Student Loans
Important Loan Terms
Accrued Interest - Loan interest that has accumulated and must be repaid in addition to the loan principal. The more interest that accrues, the more the loan will cost before it is fully repaid.
Cancellation - An action to negate the balance of one or more loan disbursements prior to the disbursement going to the school.
Capitalizing Interest - A process where a lender adds any unpaid interest to the principal of the loan, thereby increasing the outstanding principal balance.
Credit-Based Loan - A loan based on the borrower's ability to repay, i.e., the Federal PLUS loan.
Default - Failure of a borrower to repay a loan for over 180 days. Defaults become a permanent negative mark on the borrower's credit history.
Deferment - An entitlement to postpone payment of principal and interest to those borrowers who qualify.
Deliquency - Failure to make a payment by the scheduled due date.
Dependent Student - A student who is under 24 years of age by December 31 of the award year; is not a graduate or professional student; is not married; does not have legal dependents; is not a veteran of the United States Armed Forces; or is not an orphan or ward of the court.
Disbursement - The transfer of loan proceeds, via a check or electronic funds transfer by a lender to the school.
Discharge - When a borrower's promise to pay back a loan is forgiven due to permanent disability or death of the borrower, or student in the case of a Federal PLUS loan.
Disclosure Statement - Statement of the actual cost and terms of a loan.
Financial Aid Transcript - A document provided by a school which discloses information about the financial aid that a particular student received at that school.
Forbearance - A temporary suspension of payments or a reduction of principal and interest payment.
Forgiveness - The cancellation of a borrower's obligation to repay part or all of the loan. Granted in extreme instances such as death or total disability. Also granted in some cases to students entering certain public, civil or military service professions.
Grace Period - The period of time, usually six months, prior to the first scheduled loan payment. Applies to Federal Stafford loans only.
Guarantee Agency - Entity that insures Federal Family Education Loans against the borrower's permanent disability, death, default or bankruptcy.
Independent Student - Any student who is 24 years of age or older by December 31 of the award year; is a graduate or professional student; is married; has legal dependents other than a spouse; is a veteran of the United States Armed Forces; is an orphan or ward of the court; or is a student for whom a Financial Aid Officer makes a documented determination of independence by reasons of unusual circumstances.
Interest - The fee charged to borrow money.
Lender - A bank, credit union, or other financial institution that loans money to the borrower. With Direct Loans, the lender is the Federal Government.
Loan Period - A period of enrollment within the academic year in which a borrower intends to use Federal Family Education Loan proceeds to cover educational costs incurred.
Loan Servicer - An organization that disburses student loan proceeds, processes payments and deferments, and answers questions on behalf of a lender.
Master Promissory Note (MPN) - A legal document whereby the borrower may receive loans for single or multiple periods of enrollment.
Origination Fee - Fee deducted from your loan principal to aid the U.S. Department of Education's student loan program.
Originating Lender - A lender that makes and disburses a student loan to a borrower.
Prepayment - Repayment of part or all of your loan before it is required. You have the right to prepay at any time, in any amount, without penalty, and it is a great way to avoid paying extra interest.
Principal - The amount borrowed.
Repayment Period - The period of time, excluding periods of deferment and forbearance, in which the loan must be paid.
Repayment Schedule - a document listing the number or payments required to repay your loan in full. Includes the frequency and amount of each payment. You should receive a schedule about 120 days prior to the beginning of your repayment period.
Secondary Market - An organization that purchases student loans from originating lenders.
Subsidized Loans - Interest is paid by the federal government while the student is enrolled in school at least half-time, during the six month grace period prior to entering repayment, and during eligible deferment periods.
Unsubsidized Loans - Accrued interest is paid by the borrower during the in-school periods, eligible deferment periods, and the repayment period.
