Student Loans Glossary

Ability to Benefit
If you don't have a high school diploma or its recognized equivalent, you may still be eligible to receive federal student loans and other aid if you pass an independently administered ability to benefit (ATB) test the U.S. Department of Education has approved. (last updated 03/19/2004)

Academic Year
A period of time schools use to measure a quantity of study. For example, a school's academic year may consist of a fall and spring semester during which a student must complete 24 semester hours. Academic years vary from school to school and even between educational programs within the same school. (last updated 03/19/2004)

Consolidation
The process of combining a number of unpaid federal student loans with various repayment schedules into one loan with one monthly payment. (last updated 03/19/2004)

Consolidation Education Loan
A Consolidation Education Loan allows you to combine several types of federal student loans with various repayment schedules into one loan. The repayment process is simpler because you make only one payment a month. Also, the interest rate on the Consolidation Loan might be lower than what you're currently paying on one or more of your loans. (last updated 03/19/2004)

Cost of Attendance (COA)
The total amount it will cost you to go to school - usually expressed as a yearly figure. For purposes of determining your eligibility for federal student loans, COA is determined using rules established by Congress. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance if you live off campus); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care costs related to a disability and miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Also included are reasonable costs for eligible study-abroad programs. If you are attending less than half time, the COA includes only tuition and fees and an allowance for books, supplies, transportation, and dependent-care expenses. Talk to the financial aid administrator at the school you're planning to attend if you have any unusual expenses that might affect your cost of attendance. (last updated 03/19/2004)

Default
Default is a failure to repay a loan according to the terms you agreed to when you signed a promissory note. For the Federal Family Education Loan (FFEL) and Direct Loan programs, default is more specific - it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently). The consequences of default are severe. Your school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This affects your credit rating for a long time. For example, you might find it very difficult to borrow money from a bank to buy a car or a house. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck.

Also, you're liable for loan collection expenses. If you return to school, you're not entitled to receive additional federal student aid. Legal action also might be taken against you. In many cases, default can be avoided by submitting a request for a deferment, forbearance, or discharge (cancellation) and by providing the required documentation. (last updated 03/19/2004)

Deferment
A deferment is a temporary suspension of your monthly student loan payments. There are many different types of deferments available - check with your school or lender to find out if you qualify. (last updated 03/19/2004)

Dependent Student
You are considered a "dependent student" and must include your parents' income on your Free Application for Federal Student Aid (FAFSA) if you are less than 24 years old, you are not married or separated, you are not and will not be enrolled in a master's or doctorate program (beyond a bachelor's degree), you do not have children who receive more than half their support from you, you are not a veteran, you are not an orphan or a ward of the court.. (last updated 03/19/2004)

Direct Education Loan
Direct Education Loans are federal student loans made directly from the U.S. Department of Education to help eligible students pay for their education expenses. These loans are made under the William D. Ford Federal Direct Loan Program. (last updated 03/19/2004)

Disbursement
Payment of loan proceeds to the student or parent borrower. For a Consolidation Loan, this term refers to sending payoffs to the loan holders of the underlying loans you are consolidating. (last updated 03/19/2004)

Eligible Non-citizen
If you are not a U.S. citizen or U.S. national, to be eligible for federal student loans and other aid, you must:

• Be a U.S. permanent resident who has an I-151, I-551, or I-551C (Alien Registration Receipt Card) or
• Have an Arrival-Departure Record (I-94) from the U.S. Immigration and Naturalization Service (INS) showing one of the following designations:
  • "Refugee"
  • "Asylum Granted"
  • "Cuban-Haitian Entrant, Status Pending"
  • "Conditional Entrant"(valid only if issued before April 1, 1980)

You are not eligible for federal student loans if:

• You have only a Notice of Approval to Apply for Permanent Residence (I-171 or I-464);
• You're in the United States on certain visas, including an F1 or F2 student visa or a J1 or J2 exchange visitor visa;
• You have only a G series visa (pertaining to international organizations).

Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau are not eligible for federal student loans. (last updated 03/19/2004)

Eligible Program of Study
A program of organized instruction that leads to a recognized educational credential. To get federal student loans, you must be enrolled in an eligible program. Check with your school to see if your program is eligible. (last updated 03/19/2004)

Expected Family Contribution (EFC)
Your Expected Family Contribution (EFC) is calculated by the U.S. Department of Education based on the information you submit on your Free Application for Federal Student Aid (FAFSA), and is used to determine your eligibility for federal student loans and other aid. The formula used to calculate your EFC is established by law and is used to measure your family's financial strength on the basis of your family's income and assets. The EFC indicates how much money you and your family are expected to contribute toward your Cost of Attendance (COA) for the school year. (last updated 03/19/2004)

Federal Family Education Loan (FFEL)
Federal Family Education Loans (FFELs) are federal student loans made by eligible private lenders to help students pay for their education expenses. For students, these are generally known as Federal Stafford Loans. (last updated 03/19/2004)

Financial Aid Package
The total amount of financial aid (federal and non-federal) a student receives. The financial aid administrator at a postsecondary institution combines education loans and other forms of aid into a "package" to help meet your need. (last updated 03/19/2004)

Forbearance
Forbearance can be used to temporarily suspend or reduce monthly student loan payments. You may qualify for forbearance if you are willing but unable to make loan payments due to certain circumstances, including financial hardship. Check with your lender to see if you qualify. (last updated 03/19/2004)

Free Application for Federal Student Aid (FAFSA)
The FAFSA is the form you must complete to apply for federal student loans or other student aid from the U.S. Department of Education. Many states and schools also use the FAFSA data to award aid from their programs. The information you report is used to calculate your Expected Family Contribution (EFC), which measures your family's financial strength on the basis of your family's income and assets. (last updated 03/19/2004)

General Education Development (GED) Certificate
A certificate showing that an individual has passed a specific, approved high school equivalency test. Students with GEDs may still qualify for federal student loans. (last updated 03/19/2004)

Grace Period
A period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your federal student loan. If you have a Perkins Loan, your grace period is nine months; if you have a FFEL or Direct Stafford Loan, your grace period is six months. (For unsubsidized Stafford Loans, you are responsible for the interest during the grace period.) (last updated 03/19/2004)

Guaranty Agency
The organization that administers the Federal Family Education Loan (FFEL) Program in your state. This agency is the best source of information on FFELs. (last updated 03/19/2004)

Half-Time Attendance
The definition of half-time attendance depends on how your school measures the course load of its full time students. Check with your school to find out how it defines half time. (last updated 03/19/2004)

Independent Student
You are considered an "independent student" and do not need to include your parents' income on your Free Application for Federal Student Aid (FAFSA) if you are at least 24 years old, married (or separated but not divorced), a graduate or professional student, a veteran, a ward of the court (or both parents are deceased), or have legal dependents other than a spouse. (last updated 03/19/2004)

Interest Capitalization
If you have unsubsidized FFEL or Direct Stafford Loans, and you don't pay the Interest that accrues (accumulates) while you are in school or during deferment periods, the interest will be capitalized - added to the principal amount of your loan. Capitalization increases the amount of your loan. (last updated 03/19/2004)

PLUS Loan
The Federal PLUS Loan enables parents of eligible dependent undergraduate students borrow to help pay their children's education expenses. (last updated 03/19/2004)

Perkins Student Loan
Perkins Loans are low-interest (five percent) federal student loans for both undergraduate and graduate students. Perkins Loans are made through a school's financial aid office. Your school is your lender, and the loan is made with government funds. (last updated 03/19/2004)

Promissory Note
The binding legal document you sign when you get a student loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan. It includes information on how interest is calculated and what the deferment and cancellation provisions are for your loan. It's very important to read and save this document because you'll need to refer to it later when you begin repaying your loan. (last updated 03/19/2004)

Regular Student
If you are enrolled in an institution to obtain a degree, certificate, or other recognized educational credential, you are considered a "regular student." Generally, to receive federal student loans and other aid, you must be a regular student. (For some programs, there are exceptions to this requirement. Check with your school for more information.) (last updated 03/19/2004)

Satisfactory Academic Progress
To be eligible to receive federal student loans and other aid, you must maintain satisfactory academic progress toward a degree or certificate, according to your school's written standard of satisfactory progress. Check with your school to find out about its standard. (last updated 03/19/2004)

Selective Service Registration
If you are a male who was born on or after January 1, 1960, are at least 18 years old, and are not currently on active duty in the U.S. Armed Forces, you must register, or arrange to register, with the Selective Service in order to receive federal student loans and other aid. Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau are exempt from registering. (last updated 03/19/2004)

Stafford Student Loan
Stafford Loans are federal student loans made to eligible students to help pay their education expenses. Stafford Loans are made under the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. See the definitions of "Federal Family Education Loans (FFEL)" and "Direct Loan," above. (last updated 03/19/2004)

Subsidized/Unsubsidized Stafford Student Loan
Borrowers who demonstrate financial need can receive a subsidized FFEL or Direct Stafford Loan, which means the government pays the interest on your loan while you are in school at least half time, in your grace period, or in an authorized period of deferment (but not during forbearance). If you don't demonstrate financial need (or if you need to borrow more than your subsidized loan limit), you can receive an unsubsidized FFEL or Direct Stafford Loan. This means you are responsible for the interest that accumulates - the government doesn't pay it. (last updated 03/19/2004)

Unsubsidized Stafford Student Loan
If you don't demonstrate financial need (or if you need to borrow more than your subsidized loan limit), you can receive an unsubsidized FFEL or Direct Stafford Loan. This means you are responsible for the interest that accumulates - the government doesn't pay it. (last updated 03/19/2004)

Variable Interest Rate
FFEL and Direct Stafford Loans have variable interest rates, which means the rates change yearly, on July 1st. The interest rate is tied to, and fluctuates with, the Treasury Bill rate. You will be notified throughout the life of your loan what your current interest rate is. (last updated 03/19/2004)