APPENDIX AFinancial Aid Glossary
academic year:
An institution's educational time period, consisting of one twelve-month year, the academic year usually begins in July and ends in June. The year is divided into standard academic terms of quarters, trimesters, or semesters. Each institution must designate whether its summer term is considered as the beginning or the ending of the academic year.
accrual:
The accumulation of interest, usually applied on a monthly basis. Some educational loans, such as the unsubsidized Stafford loan, allow for regular payment of accrued interest, so the loan balance remains at the principal amount until the student enters repayment.
adjusted gross income (AGI):
This amount is calculated on a tax filer's federal income tax return. It is the taxpayer's income minus certain allowable amounts, such as student loan interest.
American College Testing Service (ACT):
A nonprofit organization that does research and provides assessment testing for educational purposes.
amortization:
A loan's repayment is scheduled over a specific period of time, during which the principal decreases, or amortizes. Payments include both principal and interest.
assets:
Generally speaking, assets are owned items that can be converted into cash. When completing financial aid applications, be sure to understand which assets must be reported and which should not be included. For example, when completing the FAFSA, the value of a family's primary residence is not counted as a part of the parents’ or student's total assets.
assistantship:
This type of financial aid is usually provided for graduate students. It waives all or a portion of the student's educational expenses in exchange for teaching, assisting, or involvement in research/experimental work.
balloon payment:
A large payment used to pay off 100 percent of the remaining balance of a loan. This is an option with certain educational loans.
base year:
On financial aid forms, the tax year that is used to determine how financial aid will be made available and/or awarded. Usually refers to the calendar year prior to the one in which the student will attend college.
bursar:
A treasurer or business officer at a college or university.
campus-based programs:
Federal financial aid programs for students that are managed by the institution. The institution determines eligibility and distributes award amounts. Current campus-based programs include the Federal Supplemental Educational Opportunity Grant (FSEOG), federal work study, and the federal Perkins loan program.
capitalization:
A term for interest that accumulates on top of already unpaid interest. If a borrower pays off the interest on a loan as it is accrued, there is no capitalization.
CSS profile:
A financial aid application created by the College Board, a national nonprofit association.
commuter student:
A student who lives with one or both parents, or some other relatives, while attending college courses.
consolidation loan:
This type of loan combines two or more educational loans into one new one by paying off the original debts and creating one new, larger one in their place.
cost of attendance (COA):
The estimate of a student's educational expenses for an academic period of time. The costs generally included in a student's cost of attendance are as tuition, fees, room and board, books, transportation, and personal expenses. Institutions may also include additional items. A student's total financial aid package is not allowed to exceed his or her cost of attendance.
custodial parent:
For financial aid purposes, the parent with whom the student lived with for the most time during the past year. If the student did not live with any one parent more than the other, then the parent who provided the highest amount of financial support is considered the custodial parent. If the custodial parent has remarried, then the new spouse is also required to provide financial information that will be included in the calculation.
default:
Failure to repay a loan according to the legal agreement originally signed by the borrower. Default status appears on the borrower's credit report and can prevent further loans from being granted.
deferment:
A legal postponement of an individual's obligation to pay back a loan. Many educational loans are automatically deferred until the time a student graduates from college or ceases to be enrolled as at a least half-time student.
delinquent:
A debtor who has failed to make a loan payment by the required due date. Usually a late fee is assessed, and the borrower has a certain amount of time to make the required payment before the loan is considered to be in default.
demonstrated financial need:
Usually the difference between the student's cost of attendance (COA) and the expected family contribution (determined through the FAFSA). A student's demonstrated financial need will not be the same at every college and university, mainly because the cost of attendance varies.
dependency status:
Students are considered either dependent or independent in terms of their eligibility for financial aid. Status is determined based on a number of criteria, including age, number of dependents, and military service.
disbursement:
Money paid out on behalf of the student. Financial aid is usually disbursed in equal parts over the course of the academic year (as in once a semester).
endowment:
The property or funds that provide an institution of higher learning with a permanent source of income. Some colleges and universities have endowed scholarships, which are funded with the earnings or interest of a donor's monetary gift to the school.
entitlement program:
This is a type of financial aid that guarantees all eligible students will receive the authorized amounts (because they are “entitled”). The Pell grant program is one example of an entitlement program.
expected family contribution (EFC):
The amount of money that the student and family are expected to pay toward the student's educational expenses over the next academic year. It is determined by a formula developed by Congress, called the federal methodology.
Federal Application for Student Aid (FAFSA):
A financial aid application form provided by the U.S. Department of Education. It collects income and asset information of the student and student's parents (if the student is dependent). Most institutions require that students complete the FAFSA in order to be considered for financial aid.
Federal Family Education Loans (FFEL):
The “umbrella” federal loan program that includes federal Stafford loans (whether subsidized or unsubsidized), federal PLUS loans, and federal consolidated loans. Borrowers of loans that fall under the FFEL are required to apply through private lenders, and the federal government guarantees the loans.
federal methodology:
The mathematical formula, developed by Congress, used to calculate a student's expected family contribution (EFC).
federal Pell grant:
A grant entitlement program provided by the federal government for undergraduate students with financial need.
federal Perkins loan:
A low-interest, campus-based loan program for both undergraduate and graduate students. Federal Perkins loans are subsidized, and the repayment interest rate is set at 5 percent.
Federal Parent Loan for Undergraduate Students (PLUS Loan):
A federal loan program specifically designed for the parents of college students. The PLUS loan program has a variable interest rate, which is capped at a maximum of 9 percent.
Federal Supplemental Education Opportunity Grant (FSEOG):
A campus-based program provided for undergraduate students who have an exceptional amount of demonstrated financial need. Priority must be given to Pell Grant recipients who have the highest demonstrated financial need.
federal work study:
A campus-based program for undergraduate and graduate students who have a demonstrated financial need. It provides part-time employment with an hourly wage. Students are encouraged to work in jobs related to their specific academic program of study.
fellowship:
A type of financial aid, usually awarded to college graduate students, that provides for an allowance or cash stipend for the purpose of funding a student's special focus of study.
financial aid officer (FAO):
The administrator at a college or university who is primarily responsible for interpreting and implementing financial aid regulations, policies, and programs.
financial aid package:
The combination of all the financial aid options available to the student for the academic year. Additional sources of financial aid may be incorporated into a student's financial aid package throughout the academic year.
forbearance:
A temporary or complete discontinuance of the repayment of a loan (often by the borrower). Some educational loans have possible forbearance options if they occur under certain circumstances.
grace period:
The time after a student graduates, or ceases to be enrolled in courses as at least a half-time student, before the student must begin to make repayment of a tuition loan.
grant:
A type of gift aid that does not need to be repaid, usually awarded on the basis of need and sometimes on the basis of an applicant's skills, accomplishments, or some other qualifying criteria.
guaranty agency:
The organization in each state that administers the FFEL (federal family education loans) program in that state.
institutional student information record (ISIR):
An institution's version of the student aid report, or the response from the federal processor after a student has filed the FAFSA. Only institutions listed by the student on the FAFSA will receive an ISIR.
interest:
The amount that accrues at a set percentage rate on the amount originally borrowed (the principal). The interest paid on a loan is the amount is costs to pay the loan back (that is, the amount it cost to borrow the money in the first place). Interest must be paid to the lender, along with the principal amount that was borrowed from the lender.
loan entrance and exit counseling:
A requirement for some educational loans to inform the student of a loan borrower's rights and obligations. Institutions can provide this counseling by providing information sessions, one-on-one counseling, or through an online counseling program.
National Student Loan Data System (NSLDS):
The database of borrower information for federal loans, including outstanding balances, status of loans, and disbursements made. The information comes from institutions, guaranty agencies, and the U.S. Department of Education.
outside scholarships:
Scholarships that are provided from a source outside of the institution the student attends.
packaging:
The determination a financial aid administrator makes concerning a student's financial aid eligibility for various types of aid. Packaging can be done through a computer program or manual calculations.
personal identification number (PIN):
A unique identification number that serves as a student's or parent's electronic signature on the online FAFSA. A person's PIN can be used to access other federal financial aid information online and to electronically sign other documents.
promissory note:
A legal document that lists the borrower's conditions and terms of a loan. It includes both principal and interest information, as well as provisions for deferment and cancellation.
satisfactory academic progress (SAP):
An institution's standard of progress, which is required for continued participation in a number of educational programs. It must include a quantitative component and a qualitative component (that is, how many classes the student is taking and the grades being earned).
student aid report (SAR):
A report that summarizes the student's data inputs as recorded on the FAFSA, lists the student's EFC, and may provide further information or instructions for the student.
subsidized loan:
A federal student loan for which the U.S. government pays the interest while the student is enrolled in college courses as at least a half-time student.
tax credit:
A dollar-for-dollar reduction in the amount of tax obligation that can be deducted directly from the amount of taxes the individual owes.
tax deduction:
Expenses that can be subtracted from taxable income (as figured on state and federal tax returns), thus lowering the amount of tax owed.
tuition payment plans:
A program that enables a family to make regular, periodic payments toward any of a student's educational expenses that are not covered by financial aid. This type of plan may be offered by the school or by a private lending institution.
unsubsidized Stafford loan:
A federal student loan that accrues interest in the same way as any other type of loan.
verification:
A process that compares the student's FAFSA information with the student's and the parent's tax return information as well as certain other submitted documents. Colleges and universities must verify students who have been selected by the CPS (central processing system).
verification worksheet
A form that families must complete for the financial aid verification process. This worksheet is provided by the institution and collects necessary information to be compared to a student's FAFSA as well as other verification materials.
W-2 form:
A statement of the wages that an individual earned during the previous tax year. This form is required to complete all tax returns as well as the FAFSA.
