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Financial Aid Glossary


Aggregate Loan Limit: The borrower's maximum allowable unpaid principal amount throughout the student's academic career. 

Aid Request Form: This form is an internal document that will be used in conjunction with your FAFSA (Free Application for Federal Student Aid) in determining your financial aid eligibility. The information you provide is essential in the accuracy of your financial aid award. 

Anticipated Completion (Graduation) Date: The date on which a student is expected to complete an academic program. This date is provided by a school official on the borrower's loan application, and in subsequent enrollment status updates.  

Appeal: A formal request to have a financial aid administrator review your aid eligibility and possibly use Professional Judgment to adjust the figures. For example, if you believe the financial information on your financial aid application does not reflect your family's current ability to pay (e.g., because of death of a parent, unemployment or other unusual circumstances), you should definitely make an appeal. The financial aid administrator may require documentation of the special circumstances or of other information listed on your financial aid application.

Asset: An item of value, such as a family's home, business, and farm equity, real estate, stocks, bonds, mutual funds, cash, certificates of deposit (CDs), bank accounts, trust funds and other property and investments.

Award Letter: An official document issued by the Financial Aid Office listing all the financial aid awarded to the student.


Borrower: The person who receives the loan.


California Student Aid Commission (CSAC): The principal state agency responsible for administering financial aid for students attending schools in California.

Capitalization: An increase in the principal balance of a Stafford, SLS, PLUS, or Federal Consolidation loan that occurs when a lender adds the interest accrued on the loan to the outstanding principal balance.

Capitalized Interest: Accrued interest added to the borrower's outstanding principal. Subsequent interest accrues on the new total principal balance, which includes any capitalized interest.

Certification: The act of attesting that something is true or meets a certain standard. For example, the school completes its section of the application, thereby confirming the borrower's eligibility for the guarantee and, if applicable, interest benefits and special allowance. The borrower completes the borrower's section of an application or deferment form, thereby confirming that certain eligibility criteria have been met.

Citizen/Eligible Non-citizen: An eligibility requirement that must be met by Federal Stafford, PLUS, and SLS loan borrowers and recipients.

Code of Federal Regulations (CFR): The collection of federal regulations promulgated by the U.S. government. The Department of Education's regulations are codified in Volume 34.

Commuter Student: A student who lives at home and commutes to school every day.

Consolidation: Refinancing multiple educational loans into one new loan with a new repayment term, monthly payments, and interest rate. Often the monthly payment amount can be reduced with consolidation.

Cosigner: A cosigner on a loan assumes responsibility for the loan if the borrower should fail to repay it.

Cost of Attendance (COA): (Also known as the cost of education or "budget") The total amount it should cost the student to go to school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses.


Default: The failure of a borrower (or endorser, if any) to make installment payments when due, or to meet other terms of the promissory note or other written agreement(s) with the lender under circumstances where the Department of Education or guarantor of the loan reasonably concludes that the borrower no longer intends to honor the borrower's obligation to repay a loan, provided that this failure persists for the most recent consecutive 180-day period (for a loan repayable in monthly installments) or the most recent 240-day period (for a loan repayable in less frequent installments).

Deferment: A period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make payments of loan principal.

Delinquency: A period that begins on the day after the due date of a payment when the borrower fails to make the equivalent of one full payment.

Department of Education, the (USED): The U.S. Department of Education or an official or employee of the Department of Education acting for the Department of Education under a delegation of authority.

Dependent Student: A student who does not meet the eligibility requirements for an "Independent Student," under the Higher Education Act of 1965, as amended. See Independent Student.

Dependent Verification Worksheet: See Verification Worksheet.

Disbursement: The transfer of loan proceeds by individual check, master check, or electronic funds transfer (EFT) by a lender to a borrower, a school, or an escrow agent. For a Consolidation loan, disbursement is the transfer of borrower loan proceeds from the consolidating lender to the current holder of the loan being consolidated

Disbursement Date: For a loan disbursed by check or draft, the date the check or draft is issued. For a loan disbursed by electronic funds transfer (EFT) or wire transfer, the date the funds are transferred from the lender to the school or escrow agent. 

Documentation: A written or printed paper, a supporting reference, or a record that can be used to furnish evidence, proof, or information.


Eligible Non-Citizen: Someone who is not a US citizen but is nevertheless eligible for Federal student aid. Eligible non-citizens include US permanent residents who are holders of valid green cards, US nationals, holders of form I-94 who have been granted refugee or asylum status and certain other non-citizens. Non-citizens who hold a student visa or an exchange visitor visa are not eligible for Federal student aid.

Enrolled: The status of a student who has met either of the following requirements: Completed the registration requirements (except for the payment of tuition and fees) at the school the student is attending. Has been admitted into an educational program offered predominantly by correspondence and has submitted one lesson, completed by the student after acceptance for enrollment and without the help of a representative of the school.

Enrollment Status: An indication of whether you are a full-time or part-time student. Generally you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.

Entrance Counseling: Counseling provided to a student about debt and accumulated indebtedness. Counseling is required both before the student receives the first disbursement of the student's first loan.

Exit Counseling:  Counseling when the student is scheduled to complete an academic program-commonly referred to as exit counseling.  

Expected Family Contribution (EFC): The amount of money that the family is expected to be able to contribute to the student's education, as determined by the Federal Methodology need analysis formula approved by Congress. The EFC includes the parent contribution and the student contribution, and depends on the student's dependency status, family size, number of family members in school, taxable and nontaxable income and assets. The difference between the COA and the EFC is the student's financial need, and is used in determining the student's eligibility for need-based financial aid. 


FAFSA (Free Application for Federal Student Aid): The form the student must complete to apply for federal Title IV financial assistance, including Stafford loans. The student must include financial information on the student's household so that the expected family contribution can be calculated.  

Federal Family Education Loan Programs (FFELP): Loan programs authorized by Title IV, part B of the Higher Education Act of 1965, as amended, including the Federal Stafford, Federal PLUS, Federal SLS, and Federal Consolidation Loan Programs. These loan programs are funded by lenders, guaranteed by guarantors, and reinsured by the federal government. These programs are defined individually in 34 CFR 668.

Federal Need Analysis Methodology (FM): The formula used to calculate the expected family contribution with regard to determining the amount of Title IV assistance available to a borrower. 

Federal Processor: The organization that processes the information submitted on the Free Application for Federal Student Aid (FAFSA) and uses it to compute eligibility for federal student aid. There are two different federal processors serving specific geographic regions.

FERPA (Federal Education Rights and Privacy Act):  Also known as the Information Release Consent Form. This form is needed from all students to inform the Financial Aid Office of whom the student wishes to have access to their information in the student's financial aid file. If the student is over 18 years of age, we are prohibited to disclose financial aid information to a third party (i.e. parent, friend, aunt, etc.) without student authorization.

Financial Aid: Money provided to the student and the family to help them pay for the student's education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work).

Financial Aid Administrator (FAA): A college or university employee who is involved in the administration of financial aid. Some schools call FAAs "Financial Aid Advisors" or "Financial Aid Counselors".

Financial Aid Package: The total amount of financial aid that a school awards a student. Federal and nonfederal aid such as loans, grants, or work-study are combined into a "package" to help meet the student's need. Using available resources to give each student the best possible aid package is one of the major responsibilities of a school's financial aid administrator. 

Financial Need: The student's cost of attendance less the expected family contribution. In determining a student's eligibility for a subsidized Stafford loan and a FFELP borrower's total loan amount, the student's estimated financial assistance is also subtracted from the cost of attendance. 

Forbearance: During a forbearance the lender allows the borrower to temporarily postpone repaying the principal, but the interest charges continue to accrue, even on subsidized loans. The borrower must continue paying the interest charges during the forbearance period. Forbearances are granted at the lender's discretion, usually in cases of extreme financial hardship or other unusual circumstances when the borrower does not qualify for a deferment. You can't receive a forbearance if your loan is in default.

Full-Time Student: A student enrolled in an institution of higher education (other than a student enrolled in a program of study by correspondence) who is carrying a full academic workload as determined by the school under standards applicable to all students enrolled in that student's particular program. The student's workload may include any combination of courses, work, research, or special studies, whether or not for credit, that the school considers sufficient to classify the student as a full-time student. 

Funds: Any monies (including checks, drafts, or other instruments); any commitment to provide money; or any commitment of insurance that has been, or may be, provided under the guarantor's programs to a borrower enrolled at and attending a participating school, or a borrower accepted for enrollment at a participating school.


Grace Period: 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 (Stafford Loans) before you must start making payments on your student loans. The PLUS Loans do not have a grace period.

Grade Level: A student's academic class level, as provided by a school official on the student's application and promissory note. Undergraduate students are 01 (first year) through 05 (fifth year/other undergraduate); graduate and professional students are A (first year) through D (fourth year and beyond). 

Graduate or Professional Student: A student who, is enrolled in a program or course above the baccalaureate level at an institution of higher education, or enrolled in a program leading to a first professional degree. Has completed the equivalent of at least three years of full-time study at an institution of higher education, either before entrance into the program or as part of the program itself and is not receiving Title IV aid as an undergraduate student for the same period of enrollment.

Grants: Financial aid awards that do not have to be repaid, available through the federal government, state agencies and colleges.


Half-Time Student: A student who is: (1) enrolled in a participating school; (2) carrying an academic workload that amounts to at least half of the workload of a full-time student, as determined by the school; and (3) not a full-time student. A student enrolled solely in an eligible program of study by correspondence is considered a half-time student.


Independent Student: A student who meets one or more of the following criteria: an individual who is at least 24 years old by December 31 of the award year. An orphan or ward of the court. A veteran of the U.S. Armed Forces. A graduate or professional student. A married person. An individual with legal dependents other than a spouse. A student for whom the school's financial aid administrator determines and documents the student's independent student status based on the administrator's professional judgment of the student's unusual circumstances.  

Independent Verification: See Verification Worksheet.

Information Release Consent Form: See FERPA (Family Educational Rights and Privacy Act). 

Interest: The charge made to a borrower for use of a lender's money.

Internal Revenue Service (IRS): Federal agency responsible for enforcing US tax laws and collecting taxes.


Lender: A bank, credit union, savings & loan association, or other financial institution that provides funds to the student or parent for an educational loan. Note: Some schools now participate in the Federal Direct Loan program and no longer use a private lender, since loan funds are provided by the US Government.

Loan: A type of financial aid which must be repaid, with interest. The federal Direct loan program is a good method of financing the costs of your college education. These loans are better than most consumer loans because they have lower interest rates and do not require a credit check or collateral. The Stafford Loans also provide a variety of deferment options and extended repayment terms.

Loan Period: The period of time for which a loan application is certified.


Master Promissory Note: A legally binding agreement the borrower signs to obtain a loan under the Federal Direct Loan, in which the borrower promises to repay the loan, with interest, in periodic installments. The agreement also includes information about any grace period, deferment, or cancellation provisions and the student's rights and responsibilities with respect to the loan.


National of the United States: A citizen of the United States or, as defined in the Immigration and Nationality Act, a non-citizen who owes permanent allegiance to the United States.  

Financial aid that is need-based depends on your financial situation. Most government sources of financial aid are need-based.

NSLDS (National Student Loan Data System): A database comprised of information from guarantors, schools, lenders, and the Department of Education which contains information on Title IV aid received by students.

Need Analysis: A standardized assessment of the ability of a student or of a student's family to contribute toward educational expenses.


Origination Fee: A fee charged to offset the cost of interest, special allowance, and reinsurance payments by the federal government on a Federal Direct loan. This fee, like the guarantee fee, is subtracted from the borrower's proceeds.


Pell Grant: A federal need-based grant. 

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 Stafford Loan program.

PIN: Personal Identification Number. Your PIN serves as your electronic signature and gives you access to your personal records with the Department of Education.

Proration: A reduction of the standard annual loan limit for an undergraduate student. Proration of the loan amount is required if the student's program or the remainder of the student's program is less than a full academic year in length.


Satisfactory Academic Progress (SAP): The level of academic progress required of a student by the Higher Education Act in order to receive Title IV aid, including Federal Stafford, PLUS, or SLS loans. Each school must establish a standard for evaluating a student's efforts to achieve an educational goal within a given period of time. In making this evaluation, the school must establish the normal time frame for completion of the course of study in which the student is enrolled, and a method, such as grades or work projects completed, to measure the quality of the student's performance. Students who exceed one and a half times the normal time required to complete their academic program are not eligible for additional Title IV assistance for that period that is in excess of 150% of the academic period normally required. 

Scholarship: A form of financial aid given to undergraduate students to help pay for their education. Most scholarships are restricted to paying all or part of tuition expenses, though some scholarships also cover room and board. Scholarships are a form of gift aid and do not have to be repaid. Many scholarships are restricted to students in specific courses of study or with academic, athletic or artistic talent.

Selective Service: Registration for the military draft. Male students who are US citizens and have reached the age of 18 and were born after December 31, 1959 must be registered with Selective Service to be eligible for federal financial aid. If the student did not register and is past the age of doing so (18-25), and the school determines that the failure to register was knowing and willful, the student is ineligible for all federal student financial aid programs. The school's decision as to whether the failure to register was willful is not subject to appeal. Students needing help resolving problems concerning their Selective Service registration should call 1-847-688-6888.

Social Security Number (SSN): The 9-digit number assigned to the borrower by the Social Security Administration. The SSN is used as an identifier for tracking the borrower's loan account(s), skip tracing, and reporting to the Department of Education. A borrower must have an SSN in order to apply for a FFELP loan. 

Direct Loans: Federal loans that come in two forms, subsidized and unsubsidized. Subsidized loans are based on need; unsubsidized loans aren't. The interest on the subsidized Stafford Loan is paid by the federal government while the student is in school and during the 6 month grace period. The Subsidized Stafford Loan was formerly known as the Guaranteed Student Loan (GSL). The Unsubsidized Stafford Loan may be used to pay the EFC.

Undergraduates may borrow up to $23,000 ($3,500 during the first year, $4,500 during the sophomore year and $5,500 during the third, fourth and fifth years) and graduate students up to $65,500 including any undergraduate Stafford loans ($8,500 per year). These limits are for subsidized and unsubsidized loans combined. The difference between the subsidized loan amount and the limit may be borrowed by the student as an unsubsidized loan.

Higher unsubsidized Stafford loan limits are available to independent students, dependent students whose parents were unable to obtain a PLUS Loan and graduate/professional students. Undergraduates may borrow up to $46,000 ($6,625 during the first year, $7,500 during the sophomore year and $10,500 during each subsequent year) and graduate students up to $138,500 including any undergraduate Stafford loans ($18,500 per year). These limits are for subsidized and unsubsidized loans combined. The amounts of any subsidized loans are still subject to the lower limits. 

Student Aid Report (SAR): The student's need analysis report, which is generated by the Department of Education's central processing system or MDE processor. The SAR summarizes information that the student reported on the FAFSA. An electronic version sent to the school is called an ISIR (Institutional Student Information Record).

Subsidized Loan: A loan eligible for interest benefits paid by the federal government. The federal government pays the interest that accrues on subsidized loans during the student's in-school, grace, authorized deferment, and (if applicable) post-deferment grace periods, if the loan meets certain eligibility requirements. 

Supplemental Education Opportunity Grant: Federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school's financial aid office, and provide up to $4,000 per year. To qualify, a student must also be a recipient of a Pell Grant.


Treasury Bill (T-bill): A note or bill issued by the U.S. Treasury as legal tender for all debts.


Undergraduate Student: A student who is enrolled at a school in a course of study, at or below the baccalaureate level, that usually does not exceed four academic years, or is up to five academic years in length and is designed to lead to a first degree. 

Unsubsidized Loan: A non-need-based loan such as an unsubsidized Federal Stafford loan or a Federal PLUS loan. The borrower is responsible for paying the interest on an unsubsidized loan during in-school, grace, and deferment periods, in addition to repayment periods. 

US Department of Education (ED or USED): Government agency that administers several federal student financial aid programs, including the Federal Pell Grant, the Federal Work-Study Program, the Federal Perkins Loans, the Federal Stafford Loans and the Federal PLUS Loans.

U.S. Citizen or National: The term "citizen" includes all native or naturalized persons who owe allegiance to the United States and are entitled to protection by it. The U.S. includes the fifty states, the District of Columbia, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands. The term "national" includes all U.S. citizens and citizens of American Samoa and Swain's Island.


Variable Interest Rate: An interest rate that changes, usually annually, according to prescribed methods. 

Verification: Verification is a review process in which the FAO determines the accuracy of the information provided on the student's financial aid application. During the verification process the student and parent will be required to submit documentation for the amounts listed (or not listed) on the financial aid application. Such documentation may include signed copies of the most recent Federal and State income tax returns for you, your spouse (if any) and your parents, proof of citizenship, proof of registration with Selective Service, and copies of Social Security benefit statements and W2 and 1099 forms, among other things.

Financial aid applications are randomly selected by the Federal processor for verification, with most schools verifying at least 1/3 of all applications. If there is an asterisk next to the EFC figure on your Student Aid Report (SAR), your SAR has been selected for verification. Schools may select additional students for verification if they suspect fraud. Some schools undergo 100% verification.

If any discrepancies are uncovered during verification, the financial aid office may require additional information to clear up the discrepancies. Such discrepancies may cause your final financial aid package to be different from the initial package described on the award letter you received from the school.

If you refuse to submit the required documentation, your financial aid package will be cancelled and no aid awarded.

Verification Worksheet: A federal form used for verification process, under the financial aid program rules (34 CFR, Part 668).


W2 Form: The form listing an employee's wages and tax withheld. Employers are required by the IRS to issue a W2 form for each employee before February 28.

Ward of the Court: A ward of the court is someone under the protection of the courts. The ward of the court may have a guardian appointed by the court. The legal guardian is not personally liable for the ward's expenses and is not liable to third parties for the ward's debts.

Although a ward of the court can have a legal guardian, having a legal guardian does not automatically make the child a ward of the court. A legal guardian can be appointed by parental consent through a power of attorney. A legal guardian must have been appointed by the court for the child to be a ward of the court. When a guardian is appointed by the court, the parent no longer has the authority to revoke the guardianship.

Often a minor becomes a ward of the court when the court determines that the child will be subject to abuse or neglect if they remain with the parent or if both of the student's biological or adoptive parents are deceased.

Note that a child does not automatically become a ward of the court upon being incarcerated. The key issue is whether the court assumed custody of the child because it found that the parents are unable to properly care for the child. Likewise, emancipation does not make a student a ward of the court. Neither incarceration nor emancipation of the student is sufficient on its own to make the student independent.

The key issue for financial aid purposes is that when a child becomes a ward of the court, no parent or other person is financially responsible for the child. Legal guardians and foster parents are not financially responsible for a ward of the court. Adoptive parents, on the other hand, are financially responsible for the child.

If the student is declared a ward of the court before the end of the award year, the student is considered to be an independent student for the award year and the student's status would need to be updated.

The school financial aid administrator should ask for a copy of the court order that declared the child a ward of the court. If there is any confusion as to whether the child is a ward of the court or not, the financial aid administrator should ask for a letter from the judge clarifying whether the child is a ward of the court.

Note that a child can be a ward of the court and still have contact with his or her biological parents or even still be living with the parents (albeit under court supervision). The biological parents, however, are no longer empowered to make any decisions on behalf of the child.