Glossary of College Financial Aid Terms

By on May 3, 2017

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As we head into the winter semester, senior high school students and their parents are still looking for ways to pay for college. For those who filled out and submitted a Free Application for Federal Student Aid (FAFSA) form on January 1 you are probably receiving your Student Aid Reports (SAR), financial aid awards or requests for more information and you may need a little help making sense of the words and abbreviations.

Financial aid involves a number of unique acronyms and commonly used institutional or financial terms unfamiliar to most students or parents. It is important to have a clear understanding of these terms so you can accurately interpret your eligibility and responsibilities for receiving college financial aid.

No matter where you are in the financial aid application process, you could you some help wading through the jumbled jargon. Here are some of the most common financial aid terms your will encounter:

Commonly Used Financial Aid Terms

ACADEMIC YEAR

A period of at least 30 weeks of college during which a full-time student is expected to complete 24 semester/trimester credits or 36 quarter credits; or at least 900 clock hours.

ACCRUAL DATE

The day interest charges on an financial aid loan begins to accrue.

ADJUSTED GROSS INCOME (AGI)

Wages, investment dividends, earned interest, etc., minus certain deductions from income as reported on a federal income tax return. Used to determine aid eligibility.

AWARD LETTER

The official document which lists all the financial aid (loans, scholarships, grants, etc.) awarded to the student. Award letters will vary from college to college; the letter generally lists the expected family contribution (EFC), cost of attendance and the terms of the aid awarded (i.e. responsibilities of student, disbursement dates, repayment conditions, default agreements, etc.).

COST OF ATTENDANCE (COA)

This is the estimated budget for a student’s tuition and fees, allowances for books, supplies, transportation (dependants if any) and a localized standard for living expenses while attending school. The COA will vary from school to school using guidelines established by federal regulations. For students attending less than half-time, the COA will be adjusted based on attendance.

DATA RELEASE NUMBER (DRN)

The four-digit number assigned to your FAFSA located on submission confirmation page or Student Aid Report (SAR). This number will allow you to make corrections to your mailing address or the schools you wish to send your financial aid information to listed on your FAFSA.

DISBURSEMENT

The release of loan funds to your university for delivery to student aid recipients. Disbursements are usually made in equal installments each semester or quarter.

ENDORSER (aka Co-signer)

This is a person or co-signer, with good credit history, who agrees to be responsible for the borrower’s student loan when the borrower, who has an adverse credit history, does not repay it.

EXPECTED FAMILY CONTRIBUTION (EFC)

An amount that a student (and parents if the student is deemed a dependent) are expected to contribute toward college expenses. The federal government and each college have established guidelines for determining these estimates. The EFC is subtracted from the costs of attendance (COA) to demonstrate a student’s need for financial aid.

FEDERAL DIRECT LOAN PROGRAM

A loan made by the U.S. Department of Education to graduate or professional students and parents of dependent undergraduate students for which the borrower is fully responsible for paying the interest regardless of the loan status. Federally sponsored loan programs, which include the Stafford Loan, Graduate PLUS Loan, and the Parent PLUS Loan (for parents of undergraduate students).

FEDERAL FAMILY EDUCATION LOAN (FFEL) PROGRAM

Under this program, private lenders provided loans to students that were guaranteed by the federal government. FFEL Program loans are no longer made by private lenders, but are consolidated under the U.S. Department of Education as the Direct Loan Program.

FINANCIAL AID ADVISOR (FAA)

The counselor in a college’s Financial Aid Office that reviews student financial application and awards, then helps students in all aspects of the financial aid process.

DEMONSTRATED FINANCIAL NEED

A student’s financial need is the difference between the cost of attendance (COA) and the amount a student or their family is expected to contribute (EFC) to the cost to attend. The demonstrated need will vary according to the unique cost to attend of each college the student wishes to attend.

GRANT

A type of financial aid award based on need or merit that is not expected to be repaid by the student.

GRACE PERIOD

The period between the time a borrower leaves school or drops below half-time and the time they are obligated to begin repaying their loans.

INSTITUTIONAL STUDENT INFORMATION REPORT (ISIR)

This is the student aid report (SAR) sent to each school by the FAFSA processors.

INTEREST or INTEREST RATE

A fee charged for borrowing money. Interest rates may be reflect a percentage of the principal loan amount, they can be fixed for life of the loan (fixed rate) or it may vary according to global financial indexes (variable rate).

LENDER

A financial institution, bank, credit union, university or US Department of Education which provides loans to students and parents to pay for college..

LOAN REPLACEMENT GRANT

Grants (funds which are not expected to be repaid) are counted as a student’s self-help contribution and replaces any equal amount of Federal Subsidized Stafford loans in the initial award package.

MASTER PROMISSORY NOTE (MPN)

This is the legal document you will sign when you accept a federal student loan. It lists the terms and conditions under which you agree to accept the loan (and interest rates), how you are expected to repay the loan and explains your rights and responsibilities as a borrower. It’s important to read and save a copy of your MPN until your loan is completely repaid.

MERIT-BASED AID

This aid is awarded based on a student’s grade or test scores, leadership talents, artistic or other merit-based criteria (not a student’s financial need).

NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS)

The NSLDS is centralized database, which stores information on a student’s financial aid and grants, enrollment status, and loan servicer(s). You can access NSLDS using your Federal Student Aid PIN.

NEED-BASED AID

Financial aid, grants, loans or work-study programs which are awarded based on a student’s financial situation.

NEW BORROWER

A borrower who has no unpaid loan balances on the date (s)he signs the promissory note for a specific educational loan. New borrowers may be subject to different regulations than borrowers who have existing loan balances.

NATIONAL STUDENT LOAN DATA SYSTEM (NSLDS)

This database holds information about loans and grants awarded to students under Title IV of the Higher Education Act (HEA) of 1965 during their complete life cycle, from aid offers through disbursement, repayment, delinquency and closure.

PARENT CONTRIBUTION

The parents of non-independent students will be expected to contribute this portion of the expected family contribution (EFC). This amount is determined from a parents’ income, assets, taxes and any contributions for other siblings (family members) in college.

PELL GRANT

Available only to undergraduate students pursuing their first baccalaureate degree. Eligibility is based on federal regulations; the amount ranges from around $600 to $6,000, is subject to Congressional appropriations, and will be reduced for students who enroll less than full time.

PERKINS LOAN

Perkins Loans are for graduates and undergraduates who are enrolled at least half-time. Eligibility is based on financial need the availability of funds. Preference is given to students with exceptional need who meet filing deadlines.

PRINCIPAL

The amount of the loan. Interest is charged on this amount, and guaranty and origination fees will be deducted prior to disbursement to students.

REPAYMENT SCHEDULE

This document explains the borrower’s obligation to repay their loans with principal totals, interest rates, estimated monthly payments, due dates and length of time for repaying the loan.

SCHOLARSHIP

Money awarded to students based on academic or other achievements to help pay for education expenses. Scholarships generally do not have to be repaid.

SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANT (SEOG)

Available only to undergraduate students pursuing their first baccalaureate degree; priority is given to students who are eligible for Federal Pell Grants.

STUDENT CONTRIBUTION

Students are also expected to help meet a portion of their own educational costs each year through personal savings, work income, grants or scholarships.

STUDENT AID REPORT (SAR)

This is the form sent to students after submitting the FAFSA. The SAR is a record of the information submitted and indicates Pell Grant Eligibility. If there are no corrections or additional information required from the student and parents (i.e. tax return transcripts), the SAR will contain your EFC used to determine your eligibility for need-based federal financial aid.

SUBSIDIZED LOAN

These loans, such as the Perkins Loan and Subsidized Stafford Loans, are awarded based on financial need> The government pays the interest on the loan while the student is in school and during the grace period or deferment periods after the student leaves school. are subsidized loans.

**Rules are changing for Direct Subsidized Loans: After 2014, the borrower will be responsible for paying any interest that accrues during the grace period; any unpaid interest will be added to the loan’s principal balance (capitalization).

UNSUBSIDIZED LOAN

Unsubsidized Stafford Loans are not based on financial need and does not need to be repaid until 6 months after the students leaves school or drops below half-time enrollment. The government does not pay the interest while the student is enrolled, therefore students have the option to either pay the accruing interest or allow the interest to be added to the principal balance.

VERIFICATION

A process of review to determine the accuracy of the information on a student’s financial aid application. Students are selected for verification by the Central Processing System (CPS) when their FAFSA applications are processed.

WORK STUDY

A program that allows students to take a part-time campus job as part of their financial aid package. Students must fill out a FAFSA and demonstrate financial need to be eligible for the Federal Work-Study Program; some universities offer their own work-study programs.

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About Amanda Jensen

FSN college advice columnist - Amanda gives parents and students knowledgeable advice on college planning, tuition financing and scholarships. With up to date and accessible information covering everything from personal finances to federal government policies, she is determined to make the college experience a painless one for all party's involved. You can find Amanda on !

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