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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.



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Gina LaGuardia is the Editor-in-Chief of The CollegeBound Network. Learn more about finding a school that's right for you.

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