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Financial Aid Glossary

Accrued Interest:
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, etc.

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 monthly payments.

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).

Co-Borrower (Signer):
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.

Credit-Based Loans:
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 Eligibility List.

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.

Disbursement Notification:
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.

Disclosure Statement:
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.

Eligible Citizen:
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.

Eligible Non-Citizen:
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 unexpected expenses.

Exit Interview:
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.

Financial Need:
The difference between the Expected Family Contribution and the cost of attending school.

Federal Supplemental Educational Opportunity Grants (FSEOG):
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 Corporation.

Grace Period:
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 note.

A form of financial aid, similar to scholarships, that do not have to be repaid.

Gross Income:
Your income from employment and other sources, before taxes and deductions.

Guarantee/Insurance Fee:
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.

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.

Multiple Disbursements:
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.

Origination Fee:
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.

Payment Schedule:
A summary of the terms of a loan, which includes the total principal amount, the date payment begins, and the interest rate.

Payoff Balance:
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.

Pell Grants:
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 completed.

Principal Balance:
The outstanding amount you owe, excluding accrued but unpaid interest.

Promissory Note:
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 Note (MPN).

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 index.

Repayment Period:
The period of time during which you repay the money borrowed and interest.

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.

Stafford Loan:
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.

Subsidized Loan:
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).

Unsubsidized 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.

Variable Interest:
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.

Work Study:
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.

91-day T-Bill:
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 Street Journal.

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