Financial Aid Glossary (continued)

Direct Loans
The William D. Ford Federal Direct Loan Program (aka the Direct Loan Program) is a federal program where the school becomes the lending agency and manages the funds directly, with the federal government providing the loan funds. Not all schools currently participate in this program. Benefits of the program include a faster turnaround time and less bureaucracy than the old "bank loan" program. The terms for Direct Loans are the same as for the Stafford Loan program. For more information about Direct Loans, contact the Direct Loan Servicing Center at 1-800-848-0979.

Disbursement
The release of loan funds to the school for delivery to the borrower. The payment will be made co-payable to the student and the school. Loan funds are first credited to the student's account for payment of tuition, fees, room and board and other school charges. Any excess funds are then paid to the student in cash or by check. Unless the loan amount is under $500, the disbursement will be made in at least two equal installments.

Discharge
To release the borrower from his or her obligation to repay the loan. See also Cancellation.

Disclosure Statement
Provides the borrower with information about the actual cost of the loan, including the interest rate, origination, insurance, loan fees and any other types of finance charges. Lenders are required to provide the borrower with a disclosure statement before issuing a loan.

Discount
See Loan Discount.

Doctorate
One of several degrees granted by graduate schools.

Due Diligence
If a borrower fails to make payments on their loan according to the terms of the promissory note, the federal government requires the lender, holder or servicer of the loan to make frequent attempts to contact the borrower (via telephone and mail) to encourage him or her to repay the loan and make arrangements to resolve the delinquency.

Early Action
A program with earlier deadlines and earlier notification dates than the regular admissions process. Students who apply to an early action program do not commit to attending the school if admitted, unlike an early decision program. Ivy League schools do not allow you to apply to more than one Ivy early action.

Early Admission
A program that allows gifted high school juniors to skip their senior year and enroll instead in college. The term "Early Admission" is sometimes used to refer collectively to Early Action and Early Decision programs.

Early Decision
A program with earlier deadlines and earlier notification dates than the regular admissions process. Students who apply to an early decision program commit to attending the school if admitted (thus, early decision can be applied to only one school). Unfortunately, this means the student has accepted the offer of admission before they find out about the financial aid package. You should only participate in an early decision program if the school is your first choice and you won't want to consider other schools.

Electronic Data Exchange (EDE)
Program used by participating schools to electronically receive SARs from the federal processor. At some schools EDE allows students to electronically file their Free Application for Federal Student Aid (FAFSA).

Educational Testing Service (ETS)
Company that produces and administers the SAT and other educational achievement tests.

Electronic Funds Transfer (EFT)
Used by some schools and lenders to wire funds for Stafford and PLUS loans directly to participating schools without requiring an intermediate check for the student to endorse. The money is transferred electronically instead of using paper, and hence is available to the student sooner. If you have a choice of funds transfer methods, use EFT.

Electronic Student Aid Report
An electronic form of the Student Aid Report.

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.

Emancipated
To release a child from the control of a parent or guardian. Declaring a child to be legally emancipated is not sufficient to release the parents or legal guardians from being responsible for providing for the child's education. If this were the case, then every parent would "divorce" their children before sending them to college. The criteria for a child to be found independent are much stricter. See Dependency Status.

Endowment
Funds owned by an institution and invested to produce income to support the operation of the institution. Many educational institutions use a portion of their endowment income for financial aid. A school with a larger ratio of endowment per student is more likely to give larger financial aid packages.

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.

Entitlement
Entitlement programs award funds to all qualified applicants. The Pell Grant is an example of such a program.

Entrance Interview
See Loan Interviews.

Equity
The dollar value of your ownership in a piece of property. See Home Equity.

Exit Interview
See Loan Interviews.

Expanded Lending Option (ELO)
Under ELO, some schools can offer higher annual and cumulative loan limits to students receiving the Perkins Loan. The ELO is restricted to schools with a Perkins Loan default rate of 15% or less.

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. If you have unusual financial circumstances (such as high medical expenses, loss of employment or death of a parent) that may affect your ability to pay for your education, tell your financial aid administrator (FAA). He or she can adjust the COA or EFC to compensate. See Professional Judgment.

Federal Direct Student Loan Program (FDSLP)
Similar to the Federal Family Education Loan Program (FFELP). The funds for these loans are provided by the US government directly to students and their parents through their schools. Benefits of the program include a faster turn-around time and less bureaucracy than the old "bank loan" program. The FDSLP includes the Federal Direct Stafford Loan (Subsidized and Unsubsidized) and the Federal Direct Parent Loan for Undergraduate Students (PLUS).

Federal Family Education Loan Program (FFELP)
Includes the Federal Stafford Loan (Subsidized and Unsubsidized), the Federal Perkins Loan and the Parent Loan for Undergraduate Students (PLUS). The funds for these loans are provided by private lenders, such as banks, credit unions and savings & loan associations. These loans are guaranteed against default by the federal government.

Federal Methodology
The need analysis formula used to determine the EFC. The Federal Methodology takes family size, the number of family members in college, taxable and nontaxable income and assets into account. Unlike most Institutional Methodologies, however, the Federal Methodology does not consider the net value of the family residence.

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.

Federal Work-Study (FWS)
Program providing undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student's salary, making it cheaper for departments and businesses to hire the student. For this reason, work-study students often find it easier to get a part-time job. Eligibility for FWS is based on need. Money earned from a FWS job is not counted as income for the subsequent year's need analysis process.

Fellowship
A form of aid given to graduate students to help support their education. Some fellowships include a tuition waiver or a payment to the university in lieu of tuition. Most fellowships include a stipend to cover reasonable living expenses (e.g., just above the poverty line). Fellowships are a form of gift aid and do not have to be repaid.

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".

strong>Financial Aid Form (FAF)
The old name for the Financial Aid PROFILE. The Financial Aid PROFILE is a supplemental financial aid form processed by the College Scholarship Service (CSS). It is not necessary to file a Financial Aid PROFILE in order to apply for Federal student financial aid; the FAFSA is sufficient. The Financial Aid PROFILE is used by many private colleges and universities for awarding institutional funds.

Financial Aid Notification (FAN)
See Award Letter.

Financial Aid Office (FAO)
The college or university office that is responsible for the determination of financial need and the awarding of financial aid.

Financial Aid Package
The complete collection of grants, scholarships, loans and work-study employment from all sources (federal, state, institutional and private) offered to a student to enable them to attend the college or university. Note that unsubsidized Stafford loans and PLUS loans are not considered part of the financial aid package, since these financing options are available to the family to help them meet the EFC.

Financial Aid Transcript (FAT)
A record of all federal aid received by the student at each school attended. If you have previously attended an institution of higher education and are now applying for financial aid from the different university, the university will require a FAT from each of the schools previously attended, regardless of whether aid was received or not. They are required to do this by federal law. You have to submit a FAT even if you were in high school at the time. An electronic FAT process will be in place soon which will eliminate the need for the student to submit a FAT. The FAT is not the same as an academic transcript.

Financial Need
See Need.

<Financial Safety School
A school you are certain will admit you, and which is inexpensive enough that you can afford to attend even if you get no (or very little) financial aid.

First-Time Borrower
A first-year undergraduate student who has no unpaid loan balances outstanding on the date he or she signs a promissory note for an educational loan. First-time borrowers may be subjected to a delay in the disbursement of the loan funds. The first loan payment is disbursed 30 days after the first day of the enrollment period. If the student withdraws during the first 30 days of classes, the loan is canceled and does not need to be repaid. Borrowers with existing loan balances aren't subject to this delay.

Fixed Interest
In a fixed interest loan, the interest rate stays the same for the life of the loan.

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.

Free Application for Federal Student Aid (FAFSA)
Form used to apply for Pell Grants and all other need-based aid. As the name suggests, no fee is charged to file a FAFSA.

Gapping
The practice of failing to meet a student's full demonstrated need. See also Unmet Need.

Garnishment
The practice of withholding a portion of a defaulted borrower's wages to repay his or her loan, without their consent.

Gift Aid
Financial aid, such as grants and scholarships, which does not need to be repaid.

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) 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). Some schools use a 5.0 scale for the GPA.

Graduate Assistantship
There are two types of graduate assistantships: teaching assistantships (TA) and research assistantships (RA). TAs and RAs receive a full or partial tuition waiver and a small living stipend. TAs are required to perform teaching duties. RAs are required to perform research duties, not necessarily related to the student's thesis research.

Graduate Student
A student who is enrolled in a Masters or PhD program.

Graduated Repayment
A schedule where the monthly payments are smaller at the start of the repayment period and gradually become larger.

Grant
A type of financial aid based on financial need that the student does not have to repay.

Gross Income
Income before taxes, deductions and allowances have been subtracted.

Guarantee 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.

Guarantee Fee
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. Also known as a Default Fee.

Guaranteed Student Loan (GSL)
(Now called the Stafford Loan.) A guaranteed loan is insured against default. In the case of guaranteed student loans, the Federal government agrees to repay the loans in case of default. Each loan is charged a guarantee fee to cover the costs of defaulted loans.

Half-Time
Most financial aid programs require that the student be enrolled at least half-time to be eligible for aid. Some programs require the student to be enrolled full-time.

Health Education Assistance Loan (HEAL)
A low interest loan administered by the US Department of Health and Human Services (HHS). It is available to medical school students pursuing medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry, clinical psychology, health administration and public health. Undergraduate pharmacology students are also eligible.

Health Professions Student Loan (HPSL)
A low interest loan administered by the US Department of Health and Human Services (HHS). It is now known as the Primary Care Loan (PCL).

Holder
The lender, institution or agency that holds legal title to a loan. The holder may be the bank that issued the loan, a secondary market that purchased the loan from the bank or a guarantee agency if the borrower defaulted on the loan.

Home Equity
Current market value of a home less the mortgage's remaining unpaid principal. It is based on the market value, not the insurance or tax value. For a conservative estimate of your home's market value, try using the Federal Housing Index Calculator. See also Equity.

Horizontal Equity
The principle of horizontal equity is that families with similar financial circumstances should pay the same amount, regardless of how their assets, investments and income are defined.

In-State Student
A student who has met the legal residency requirements for the state, and is eligible for reduced in-state student tuition at public colleges and universities in the state.

Income
The amount of money received from employment (salary, wages, tips), profit from financial instruments (interest, dividends, capital gains), or other sources (welfare, disability, child support, Social Security and pensions).

Income Contingent Repayment
Under an income contingent repayment schedule, the size of the monthly payments depends on the income earned by the borrower. As the borrower's income increases, so do the payments. The income contingent repayment plan is not available for PLUS Loans.

Independent
An independent student is at least 24 years old as of January 1 of the academic year, is married, is a graduate or professional student, has a legal dependent other than a spouse, is a veteran of the US Armed Forces, or is an orphan or ward of the court (or was a ward of the court until age 18). A parent refusing to provide support for their child's education is not sufficient for the child to be declared independent. (See also Dependent.)