department of Education
has authorized to be used with Stafford loans beginning 7/1/99.
It allows lenders to use the single Master Promissory Note
instead of requiring borrowers to sign a new application/promissory
note for additional advances.
Loan proceeds that are paid in more than one check or electronic
transaction. For example, some of a loan may go towards the
1st semester of school and some for the second semester.
Non-Direct Lending Schools:
Institutions of higher education which have chosen to place
their students' federally insured student loans through the
Federal Family Education Loan Program (FFELP). In the FFEL
program, borrowers choose the lender from which to borrow,
and the lender then obtains a loan guarantee from a state
or private guarantee agency.
A fee charged by the federal government or FFEL loans. The
origination fee is deducted from the proceeds of your loan
by the lender and paid to the federal Department of Education.
A summary of the terms of a loan, which includes the total
principal amount, the date payment begins, and the interest
The total amount you would owe if you were to pay off your
entire loan. It includes the outstanding principal plus any
unpaid accrued interest.
One of the largest sources of grants, Pell Grants are distributed
by the federal government and are designed to help students
with financial need pay for college.
PLUS (Parent Loans):
Loans under the FFEL program for parents of undergraduate
students. They require a credit check. The interest rate is
low, but repayment begins immediately.
The original amount of the loan when all disbursements are
The outstanding amount you owe, excluding accrued but unpaid
A legally binding agreement the borrower signs to obtain a
loan, in which the borrower promises to repay the loan, with
interest. The note includes all the terms and conditions of
the loan. You need to sign a promissory note for every loan
you receive unless you have previously signed a Master Promissory
The Preliminary Scholastic Assessment Test (PSAT) is a two-hour
test given once a year in October. As with the SAT, you receive
separate math and verbal scores. In addition, the test also
includes a third scored section testing English grammar. Each
subject is scored on a scale of 20 to 80, and these scores
are combined to create your National Merit Scholarship selection
The period of time during which you repay the money borrowed
Scholarships, like grants, are a form
of financial aid that does not have to be repaid. These are
available from many sources including community groups, schools,
and private corporations. Scholarships can be awarded based
on a variety of criteria including scholastic achievement,
extacurricular activities, and academic major.
The Scholastic Aptitude Test (SAT) is a seven-section, three-hour
exam that is administered seven times a year. Three of the
sections are verbal, three are math, and one is experimental.
The experimental section can be either verbal or math. It
is used by the test-makers for research purposes only and
will not count toward your final score.
Loans under the FFEL loan program that are awarded on the
basis of financial need. These loans can be made from a bank,
credit union, other eligible lender, or obtained directly
from the government under the Federal Direct Lending Program.
Indicates the condition of your student loan. Examples would
include "in school" and "repayment."
Student Aid Report (SAR):
Commonly called an SAR, the Student Aid Report is generated
from a family's financial information provided on the FAFSA.
It is a summary of the financial aid for which the student
is eligible based on his or her individual circumstances.
Student Loan Interest Deduction:
Eligible taxpayers may deduct the amount of interest they
have paid during the tax year on any qualified education loan
for the period of time as defined by law. The deduction applies
to interest paid after December 31, 1997 and is phased out
for single taxpayers with incomes of $40,000-$55,000 and for
joint taxpayers with incomes of $60,000-$75,000. Single return
tax filers with incomes of $55,000 and joint return tax filers
with incomes of $75,000 and above will not be eligible for
a deduction. (Qualified education expenses generally include
tuition, fees, room and board.) The Student Loan Interest
Deduction is part of the Taxpayer Relief Act of 1997.
A loan on which the government pays the interest for you while
you are in school at least half-time and during periods of
grace and deferment (i.e. subsidized federal Stafford Loan).
A loan that is not based upon need (i.e., unsubsidized federal
Stafford Loan or Federal PLUS Loans). The borrower is always
responsible for paying the interest on the loan while in school,
during deferment, forbearance, and grace periods.
Interest rates that change periodically (i.e., quarterly,
annually etc.). The interest rates for Federal Stafford and
PLUS Loans are set by the government each year and change
annually on the first of July.
Part of the federal Student Financial Assistance Program,
work study provides part-time employment for post-secondary
students who need income to help meet education costs.
An IRS form used by taxpayers to certify that loans meet the
definition of qualifying education debt and which allows lenders
to report to the IRS the amount of interest paid on student
loans as interest qualifying for possible tax deductions.
Refers to the auction rate determined for 91-day Treasury
Bills by the public auction held by the United States Treasury
Department. The interest rates for Stafford and PLUS loans
are tied to the auction rates held at certain times of the
year. The rate(s) can be obtained from the Treasury Department,
but is also available in many newspapers including The Wall