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A Treasury of Financial Aid Terms

Loan Lingo

Accrual Date
The day interest charges begin to be added to the loan balance. This could be anytime from the date the loan is disbursed, to months after you leave school - it depends on the type of loan.

Accruing Interest
The piling on of interest charges to a loan amount. Watch out: They do add up!

Bankruptcy
A legal way to seek relief from creditors should you (gasp!) be unable to pay back your loans. This court room proceeding is not an easy way out - it can seriously mess up your credit history. Student loans less than five years old can be challenged by the lender.

Borrower
That's you and/or your parents once you sign on the loan dotted line and agree to repay the loan principal plus interest.

Capitalization
This one's tricky. When a lender accrues interest before the borrower goes into repayment, then adds that amount to the principal. All you really need to know is that this process, also called "compounding," will up the total to be repaid and the size of the minimum monthly payment. You can avoid capitalizing interest by paying off the accrued interest during school. Lenders usually capitalize no more often than quarterly; the more they do it, though, the greater your debt.

Default
The term for when you fail to repay the loan according to the Promissory Note.

Federal Stafford Loan
The government sponsored loan program that provides low-interest loans to students (interest rate cannot exceed 8.25 percent). Repayment usually beings six months after leaving school. The two types are subsidized and unsubsidized.

Plus Loans (Parent Loans for Undergraduate Study)
A federally subsidized loan program in which parents are the borrowers for their child's college education. They can borrow up to the total cost of attendance minus financial aid received.

Promissory Note
The contract any loan taker must sign, in which they agree to pay back every last cent plus interest.

Subsidized
This type of Stafford loan is need based and therefore can only be taken out by a student proving financial need. Interest does not begin to accrue until six months after a student leaves school.

Unsubsidized
This type of Stafford loan is non-need based and can be taken out by almost any student. Interest begins to accrue from the date that the loan is disbursed, however, students can let the interest accumulate until after they graduate.

Form 4-1-1

Adjusted Gross Income
All taxable income; derived from yours and your rents'; tax return.

CSS Profile Form
The College Scholarship Service's additional need analysis form that's required by some colleges and universities in order for scholarship consideration.

FAFSA (Free Application for Federal Student Aid)
The primary financial aid form that you MUST fill out if you have any intention of receiving any form of financial aid. It should be filled out as soon after January 1st of your senior year as possible.

Expected Family Contribution (EFC)
This is how much of a contribution you and your 'rents are expected to shell out toward your college education. This figure is used to determine your financial need.

SAR (Student Aid Report)
You'll receive this report as a sort of 'last looks' at the information you provided on the FAFSA. It's your job to check it over and send it back in as soon as possible so as not to delay the financial aid process.

Financial Aid Mix

Adjusted Aid Award
A college will re-evaluate the financial aid/grants they're giving you based on, for example, a scholarship you just received. In the case of an outside scholarship, it's usually adjusted down.

Financial Aid Package
This is the paperwork that each choice college and university will send you once accepted, that indicates how much it'll cost ya'. In other words, you'll get a breakdown of the total attendance cost, the financial aid and scholarships that you're eligible for, and your expected family contribution.

Financial Need
This is determined by subtracting the Expected Family contribution from the total cost of attendance.

Gift Aid
It is what it sounds like - financial aid that doesn't have to be paid back, specifically grants and scholarships.

Over-Award
Here's a simplified example: Imagine the cost of attendance at Dream U. is $10,000. You may receive $7,500 in federal aid, $2,500 in outside loans, and $1,000 in scholarships. Only now you're getting $11,000 - $1,000 over the cost of attendance. Federal law prohibits schools from over-awarding.

Pell Grant
This federally funded need-based aid program is available to all first-time undergraduate students who demonstrate financial need.

Unmet Need
The difference between the amount of money you expect to receive from grants, loans, work-study, and scholarships, and the amount of money you still need to attend school.

Verification
This is when you are required to submit additional financial information, such as copies of your tax forms, to verify the accuracy of the information you submitted.

Work-Study
This program offers students jobs on campus at a moderate wage-rate, usually no more than 20 hours a week, based upon financial need.


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