Common Terms and Their Meaning
Accrue: To add up over time, as in "The interest accrues from the first of the month."
Acknowledgment: Sent by a need analysis service to students when their financial aid applications have been processed.
Assets: Part of a family's financial worth, including home equity, other real estate, stocks, bonds, and cash savings.
Award Letter: The official document, issued by a college's financial aid office, which lists all the financial aid awarded to a student.
Capitalization: The act of adding unpaid interest to the principal balance that is owed on a loan. It increases the total amount owed and the monthly payment.
Cost of Attendance (Cost of Education): The total amount it will cost a student to attend a particular school. This includes tuition and fees, room and board, books, supplies, transportation costs, and personal expenses.
Default: Failure to make student loan payments or otherwise honor its terms; reported to credit bureaus and can influence future credit.
Dependent Student: According to the federal definition, a student who is dependent upon his or her parents for financial support and is declared as a dependent on the family's federal income tax form. (Refer to Federal definition of "independent".)
Expected Family Contribution: The amount the federal government, via the FAFSA process, estimates that a student's family should be able to contribute to the cost of a college education. This figure includes parental contribution as well as the student's assets and summer job earnings.
Financial Need: The difference between the expected family contribution and the total cost of attendance.
Free Application for Federal Student Aid (FAFSA): The form on which parents or independent students list all income and net assets to estimate the amount they will be expected to contribute toward college costs and determine eligibility for federal family aid.
Grants: Financial aid that does not have to be repaid.
Grace Period: The span of time allowed before principal repayment of a Federal Stafford loan must begin after graduating or leaving school.
Independent Student: According to the federal definition, a student who is 24-years old by December 31 of the same year, married, a graduate or professional student, someone with legal dependents other than a spouse, an orphan or ward of the court, or a veteran.
Interest: The fee charged to borrow money.
Needs Analysis: A detailed study of family finances, which is the first step in determining how much financial aid the student qualifies for.
Origination Fee: The fee charged by the government to offset interest payments. The amount of the fee is usually deducted from the dollar amount of the loan.
Parental Contribution: The amount it is estimated that parents, not the student, should be expected to contribute toward college expenses.
Pell Grant: This is the largest federal grant aid program. Qualifying students apply directly to the government for Pell Grants, but the grants are disbursed by the colleges the students attend, to all who qualify for this aid.
Period of Enrollment: The time between the beginning and ending dates of the school term during which the student will use his/her Stafford loan.
Principal: The amount you borrow on which interest will be charged.
Private Sources of Aid: Financial Aid from non-government sources such as corporations, foundations, civic associations, etc.
Promissory Note: The signed, legal, binding agreement between student and lender stipulating the amount of the loan and the terms under which it is to be paid back. Keep it until the loan is paid off.
Satisfactory Academic Progress: The academic standing which meets the financial aid office's requirements. Anything less will jeopardize the student's federal aid.
Student Aid Report: A report sent to the student which gives a Pell Grant Index (PGI) number indicating eligibility.
Unmet Need: The difference between the amount of money a college or university awards a student and the expected family contribution.
W-2: A statement of earned wages which employers must issue shortly after January 1.
Work Study: Federally funded financial aid, usually in the form of an on-campus job. Schools set their own policies on how many hours (usually 15-20 hours) a student must work per week.