Financial Aid Glossary of Terms

Academic Year

The period in which school is in session. Typically August through May.

Associate Degree

A two-year college degree.

Award Letter

Official letter from the college financial aid office that lists all the financial aid awarded to the student..

Bachelor’s Degree

A four-year college degree.

Budget

The estimated cost of attendance for a student at an institution: typically includes tuition, fees, books, supplies, room, board, personal expenses and transportation.

Bursar

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

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)

The computer system that receives the student’s need analysis data. The Central Processing System performs database matches and calculates the official Expected Family Contribution (EFC) 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

Loan that allows borrowers to lower their monthly payments by replacing their original loans with one loan. Consolidation loans typically have longer repayment periods and greater interest.

Cosigner

Individual who assumes responsibility for a loan if the borrower fails to repay.

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.

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 new federal program where the school becomes the lending agency and manages the loan funds directly, with the federal government providing the loan funds. Not all schools currently participate in this program.

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.

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.

Expected Family Contribution (EFC)

A measure of your family’s financial strength. States and colleges use this number to help determine your financial aid award. The EFC is calculated using information you supply about your family’s financial circumstances. Read about the EFC.

FAFSA

Look under Free Application for Federal Student Aid.

Federal Direct Student Loan Program (FDSLP)

Loans provided by the U.S. government directly to students and their parents through their schools.

Federal Methodology

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

Federal Supplemental Educational Opportunity Grant (FSEOG)

These are federal grants for students with exceptional financial need (as determined by the college). 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 officers can help you to 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 receives, including grants, loans, and federal work-study. Unsubsidized Stafford loans and 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

Interest rate stays the same for the life of the loan.

Forbearance

The approved temporary suspension of loan payments due to a financial hardship (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.

Grace Period

The period after a student either graduates or leaves school and before loan payments must begin (typically six to nine months).

Grant

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

Guarantee Fee

A percentage of the loan that is paid to the guarantor to insure the loan against default. The fee is usually one percent of the loan amount.

Guarantor

A state agency or private, nonprofit organization that administers a student loan insurance program.

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.

Lender

A bank, credit union or other financial institution that provides funds to the student or parent for an educational loan.

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 — a fee for borrowing the money. Learn about Your College Loan Options.

Merit-Based Aid

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

Need Analysis

The process used by a college to evaluate an applicant’s financial resources and determine how much the student or family can pay toward the cost of the education.

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.

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.

Packaging

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

Parents’ Contribution

A quantitative estimate – calculated by the federal government – of the parents’ ability to contribute to postsecondary educational expenses.

Pell Grant

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

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 amount borrowed or owed on a loan.

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).

Promissory Note

A legally binding contract a student signs before receiving loan funds that details the terms of the loan and obligates the borrower to repay.

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.

Servicer

An organization that is paid by a lender to administer their student loan portfolio.

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.

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.

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.

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.

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.

Work-Study

A program that allows students to take a part-time campus job as part of their financial aid package. To qualify for the Federal Work-Study Program, which is funded by the government, you must complete the Free Application for Federal Student Aid (FAFSA). Some colleges have their own work-study programs.