Sometimes when you go into the financial aid office, the language can be confusing. This section will help you to understand the meaning of the terms used.
Simply choose one of the following alphabetized tabs to see a list of corresponding terms.
The date on which interest charges on an educational loan begin to accumulate (or accrue).
Assignment (of loans)
Assignment occurs when a new lender assumes an educational loan from a previous lender.
See also subrogation.
A legal proceeding in which an insolvent person (i.e., someone who cannot pay debts) may be relieved of financial obligations, but loses control over bank accounts and future financial options. Bankruptcy is a last resort for those with debt problems, and although some debts may be discharged, bankruptcy affects a person's credit rating and financial opportunities for many years. Student loans, including alternative student loans, cannot be discharged through bankruptcy.
A borrower is the person who has signed and agreed to the terms in the promissory note, and must repay the loan.
A budget is a plan for the coordination of resources (income, checking/savings accounts, etc.) and expenses, to prevent spending more than available resources.
Some loan programs provide for cancellation (i.e., waiver of your requirements to repay the loan) under certain circumstances, such as death or permanent disability of the borrower. Some federal student loan programs have additional cancellation provisions. For example, students who become teachers in certain national shortage areas, may be eligible for cancellation of all or part of the balance of their educational loans.
See also forgiveness.
Please check with your loan servicer to determine if you are eligible for partial or total cancellation. The following is a list of occupations, professions, and situations that may be eligible for cancellation: (Note: You may lose these privileges if you consolidate.)
- Teacher--low income school, special education, or shortage in specified field (i.e., math or science)
- Head Start Administrator
- Law enforcement or corrections officer
- Military service in area of hostility
- Peace Corps volunteer
- Full-time nurse or medical technician
- Full-time employee of family services organization working with high-risk children
- Totally and permanently disabled
Capitalizing interest means that all interest accrued is added to the principal amount of your loan. Additional interest would then be based upon the higher principal amount. In other words, you would be paying interest on interest.
If you are borrowing a Federal Direct Stafford Loan that is unsubsidized, you will be able to indicate on your master promissory note (MPN) whether you choose to pay your interest quarterly or have the interest capitalize while you are in school. Choosing to pay your interest quarterly will minimize your loan debt.
Career Maximum Stafford Loan Limit
A student's career maximum Stafford loan limit is the total amount of Stafford loan, both subsidized and unsubsidized, that a student can borrow in all years while pursuing a degree(s).
Certification (of a loan)
When an educational institution certifies a loan, they notify and provide the lender with various pieces of information to complete the loan application including the student's enrollment status, expected graduation date, year in school, loan period, and cost of attendance.
Combined Total (Stafford Loan)
In some scenarios, the subsidized and unsubsidized portions of a Federal Direct Stafford Loan are added together to give you a combined total. This helps you to easily see your total (aggregate) loan borrowing without having to add up the subsidized and unsubsidized components.
You can find combined Stafford Loan amounts on the student portal of the National Student Loan Data System (NSLDS).
A consolidation loan combines several student loans into a larger loan from a single lender. The consolidation lender pays off the balances on the other loans giving the student the convenience of making one payment. Carefully review the advantages and disadvantages of consolidating.
A term referring to a person, other than the principal borrower, who signs an agreement to repay a loan. The cosigner assumes equal liability for repayment of the loan.
Cost of Attendance
The cost of attendance is an estimate of a student's educational expenses for a specific period of enrollment.
Your cost of attendance varies based on the number of credits you take, the courses you choose, and your living arrangements. In addition to tuition and fees, living expenses such as meals, rent, transportation, and books are built into each cost of attendance. Your total student aid can never exceed your cost of attendance.
You are taking an initial step toward establishing credit when you borrow money. Credit is a promise to pay later for goods, services, or money you receive now. Establishing good credit is important. By repaying your loans on time and making informed decisions regarding your student loan needs, you will prevent future credit difficulties.
Credit bureaus and credit reporting agencies provide banks and businesses with a credit rating, which assists banks and businesses in deciding whether to issue a loan or extend credit. There are three nationwide consumer credit report companies:
- Experian - 888-397-3742
- Equifax - 800-685-1111
- TransUnion - 877-322-8228
You may access 1 free credit report each year by going to www.annualcreditreport.com.
Credit Limit/Line of Credit
An arrangement between a bank or credit card company and a customer which allows the customer to borrow up to a pre specified amount as determined by the lender.
Credit Rating (Credit Score)
A credit rating or credit score is an evaluation of the likelihood of a borrower to default on a loan. 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.
A defaulter is a person who fails to meet his or her loan responsibilities. Being labeled a defaulter will stay on your credit history for up to seven years. Defaulters can be denied access to future credit or investments, and the federal government can deduct payments from wages or seize income-tax refunds. Also see Office of Loans and Scholarships information on the consequences of defaulting.
To avoid default, maintain contact with your lender. (To identify your lender, use NSLDS or the Loan Locator.) It is possible for your lender to change during your college career or during repayment (your loans may be sold to a third-party servicing agency). Keep a detailed file of loan information, and notify your lenders as your situation changes. It is your responsibility to contact your lender if there is a change in your name, address, or enrollment status.
See also deferment, forbearance and loan forgiveness.
Deferment is a period of time in which approved borrowers are not required to repay their loans (principal or interest). The following circumstances may enable you to pursue a deferment: (Note: You may lose these privileges if you consolidate.)
- Full-time or half-time study
- Active military duty
- Peace Corps, Vista, ACTION, domestic service, or private/non-profit volunteer
- Engaged in service listed under cancellation privileges (see also forgiveness)
- National Oceanic & Atmospheric Administration Corps
- Graduate fellowship
- Professional internship
- Advanced professional training
- Economic Hardship
- Hardship (interest accrues)
- Unable to find full-time employment
- Pregnancy, adoption, or child care
- Mother of preschool child who is entering the workforce
- Temporary or total disability
If you do not qualify for a deferment but are still unable to make satisfactory repayment, you may qualify for a forbearance. Also see grace period.
For more information on deferment, access AES/PHEAA's deferment information, or contact your lender. (To identify your lender, use NSLDS or the Loan Locator.)
Delinquency occurs when loan payments are late or missed, as specified in the terms of the promissory note and the selected repayment plan.
A dependent student is required to include both student and parent income information on the Free Application for Federal Student Aid (FAFSA). Dependency status is determined using federal guidelines on the FAFSA. Also see independent.
Disbursement occurs when the lender releases the loan funds to the school for delivery to the borrower. At PPCC, educational loans are disbursed directly into the student's account.
When a bankrupt person is legally free and clear of any obligation to repay certain debts. Student educational loans can never be discharged under current bankruptcy laws.
A disclosure statement is a statement of the actual cost of a loan, including the interest costs and the loan fee.
Expected Family Contribution (EFC) and Financial Need
Your EFC is a calculated figure that is used to estimate your family's ability to contribute towards your education. This figure is established by entering the information you submit on the FAFSA on the Web into a formula established by Congress and federal law. Please access additional information on EFC.
FAFSA (Free Application for Federal Student Aid)
The FAFSA is the federal application that a student must complete to receive federal, state, or institutional aid. Please access our information on the application process. This application must be completed each year.
Fixed Interest Rate
A fixed interest rate is locked in at the origination of the loan and does not change during the term of the loan. See also variable interest rate.
Forbearance is a period of time in which payments of principal are deferred while interest payments are not deferred. The interest will continue to accrue, and if not paid, may be added to your principal, increasing the total amount borrowed and the amount of interest you will pay. To determine whether or not you are eligible for a deferment or forbearance, contact your lender or loan servicer.
Federal Direct Stafford Loans--Contact the U.S. Department of Education at 800-848-0979 or your Stafford Loan servicer for specific information on repayment, deferment, and forbearance.
Federal Direct Parent PLUS Loan--Parents may contact the U.S. Department of Education at 800-848-0979.
See also deferment.
Loan forgiveness occurs when the federal government cancels all or part of an educational loan because the borrower meets certain criteria (e.g., is performing military or volunteer service). See also cancellation. (Note: You may lose these privileges if you consolidate.)
Certain aid programs require full-time enrollment. For undergraduate students, full-time enrollment is at least 12 credits; for graduate students, full-time enrollment is at least 9 credits. Also see half-time.
Garnishment of Wages
Garnishment is the practice of withholding a portion of a defaulted borrower's wages to repay his or her loan, without consent.
In most cases, student loans offer a grace period, a period of time immediately following separation from school during which the borrower is not required to begin repayment. This period allows the borrower to find a job and establish a budget before repayment begins. Federal Direct Stafford Loans offer a 6-month grace period; Federal Perkins Loans offer a 9-month grace period.
The term gross refers to an overall total, excluding deductions. Your gross income, for example, is your total income without taxes or other items deducted from it.
The gross amount of your Federal Direct Stafford Loan or Federal Direct PLUS Loan is the full amount you borrow, not including loan processing fees (1-3%). Once these fees are deducted, the net amount of your loan will be disbursed into your account to cover your tuition, fees, bookstore and any approved charges; and any excess will be mailed to you as a refund. Also see net.
The loan guarantor is the agency or institution that insures up-to-permissible limits against loss to lenders in the event of a default. The loan guarantor often reviews and approves the loan on a lender's behalf, where such arrangements have been made between the guarantor and the lender.
See also loan servicer.
When federal loans are guaranteed by the guaranty agency, the agency is affixing federal protection to the loan. This protection ensures that the lender is repaid in the case of a default. The guaranty agency assumes responsibility for the defaulted loan and attempts to correct it.
To be eligible for most federal student aid, a student must be enrolled at least half-time. For undergraduate students, half-time enrollment is at least 6 credits; for graduate students, half-time enrollment is at least 5 credits. Also see full-time.
Students that are receiving funds from Veterans Affairs may have different requirements for full-time.
In the event that a student does not complete specific school-related requirements, a hold may be placed on the student's record(s), which prevents certain student actions or requests from occurring (e.g., future registration or release of transcripts).
An independent student uses only student income information on the Free Application for Federal Student Aid (FAFSA) and is not required to include parent information. The criteria for determining that a student is independent have been determined by the federal government and are as follows:
- The student is or will be 24 years old during the academic year
- The student is enrolled in a master's or doctoral program
- The student is married when he or she completes the FAFSA
- The student has a child or other dependent who receives more than half of his or her support from the student
- The student is an orphan or ward of the court
- The student was in foster care since turning age 13
- The student was a dependent or ward of the court since turning age 13
- The student is currently or was an emancipated minor
- The student is currently or was in legal guardianship
- The student is or at the risk of being homeless
- The student is a veteran of the U.S. Armed Forces
- Serving on Active Duty in the U. S. Arned Forces
If one or more of these criteria apply to a particular student, that student will be considered independent and will not be required to include parent information on the FAFSA. The student will also be able to borrow a larger Federal Direct Stafford Loan.
Also see dependent.
Interest on loans is a fee the lender charges for borrowing money. Interest is charged on loans from the time you sign a promissory note until the time you completely repay the loan. See interest rate information for Direct Stafford and Direct PLUS.
The interest rate is the annual percentage of the loan or credit card amount that is charged for its use. For Federal Direct Stafford and Federal Direct PLUS Loan interest rates, please see interest rates on loans for undergraduate students or interest rates on loans for graduate students.
A court order to pay a party a certain amount of money.
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A lender is the financial institution that provides the money to be borrowed through a student loan program. The lender approves the loan and applies for the loan guarantor. See also loan servicer. Credit card companies are also lenders in that they extend credit to borrowers who agree to repay the balance for items charged or cash advances on a credit card.
The right to take and hold or sell the property of a debtor as security or payment for a debt or duty.
A loan is money borrowed that must be repaid.
A loan fee is the expense of borrowing. This fee is deducted from each loan disbursement. Not all loans have fees.
Loan origination is the process by which a lender brings a loan into existence and involves certification of the loan, guaranty, and completion of the master promissory note (MPN).
A loan servicer is a company hired by your lender to process loan repayments.
See also loan guarantor.
Master Promissory Note (MPN)
The Federal Direct Stafford Loan MPN is the loan application for your Federal Direct Stafford Loan. It is valid for 10 years while you are enrolled as a student. Once you complete the Federal Direct Stafford Loan MPN, you will not need to sign another one to borrow in future years as long as you continue to borrow each year from the same federal student loan lender. Also see promissory note.
The Federal Direct PLUS Loan MPN is a parent's loan application for the Federal Direct Parent (PLUS) Loan. Once a parent completes the PLUS Loan MPN, he/she will not need to sign another one to borrow in future years as long as he/she continues to borrow each year from the same lender. If a parent has two students attending college, a separate MPN is required for each student. Likewise, if a mother and father both borrow a PLUS Loan for one student, a separate MPN is required for each borrower. Although the PLUS Loan MPN remains in effect for ten years, parents need to complete the Online PLUS Pre-approval every year to activate a new PLUS Loan for each loan term and to ensure that credit standards continue to be met.
The Federal Perkins Loan MPN and University Loan MPN are the legally binding documents that are evidence of a borrower's indebtedness to a school. If awarded a Perkins or University Loan, you must sign the MPN before receiving funds. Please visit the Office of Loans and Scholarships for more information.
The maturity date is when the grace period on a loan has ended and the loan officially moves to repayment status.
National Student Clearinghouse
The National Student Clearinghouse is a national database, which lenders, loan servicers, guaranty agencies, schools, and students can access to verify student degree and enrollment information.
National Student Loan Data System (NSLDS)
NSLDS is the U.S. Department of Education's central database for student aid. It receives data from schools, agencies that guaranty loans, the Direct Loan program, the Pell Grant program, and other U.S. Department of Education programs. NSLDS provides a centralized, integrated view of Title IV loans and Pell grants that are tracked through their entire cycle; from aid approval through closure.
The term net is used to refer to the amount remaining after all charges or fees have been deducted from the total. For example, your net income is your total income minus the amount of taxes you pay.
The net amount of your Federal Direct Stafford Loan is the amount that is disbursed into your Bursar account to cover University charges. It is the amount that you borrowed (i.e., the gross amount), with 0-3% loan processing fees deducted. Also see gross.
Delivered via CCCOnline and PPCC Internet courses, are online courses that are offered in a time frame that is comparable to a traditional semester schedule, with fixed start and end dates. Course content and activities are available in electronic media. Access to the Web is required for course completion. Student aid may be available.
Origination fees are loan fees 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 approximately 0-3% of the amount disbursed. This fee is recouped by the federal government to compensate for loans in default.
Personal Identification Number (Federal Student Aid PIN)
Your Federal Student Aid PIN (Personal Identification Number), or PIN is a unique number assigned to you by the Department of Education. You can use your PIN to securely access online resources and applications relating to student aid.
If you are a dependent student, your parents can also apply for a PIN so they can complete portions of your financial aid application using their PIN online.
Prepayment loans indicate that the borrower is paying off all or part of a loan before it is due.
The term principal refers to a sum of money borrowed, due, or used as a fund. The principal amount of your Federal Direct Stafford Loan is the total amount you have borrowed and must repay, with interest charges.
If you have chosen to capitalize the interest on an unsubsidized Federal Stafford Loan (rather than paying it quarterly as it accrues), the principal will include the amount you originally borrowed plus interest that has capitalized. When you graduate and use your grace period, you will then begin payments of principal and interest.
If you are using a subsidized Federal Direct Stafford Loan, the government will pay the interest on the principal amount while you are in school. Once you graduate and use your grace period, you will then begin payments of principal and interest.
A promissory note is a legal contract requiring a borrower to repay a loan. When you sign a promissory note, you agree to repay the amount borrowed under the terms outlined in the promissory note. Repayment follows the grace period or deferment period that begins when you leave school or drop below half-time enrollment -- even if you do not finish your program of study or obtain a job in your major. See also Master Promissory Note (MPN).
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A loan in repayment status, after the expiration of the grace period, is being billed by the loan holder and payments are due.
A repayment schedule is a statement provided by the lender or loan servicer that lists the amount borrowed, the amount of monthly payments, and the date payments are due.
The repayment term of a loan is the period during which the borrower is required to make payments on the loan. When the payments are made monthly, the term is usually given as a number of payments or years.
Satisfactory Academic Progress
The Office of Student Aid is required by federal regulation to monitor student progression toward completion of degree and certificate programs at both the undergraduate and graduate levels. This Satisfactory Academic Progress Standard requires that a specific number of completed credits are necessary each academic year to remain eligible for student financial aid.
The date when a student ceases being enrolled at least half-time. This is the time when a loan officially ends its initial "in-school" period, which can occur because of graduation, withdrawal, termination, or enrollment of less than half-time.
Subrogation is the substitution of one lender for another. The current lender assumes the terms and conditions of the previous lender. See also assignment.
If you are borrowing a subsidized Federal Direct Stafford Loan, the interest on the loan is paid by another party on your behalf while you are in school. Once you graduate or leave school and your grace period has expired, you will begin making monthly payments on both the interest and the principal (the amount borrowed).
See also unsubsidized.
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If you are borrowing a Federal Direct Stafford Loan that is unsubsidized, the federal government will not pay the interest on (i.e., will not subsidize) your loan while you are in school or during your six-month grace period.
You will be able to indicate on your Federal Direct Stafford Loan Master Promissory Note (MPN) whether you choose to pay the interest on your loan quarterly or allow it to capitalize while you are in school. Choosing to pay the interest quarterly will minimize your loan debt. Payments of principal and interest begin once the six-month grace period expires.
See also subsidized.
Variable Interest Rate
A variable interest rate is the rate of interest on a loan that is tied to a stated index and changes annually, every July 1, as the index changes. See also fixed interest rate.
Federal regulations require that the Office of Student Aid reviews all student financial aid applications (i.e., your FAFSA information) to make sure it is accurate and consistent. The Office of Student Aid is required to resolve any inconsistencies or errors made on FAFSA applications to ensure the integrity of federal student financial aid programs. You may be selected for verification if:
- Your Social Security number, veteran status, or citizenship status reported on the FAFSA does not match the federal government’s data.
- You completed the FAFSA using estimated income information or income information is inconsistent (i.e., your reported adjusted gross income is less than taxes paid). You may be asked to supply copies of federal tax returns.
Important: You must respond to requests for verification within the stated deadlines to avoid cancellation of your student aid.
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Yearly Maximum Stafford Loan Limit
The total amount of Stafford Loan, both subsidized and unsubsidized, that a student can borrow each year (fall/spring/summer).
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