Financial Aid Glossary (page 2)
Financial aid has its own vocabulary. To help you speak the language, here are the most commonly used terms and acronyms.
|ACT||American College Testing Program|
|AFDC||Aid to Families with Dependent Children|
|BIA||Bureau of Indian Affairs|
|CLEP||College-Level Examination Program|
|COA||Cost of Attendance|
|CPS||Central Processing System|
|CSS||College Scholarship Service|
|ED||US Department of Education|
|EFC||Expected Family Contribution|
|EFT||Electronic Funds Transfer|
|ELO||Expanded Lending Option|
|ESAR||Electronic Student Aid Report|
|ETS||Educational Testing Service|
|FAA||Financial Aid Administrator|
|FAF||Financial Aid Form|
|FAFSA||Free Application for Federal Student Aid|
|FAO||Financial Aid Office|
|FAT||Financial Aid Transcript|
|FDSLP||Federal Direct Student Loan Program|
|FFELP||Federal Family Education Loan Program|
|FSEOG||Federal Supplemental Educational Opportunity Grant|
|GPA||Grade Point Average|
|GSL||Guaranteed Student Loan|
|HEAL||Health Education Assistance Loan|
|HHS||US Department of Health and Human Services|
|HPSL||Health Profession Student Loan|
|IRA||Individual Retirement Account|
|IRS||Internal Revenue Service|
|ISIR||Institutional Student Information Report|
|MDE||Multiple Data Entry|
|NHSC||National Health Corps Scholarship|
|NMSQT||National Merit Scholarship Qualifying Test|
|NSL||Nursing Student Loan|
|PCL||Primary Care Loan|
|PHEAA||Pennsylvania Higher Education Assistance Agency|
|PLUS||Parent Loan for Undergraduate Students|
|PSAT||Preliminary Scholastic Assessment Test|
|ROTC||Reserve Officer Training Corps|
|SAP||Satisfactory Academic Progress|
|SAR||Student Aid Report|
|SAT||Scholastic Assessment Test|
|SEOG||Supplemental Educational Opportunity Grant|
|SLMA||Student Loan Marketing Association|
|SLS||Supplemental Loan for Students|
|SSIG||State Student Incentive Grants|
|TOEFL||Test Of English As A Foreign Language|
|USED||US Department of Education|
1040 Form, 1040A Form, 1040EZ Form
The Federal Income Tax Return. Every person who has received income during the previous year must file a form 1040 with the IRS by April 15.
Form used by business to report income paid to a non-employee. Banks use this form to report interest income.
A popular type of retirement fund. It is legal to borrow money from your 401(k) to help pay for your children's education.
The period during which school is in session, consisting of at least 30 weeks of instructional time. The school year typically runs from the beginning of September through the end of May at most colleges and universities.
Access to higher education focuses on providing students with the opportunity to pursue a college education. Choice focuses on allowing students the flexibility to choose among several options. Generally, need-based aid promotes access while merit-based aid promotes choice. Students with no debt are more likely to pursue advanced education (4 year instead of 2 year undergraduate, graduate and professional school) and more likely to pursue public service careers.
The date on which interest charges on an educational loan begin to accrue. See also Subsidized Loan.
Achievement Tests (SAT II)
A collection of tests that measure the student's proficiency and accumulated knowledge of specific subject areas. Different schools require different achievement tests as part of their admissions requirements. Since March 1994, these tests are now known as the SAT II tests. See also SAT and ETS.
Adjusted Available Income
In the Federal Methodology, the remaining income after the allowances (taxes and a basic living allowance) have been subtracted.
A practice in which a school will admit marginal students, but not award them any financial aid. Very few schools use admit-deny, because studies have shown that lack of sufficient financial aid is a key factor in the performance of marginal students.
Advanced Placement Test (AP)
Test used to earn credit for college subjects studied in high school. They are offered by ETS in the spring. AP tests are scored on a scale from 1 to 5 (the best possible score).
An aggregator is a student who wins many scholarships with a cumulative value of more than $100,000. Some aggregators have published books with a theme "I won a gazillion dollars for college and you can too". Although these books contain some good advice, most students will not be able to pay for college entirely through scholarships. Very few students win more than $100,000 in scholarships, and doing so requires a combination of talent and luck. More than 90% of students do not receive any private scholarships, and the average amount received by students who do win scholarships is approximately $2,000.
See Private Loans.
American College Test (ACT)
One of the two national standardized college entrance examinations used in the US. The other is the SAT. The ACT is widely used in the West and Midwest. Most universities require either the ACT or the SAT as part of an application for admission. See also PLAN.
The process of gradually repaying a loan over an extended period of time through periodic installments of principal and interest.
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.
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.
Asset Protection Allowance
A portion of your parents' assets that are not included in the calculation of the parent contribution, as calculated by the Federal Methodology need analysis formula. The asset protection allowance increases with the age of the parents.
See Graduate Assistantship.
The degree granted by two-year colleges.
An official document issued by a school's financial aid office that lists all of the financial aid awarded to the student. This letter provides details on their analysis of your financial need and the breakdown of your financial aid package according to amount, source and type of aid. The award letter will include the terms and conditions for the financial aid and information about the cost of attendance. You are required to sign a copy of the letter, indicating whether you accept or decline each source of aid, and return it to the financial aid office. Some schools call the award letter the "Financial Aid Notification (FAN)".
The academic year for which financial aid is requested (or received).
The undergraduate degree granted by four-year colleges and universities.
A larger than usual payment used to pay off the outstanding balance of a loan without penalty. Not all loans allow balloon payments. Simple interest loans, like many educational loans, generally do allow balloon payments.
When a person is declared bankrupt, he is found to be legally insolvent and his property is distributed among his creditors or otherwise administered to satisfy the interests of his creditors. Federal student loans, however, cannot normally be discharged through bankruptcy.
The tax year prior to the academic year (award year) for which financial aid is requested. The base year runs from January 1 of the junior year in high school through December 31 of the senior year. Financial information from this year is used to determine eligibility for financial aid.
The person who receives the loan.
See Loan Discount.
See Cost of Attendance.
(Also called Student Accounts Office) The university office that is responsible for the billing and collection of university charges.
Financial aid programs are administered by the university. The federal government provides the university with a fixed annual allocation, which is awarded by the financial aid administrator to deserving students. Such programs include the Perkins Loan, Supplemental Education Opportunity Grant and Federal Work-Study. Note that there is no guarantee that every eligible student will receive financial aid through these programs, because the awards are made from a fixed pool of money. This is a key difference between the campus-based loan programs and the Direct Loan Program. Do not confuse the two, even though both loans are issued through the schools.
Some loan programs provide for cancellation of the loan under certain circumstances, such as death or permanent disability of the borrower. Some of the Federal student loan programs have additional cancellation provisions. For example, if the student becomes a teacher in certain national shortage areas, they may be eligible for cancellation of all or part of the balance of their educational loans. Repayment assistance is available if you serve in the military; the military pays off a portion of your loans for every year of service.
An increase in the value of an asset such as stocks, bonds, mutual funds and real estate between the time the asset was purchased and the time the asset was sold.
The practice of adding unpaid interest charges to the principal balance of an educational loan, thereby increasing the size of the loan. Interest is then charged on the new balance, including both the unpaid principal and the accrued interest. Capitalizing the interest increases the monthly payment and the amount of money you will eventually have to repay. If you can afford to pay the interest as it accrues, you are better off not capitalizing it. Capitalization is sometimes called compounding. See also Unsubsidized Loans.
Property that is used to secure a loan. If the borrower defaults on the loan, the lender can seize the collateral. For example, a mortgage is usually secured by the house purchased with the loan.
A company often hired by the lender or guarantee agency to recover defaulted loans.
A nonprofit educational association of colleges, universities, educational systems and other educational institutions. For more information, see College Board Online (CBO).
College Work-Study (CWS)
College Work-Study is simply a part time job. This term is sometimes erroneously used to refer to the Federal Work-Study Program.
Color of Federal Forms
The FAFSA and SAR change color each year in a four color rotation: Yellow (2003-04), Pink (2004-05), Green (2005-06), and Blue (2006-07) then it repeats. This will help you make sure you're filing the correct form. Purple has been the stable parent color since 1999-2000.
Common Law Marriage
If a couple cohabits while holding themselves out as being married, they are considered to be married in 16 states.
Community property laws specify that property is owned jointly by husband and wife unless there is a specific agreement to the contrary (i.e., prenuptial agreements). According to IRS Publication 555, the following is a list of Community Property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In addition, Alaska has community property laws.
A student who lives at home and commutes to school every day.
Interest that is paid on both the principal balance of the loan and on any accrued (unpaid) interest. Capitalizing the interest on an unsubsidized Stafford loan is a form of compounding.
(Also called Loan Consolidation) A loan that combines several student loans into one bigger loan from a single lender. The consolidation loan is used to pay off the balances on the other loans.
A program where the student spends time engaged in employment related to their major in addition to regular classroom study.
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. Loan fees, if applicable, may also be included in the COA. Child care and expenses for disabilities may also be included at the discretion of the financial aid administrator. Schools establish different standard budget amounts for students living on-campus and off-campus, married and unmarried students and in-state and out-of-state students.
An evaluation of the likelihood of a borrower to default on a loan. Credit bureaus and credit reporting agencies provide this information to banks and businesses to help them decide whether to issue a loan or extend credit. Your credit rating may include your payment history, a list of current and past credit accounts and their balances, employment and personal information and a history of past credit problems.
People who make all their payments on time are considered good credit risks. People who are frequently delinquent in making their payments are considered bad credit risks. Defaulting on a loan can hurt your credit rating.
If a student's parents are divorced or separated, the custodial parent is the one with whom the student lived the most during the past 12 months. The student's need analysis is based on financial information supplied by the custodial parent.
A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 180 days) or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, the state government and the federal government can take legal action to recover the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect your credit rating.
Synonymous with Guarantee Fee.
Occurs when a borrower is allowed to postpone repaying the loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If you don't qualify for a deferment, you may be able to get a forbearance. You can't get a deferment if your loan is in default.
If the borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default.
Determines to what degree a student has access to parent financial resources.
For a child or other person to be considered your dependent, they must live with you and you must provide them with more than half of their support. Spouses do not count as dependents in the Federal Methodology. You and your spouse cannot both claim the same child as a dependent. (See also Independent.)
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.
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.
To release the borrower from his or her obligation to repay the loan. See also Cancellation.
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.
See Loan Discount.
One of several degrees granted by graduate schools.
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.
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.
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.
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.
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.
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.
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.
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 programs award funds to all qualified applicants. The Pell Grant is an example of such a program.
See Loan Interviews.
The dollar value of your ownership in a piece of property. See Home Equity.
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.
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.
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.
Reprinted with the permission of FinAid. © 2008 by FinAid Page, LLC. All rights reserved.
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