- 1. Student Loan Terminology Explained Your Glossary For All
Important Lending Terms!
2. Accrued Interest Loans accrue interest based upon the unpaid
balance of the loan principal and the current repayment status of
the loan. 3. Alternative Student Loan An alternative loan is one
that is offered by a private lender. These loans are credit based,
can have variable rates and often require a cosigner. Alternative
loans are also known as a private student loans. 4. APR APR Stands
for Annual Percentage Rate. This not only takes interest into
account, but the points, broker fees and other charges that might
be associated with a loan. 5. Capitalized Interest With
capitalization, unpaid accrued interest is added to the principal
amount to be repaid later. You are then incurring interest on this
accrued interest as well as interest on the original loan
principal. 6. Compound Interest Interest that is calculated not
only on the initial principal but also the accumulated interest of
prior periods. Interest may be compounded annually, quarterly,
monthly, or daily, depending on the terms of the note. 7.
Consolidation Loan A loan that combines your existing loans into
one new loan, and one payment. Usually, a consolidation loan has a
lower monthly payment and a longer term than your combined original
loans. 8. Co- Signer Someone who signs a promissory note along with
the borrower, and is legally obligated to assume responsibility for
loan repayment if the borrower does not make his or her payment. 9.
Default Failure to repay your loan(s). In FFELP, a loan made before
10/1/98 is considered in default at 180 days past due. Any loan
made on or after 10/1/98 is considered in default at 270 days past
due. 10. Deferment A temporary postponement of student loan
principal and/or interest payments that may be granted if the
borrower satisfies certain criteria. 11. Delinquent The status of
your loan changes to delinquent when at least one payment is
missed. 12. Disbursement When a lender sends a check or
electronically sends funds for your loan to the school. Multiple
Disbursements are provided to coincide with each term of school and
fees (where applicable) are usually deducted proportionately. 13.
Expected Family Contribution The total money that a family is
expected to pay for a students college education based on a
detailed assessment of the familys financial situation. 14. Fees
Some lenders charge a fee to originate, insure or guarantee a
student loan. This includes the Federal Loans. Fees are usually
proportionately charged to each disbursement. Origination Fee-
charge deducted from loan proceeds for all federal loans- some
private loans have an origination fee as well. 15. Forbearance
Written permission to postpone, reduce, or extend payments, usually
for three to six months, because of serious economic hardship.
Interest continues to accrue and remains the responsibility of the
borrower. Therefore, the borrower will owe a higher total amount on
the loan when forbearance ends. 16. Grace Period Applicable to many
student loans, is the six- month period after you graduate, leave
school, or drop below half-time status. Once the period is over,
you must start making monthly loan payments or already have
obtained a deferment or forbearance. 17. Interest The amount a
lender charges a borrower for the use of money borrowed, calculated
as a percentage of the principal balance. Some rates are fixed for
the term of the loan. Others are variable tied to an index with a
margin 18. Independent Student You are automatically considered a
dependent unless you are: 24 years or older (as of 12/31 of the
award year), a graduate or a professional student, married, have
legal dependents other than a spouse, an orphan or ward of the
court, or are a veteran of the U.S. Armed Forces. 19. Index Index
is the rate that determines the average interest rate at which
banks lend to each other at. This interest rate is variable and
subject to change by quarter. 20. Margin Margin is the flat rate
which a lender will add to the lending index in order to determine
the interest rate a consumer will pay. Loan margins are tiered, and
determined based on credit score. 21. Parent Plus Loan A
government-backed loan designed for parents of financially
dependent undergraduate students. 22. Principal The full amount you
have borrowed for your loan. When you are repaying the loan, the
principal is the portion of the original amount you still owe, plus
capitalized interest, if any. 23. Promissory Note A legally binding
contract between a borrower and lender that contains the terms and
conditions under which the borrower promises to repay the loan. 24.
Repayment Schedule A document listing the total amount you owe, the
amount of your monthly payment, and the date your first payment is
due. 25. Secondary Market A state agency or private company that
purchases student loans from individual lenders. It holds and
collects loans until they are paid. The company may employ an
outside servicer. 26. Separation Date The official date you drop
below half-time status or withdraw from school. If you are entitled
to a grace period, it begins on that date. 27. Servicers Companies
that contract with lenders and secondary markets to provide all
customer service activities of loan servicing and loan collection.
28. Subsidized Student Loan A need-based, government-backed student
loan in which the government will pay the interest while the
student is in school at least half-time. 29. Unsubsidized Student
Loan Loan is not based on need, allowing students at all income and
asset levels to be eligible for a lower-cost student loan. The
student is responsible for paying interest while in school.
However, interest will accrue and capitalize.
