>> Glossary Of Terms
Financial aid, such as grants and scholarships, which does not need to be repaid.
A short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period may also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. Depending on the type of loan, you will have a grace period of six months (Direct Loans) or nine months (Perkins Loans) before you must start making payments on your student loans. The PLUS Loans do not have a grace period.
Grade Point Average (GPA)
An average of a student's grades, converted to a 4.0 scale (4.0 is an A, 3.0 is a B, and 2.0 is a C).
A type of financial aid based on financial need that the student does not have to repay.
Agency or Guarantor State agencies responsible for approving student loans and insuring them against default. Guarantee agencies also oversee the student loan process and enforce federal and state rules regarding student loans.
A small percentage of the loan that is paid to the guarantee agency to insure the loan against default. The insurance fee is usually 1% of the loan amount (and by law cannot exceed 3% of the loan amount).
Most financial aid programs require that the student be enrolled at least half-time (6 hours undergraduate and 3 hours graduate) in classes required for your eligible program. Some programs require the student to be enrolled full-time.
The difference between the COA and the EFC is the student's financial need -- the gap between the cost of attending the school and the student's resources. The financial aid package is based on the amount of financial need. The process of determining a student's need is known as need analysis.
Cost of Attendance (COA)
- Expected Family Contribution (EFC)
= Financial Need
The process of determining a student's financial need by analyzing the financial information provided by the student and his or her parents (and spouse, if any) on a financial aid form. The student must submit a need analysis form to apply for need-based aid. Need analysis forms include the Free Application for Federal Student Aid (FAFSA) and the Financial Aid PROFILE.
Financial aid that is need-based depends on your financial situation. Most government sources of financial aid are need-based.
Fee paid to the bank to compensate them for the cost of administering the loan. The origination fees are charged as the loan is disbursed, and typically run to 4% of the amount disbursed. A portion of this fee is paid to federal government to offset the administrative costs of the loan.
Aid or benefits available because a student is in school and is counted after need is determined. Outside scholarships, prepaid tuition plans and VA educational benefits are examples of outside resources.
A scholarship that comes from sources other than the school and the federal or state government.
A student who has not met the legal residency requirements for the state, and is often charged a higher tuition rate at public colleges and universities in the state.
A student who receives federal support may not receive awards totaling more than $400 in excess of his or her financial need.
The process of assembling a financial aid package.
Parent Contribution (PC)
An estimate of the portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university and other relevant factors. Students who qualify as independent are not expected to have a parent contribution.
Parent Loans for Undergraduate Students (PLUS)
Federal loans available to parents of dependent undergraduate students to help finance the child's education. Parents may borrow up to the full cost of their children's education, less the amount of any other financial aid received. PLUS Loans may be used to pay the EFC. There is a minimal credit check required for the PLUS loan, so a good credit history is required. Check with your local bank to see if they participate in the PLUS loan program. If your application for a PLUS loan is turned down, your child may be eligible to borrow additional money under the Unsubsidized Direct Loan program.
A federal grant that provides funds of up to $4050 based on the student's financial need.
Formerly the National Direct Student Loan Program, the Perkins Loan allows students to borrow up to $3,000/year (5 year max) for undergraduate school and $5,000/year for graduate school (6 year max). The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The student must have applied for a Pell Grant to be eligible. The interest on the Perkins Loan is subsidized while the student is in school.
The binding legal document that must be signed by the student borrower before loan funds are disbursed by the lender. The promissory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy and cancellations. The student should keep this document until the loan has been repaid.