Glossary of Terms

Student Loan terminology can be confusing. Here's a list of definitions that will help you make sense out of the loan process.

Adjusted gross income Income listed on your federal income tax return.

Cancellation A loan may be cancelled before or after disbursement based on a change in your eligibility or enrollment.

Capitalizing interest Adding unpaid interest to the principal of a loan. Capitalizing increases the total amount of the loan and therefore, the interest charged over the life of the loan (interest is normally calculated as a percentage of the principal).

Default Failure to pay your loan back. Defaults are recorded on your permanent credit record.

Deferment A deferment allows you to postpone payment of your principal and/or interest if you meet certain requirements. Deferments can be granted for a variety of reasons, including continuing education and unemployment.

Delinquency A borrower is delinquent if the payment is not received on the due date. Delinquencies greater than 30 days are reported to national credit bureaus.

Disclosure statement Statement of the actual cost and terms of a loan, which includes the interest rate and any additional finance charges. You will receive your first statement after disbursement and your second, when you begin to repay your loan.

Forbearance Forbearance is a special arrangement granted by your lender when you can't make payments and may not be eligible for any other deferments. If you meet the requirements, forbearance could change the terms of your student loan so that you may postpone principal payments, extend the amount of time you have to repay the loan, or make smaller payments for a specified period of time.

Grace period Applicable only to Federal Stafford Loans and Unsubsidized Federal Stafford Loans, this is a period of time during which a borrower need not make payments. It follows your graduation or withdrawal from school; or it takes effect when you fall below half-time enrollment.

Guarantee agency Guarantee agencies insure the student loans made by lenders.

Guarantee fee This is sometimes called an insurance fee, and covers default insurance for student loans. It is deducted from the principal and paid to the guarantee agency which insures the loan.

Interest The price paid (or fee charged) to borrow money. The interest is computed as a percentage of the amount borrowed.

Loan servicer The company that provides customer service (e.g., answers questions, handles address changes or transfer of schools, processes payments, etc.) during the repayment period. NOTE: This company is not always your original lender.

Loan purchasing Loan purchasing takes place when one bank takes over a loan or an entire portfolio from another lender. This may also occur at the customer's request, including when a student chooses to consolidate loans.

Multiple disubrsements When a loan is paid out in more than one check. Multiple disbursements occur when loan proceeds are needed for more than one term during an academic year.

Need Analysis A process to determine the level of financial aid you are eligible for by considering how much you and your family can contribute to the cost of education. It is based on an analysis of detailed financial information about your income and assets and those of your spouse and family.

Origination fee A fee charged by the federal government to help offset the cost of the Title IV Student Loan program. It is deducted from the principal amount of the loan.

Payment schedule A summary of the terms of a loan, which includes the total amount owed, the number of payments, the monthly payment amount, the date payment begins, and the interest rate.

Payoff balance This is the amount you would pay if you were to pay off your loan today. It includes the outstanding principal plus any unpaid interest.

Principal The amount you borrow. It's also the amount on which interest is charged.

Promissory note Your formal promise to repay a loan. It is a legally binding contract between a borrower and a lender which includes all the terms and conditions of a loan. Promissory notes should be signed for every loan you receive. You should keep your copy in your permanent files.

Repayment period Found on your disclosure statement, this is the period of time during which you repay your loan. It begins when your grace period expirse, and ends when you have fully repaid your loan. Please note the repayment period varies based on loan type.

Title IV A section of the higher Education Act of 1965 which describes the provisions for the government-insured student financial aid programs. These are the Federal Stafford Loan, Unsubsidized Federal Stafford Loan, Federal Supplemental Loan for Students, Federal PLUS Loan, and Federal Consolidation Loan.

Variable interest Federal Supplemental Loan for Students, Federal Stafford Loan, Unsubsidized Federal Stafford Loan and Federal PLUS Loan interest rates are set by the government each year, and therefore vary from year to year. The interest rate is effective July 1st. See your Financial Aid Administrator for specific rates.

Adjusted gross income	Income listed on your federal income tax return.
Cancellation	A loan may be cancelled before or after disbursement based on a change in your eligibility or enrollment.
Capitalizing interest	Adding unpaid interest to the principal of a loan. Capitalizing increases the total amount of the loan and therefore, the interest charged over the life of the loan (interest is normally calculated as a percentage of the principal).
Default	Failure to pay your loan back. Defaults are recorded on your permanent credit record.
Deferment	A deferment allows you to postpone payment of your principal and/or interest if you meet certain requirements. Deferments can be granted for a variety of reasons, including continuing education and unemployment.
Delinquency	A borrower is delinquent if the payment is not received on the due date. Delinquencies greater than 30 days are reported to national credit bureaus.
Disclosure statement	Statement of the actual cost and terms of a loan, which includes the interest rate and any additional finance charges. You will receive your first statement after disbursement and your second, when you begin to repay your loan.
Forbearance	Forbearance is a special arrangement granted by your lender when you can't make payments and may not be eligible for any other deferments. If you meet the requirements, forbearance could change the terms of your student loan so that you may postpone principal payments, extend the amount of time you have to repay the loan, or make smaller payments for a specified period of time.
Grace period	Applicable only to Federal Stafford Loans and Unsubsidized Federal Stafford Loans, this is a period of time during which a borrower need not make payments. It follows your graduation or withdrawal from school; or it takes effect when you fall below half-time enrollment.
Guarantee agency	Guarantee agencies insure the student loans made by lenders.
Guarantee fee	This is sometimes called an insurance fee, and covers default insurance for student loans. It is deducted from the principal and paid to the guarantee agency which insures the loan.
Interest	The price paid (or fee charged) to borrow money. The interest is computed as a percentage of the amount borrowed.
Loan servicer	The company that provides customer service (e.g., answers questions, handles address changes or transfer of schools, processes payments, etc.) during the repayment period. NOTE: This company is not always your original lender.
Loan purchasing	Loan purchasing takes place when one bank takes over a loan or an entire portfolio from another lender. This may also occur at the customer's request, including when a student chooses to consolidate loans.
Multiple disubrsements	When a loan is paid out in more than one check. Multiple disbursements occur when loan proceeds are needed for more than one term during an academic year.
Need Analysis	A process to determine the level of financial aid you are eligible for by considering how much you and your family can contribute to the cost of education. It is based on an analysis of detailed financial information about your income and assets and those of your spouse and family.
Origination fee	A fee charged by the federal government to help offset the cost of the Title IV Student Loan program. It is deducted from the principal amount of the loan.
Payment schedule	A summary of the terms of a loan, which includes the total amount owed, the number of payments, the monthly payment amount, the date payment begins, and the interest rate.
Payoff balance	This is the amount you would pay if you were to pay off your loan today. It includes the outstanding principal plus any unpaid interest.
Principal	The amount you borrow. It's also the amount on which interest is charged.
Promissory note	Your formal promise to repay a loan. It is a legally binding contract between a borrower and a lender which includes all the terms and conditions of a loan. Promissory notes should be signed for every loan you receive. You should keep your copy in your permanent files.
Repayment period	Found on your disclosure statement, this is the period of time during which you repay your loan. It begins when your grace period expirse, and ends when you have fully repaid your loan. Please note the repayment period varies based on loan type.
Title IV	A section of the higher Education Act of 1965 which describes the provisions for the government-insured student financial aid programs. These are the Federal Stafford Loan, Unsubsidized Federal Stafford Loan, Federal Supplemental Loan for Students, Federal PLUS Loan, and Federal Consolidation Loan.
Variable interest	Federal Supplemental Loan for Students, Federal Stafford Loan, Unsubsidized Federal Stafford Loan and Federal PLUS Loan interest rates are set by the government each year, and therefore vary from year to year. The interest rate is effective July 1st. See your Financial Aid Administrator for specific rates.