Financial Aid Glossary of Terms

A · B · C · D · E · F · G · H · I · J · K · L · M · N · O · P · Q · R · S · T · U · V · W · X · Y · Z

A

Academic Year

A period that begins on the first day of classes and ends on the last day of classes, typically August through May.

Associate Degree

An undergraduate academic degree granted after completion of two years of study. Community colleges and career colleges generally award associate degrees.

Award Letter

An Award Letter refers to the amount of money a student is eligible for a period of time. 

B

Bachelor’s Degree

An undergraduate academic degree awarded for a course of study that generally lasts four years.

Budget

A financial plan that helps you track your money, make informed spending decisions, and plan for your financial goals.

Bursar

The college official responsible for handling billing and payments for tuition, fees, housing and other related expenses.

C

Campus-Based Programs

U.S. Department of Education federal student aid programs administered by colleges and universities. Includes: Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS).

Central Processing System (CPS)

This is the Department of Education system that processes information from the FAFSA and verifies with government databases that the social security number, citizenship, and other information are correct. CPS also calculates the Expected Family Contribution (EFC) for each applicant and sends out the Student Aid Report (SAR). 

Collateral

Property used to secure a loan which can be seized if the borrower defaults on a loan

College Credit

When a college grants credit for a course, it means that passing that course counts toward a degree. Colleges may also grant degree credit for scores on exams.

Commuter Student

A student who lives at home and travels to school.

Consolidation Loan

A loan Consolidation loans typically have longer repayment periods and greater interest. 

Cost of Attendance

The total amount of college expenses before financial aid. Cost of attendance includes money spent on tuition and fees, room and board, books and supplies, and living expenses.

Custodial Parent

In cases where a student’s parents are divorced or separated, the custodial parent is the parent with whom the student lived the most during the past 12 months.

CSS/Financial Aid PROFILE®

A financial aid application used by more than 300 colleges, universities and private scholarship programs to award their financial aid funds. The College Board offers this service. Read more about the CSS/Financial Aid PROFILE.

D

Default

Failure to repay or otherwise meet the terms and condition of a loan. Default typically occurs after six months of delinquent payments. Penalties include a bad credit rating, loss of future financial aid eligibility, withholding of tax refunds, garnishing wages and loss of monthly payment options.

Delinquency

Failure to make a scheduled loan payment.

Demonstrated Need

The difference between your expected family contribution (EFC) and the total cost of attendance for a particular college.

Dependency Status

A student’s dependency status determines the degree to which the student has access to parent financial resources. An independent student is at least 24 years old as of January 1, is married, is a graduate or professional student, has a legal dependent other than a spouse, is a U.S. Armed Forces veteran or is/was an orphan or ward of the court.

Direct Loans

A federal student loan that eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans are types of Direct Loans. 

Disbursement

The process by which financial aid funds are made available to students for use in meeting educational and related living expenses. Funds may be disbursed directly to the student, or applied to the student’s account.

E

Eligible Program

An educational program that meets regulatory requirements for participating in Title IV programs.  

Enrollment Status

A classification based on the number of credit-hours you're taking; for example, your enrollment status may be full-time or half-time. Some loans or aid may be available only to students with a certain enrollment status, usually half-time or more.

Entrance Counseling

A mandatory information session that takes place before you receive your first federal student loan that explains your responsibilites and rights as a student borrower. 

Exit Counseling

A mandatory information session that takes place before you graduate or drop below half-time enrollment that explains your loan repayment responsibilities and when repayment begins. 

Expected Family Contribution (EFC)

The figure that indicates how much of a family's financial resources should be available to help pay a student's postsecondary education expenses. This is the number that's used to determine your eligibility for federal student financial aid. 

F

FAFSA

The free application for federal student aid. 

Federal Methodology

The need analysis formula used to determine a family’s expected family contribution (EFC). The Federal Methodology considers family size, the number of family members in college, taxable and nontaxable income and assets.

Federal Pell Grant

Federal grant program for undergraduate students who demonstrate financial need and have not yet completed a baccalaureate degree.

Federal Supplemental Educational Opportunity Grant (FSEOG)

A program that provides grant assistance to students (as determined by the college). Priority in awarding FSEOG funds is given to students who have exceptional financial need and are Federal Pell Grant recipients. Approximately five percent of undergraduates are recipients of FSEOG.

Federal Work-Study

Federally sponsored Work-Study (FWS) Program provides undergraduate and graduate students with school-year part-time employment. The Federal Government pays some of the student’s salary, which helps departments and businesses pay for and ultimately hire students. Eligibility is based on financial need.

Financial Aid

Money given or loaned to you to help pay for college. Financial aid can come from federal and state governments, colleges, and private and social organizations. Learn about financial aid options.

Financial Aid Office

A college office that serves as a resource for students who need help paying for college costs. Financial aid counselors can help you apply for and receive grants, loans, scholarships and work-study employment. The financial aid office may also offer programs to help you manage your money.

Financial Aid Counselor/Administrator

College employee responsible for preparing and communicating information about student loans, grants, scholarships and employment programs, and for advising, awarding, reporting, counseling and supervising student financial aid office functions.

Financial Aid Package

The total amount of financial aid a student is offered by a college. The package includes grants, loans, and federal work-study. Parent PLUS loans are not considered part of the package.

Financial Aid Transcript

A record of all financial aid awards a student received at other educational institutions.

Financial Need

The difference between the student’s educational costs and the Expected Family Contribution.

Fixed Interest Loans

An interest rate on a loan that remains the same for the entire term of the loan.

Forbearance

A period during which your monthly loan payments are temporarily suspended or reduced. During forbearance, principal payments are postponed but interest continues to accrue. 

Free Application for Federal Student Aid (FAFSA)

The free application form you submit to apply for federal financial aid. It is required for all students seeking federal student grants, work-study programs and loans. Most colleges require it as well. The FAFSA may also qualify you for state-sponsored financial aid. Read more about the FAFSA.

G

Grace Period

For certain types of federal student loans, a period of time after you graduate, leave school, or drop below half-time enrollment when you are not required to make payments. You are responsible for paying the interest that accrues on unsubsidized loans during the grace period. If the interest is unpaid, it will be added to the principal balance of the loan (capitalized) when the repayment period begins.

Grant

A kind of "gift aid" — financial aid that doesn’t have to be paid back. Grants are usually awarded based on need. 

I

Income Contingent Repayment

The size of the monthly payments depends on the income earned by the borrower. As the borrower’s income increases, so do payments.

Interest

A loan expense charged for the use of borrowed money. Interest is paid by a borrower to a lender. The expense is calculated as a percentage of the unpaid principal amount of the loan.

Interest Rate

The percentage at which interest is calculated on your loan(s).

L

Lifetime Eligibility Used (LEU)

The amount of all Federal Pell Grant aid (in percentage) awarded to you, divided by the amount of Pell Grant aid you would have been eligible to receive based on full-time enrollment. The amount of Federal Pell Grant funds a student may receive over his or her lifetime is limited by federal law to be the equivalent of six years of Pell Grant funding.

Loan

Money you borrow from the government, a bank or another source. Loans need to be paid back, usually over an agreed period of time. You will most likely also have to pay interest on a loan. 

Loan Disclosure Statement 

A document that provides a Direct Loan borrower with important loan-specific information, such as the anticipated loan disbursement amounts, the anticipated loan disbursement dates, and the amount of the borrower's loan fee. It is provided to the borrower before or at the time of the first disbursement of a Direct Loan.

Loan Servicer

An entity that collects payments on loans, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a loan (e.g., processing requests for a change in repayment plans). A federal loan servicer is a loan servicer for the U.S. Department of Education.

M

Master Promissory Note

A promissory note that can be used to make one or more loans for one or more academic years (up to 10 years). An MPN lists the terms and conditions under which the borrower agrees to repay the loan and explains the borrowers rights and responsibilities.

Merit-Based Aid

Financial aid based on academic, artistic, athletic or other merit-oriented criteria (not financial need).

N

Net Price

Net price is the true amount a student will pay for a college.

On this site, we use “net price” to mean the published price of tuition and fees for a college minus the amount of gift aid and education tax benefits a student receives. Another common definition of “net price” is the full cost of attendance at a college (including room and board, supplies, and other expenses) minus the gift aid and education tax benefits.

Net Price Calculator

An online tool that gives you a personalized estimate of what it will cost to attend a specific college. Most colleges are required by law to post a net price calculator on their websites.

NSLDS (National Student Loan Data System)

The Department od Education's centeral database for student financial aid. It provides a centralized view of federal student aid loans and pell grants received from all schools. 

O

Outside Scholarship

Also called “private scholarship.” A scholarship offered by a private organization — not the government or a college. Outside scholarships are offered by all kinds of groups, individuals, corporations and nonprofit organizations.

Overpayment

The disbursement of more federal student aid funds to a student than he or she is eligible to receive. A student's overpayment alert in My Federal Student Aid will let him or her know whom to contact to resolve the aid overpayment. 

P

Packaging

A financial aid administrator’s process of combining various types of student aid (grants, loans, scholarship and employment) to attempt to meet a student’s financial need. 

PLUS Loans (Parent Loans for Undergraduate Students)

Federal loans available to parents of dependent undergraduate students to help finance their child’s education. Parents may borrow up to the difference between education costs and financial aid received from a bank or other lending institution.

Principal

The total sum of money borrowed plus any interest that has been capitalized.

Priority Date

The date by which your application – whether it’s for college admission, student housing or financial aid – must be received to be given the strongest consideration. Since financial aid is often limited, meeting the priority date is important to be eligible to receive funds.

Professional Judgement

For need-based federal aid programs, financial aid administrators can adjust the expected family contribution (EFC), or the cost of attendance (COA), or change the dependency status (with documentation) when extenuating circumstances exist (for example, if a parent becomes unemployed, disabled or deceased).

S

Satisfactory Academic Progress

A school’s policy concerning the minimum number of courses that must be completed each semester, the maximum time frame, and the minimum GPA required to receive financial aid.

Scholarship

A kind of "gift aid" — financial aid that doesn’t have to be paid back. Scholarships may be awarded based on merit or partially on merit. That means they’re given to students with certain qualities, such as proven academic or athletic ability. Learn more about gift aid. 

Student Aid Report (SAR)

The report sent to your family after you submit the Free Application for Federal Student Aid (FAFSA) that tells you what your expected family contribution (EFC) is.

Student Contribution

A quantitative estimate of the student’s ability to contribute to postsecondary education expenses. (Typically 35 percent of his or her savings and half of the student’s summer earnings above $1,750).

Subsidized Loan

A loan that student borrowers do not have to pay interest on until after their grace period expires.

Supplemental Education Opportunity Grant (SEOG)

Federal grant program for undergraduate students with exceptional need. SEOG grants up to $4,000 are awarded by the school’s financial aid office.

T

Title IV Programs

Federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended. Includes Federal Pell Grants, Federal Supplemental Educational Opportunity Grant, Federal Work Study, Federal Perkins Loan, Federal Stafford Loan, Federal PLUS Loan, Direct Loan, Direct PLUS Loan and SSIG.

Transcript

The official record of your course work at a school or college. Your high school transcript is usually required as part of your college application and for some financial aid packages.

U

Undergraduate

A college student working toward an associate degree or a bachelor's degree.

Unmet Need

Difference between a student’s total cost of attendance at a specific institution and the student’s total available resources, including financial aid.

Unsubsidized Loan

A loan that student borrowers must pay all the interest on, including while they are enrolled.

V

Verification

The process your school uses to confirm that the data reported on your FAFSA form is accurate. Your school has the authority to contact you for documentation that supports income and other information that you reported.