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College Financial Aid Terms

Accelerated Degree Program: Intense shortened course of study; typically three years of year-round course work.

Accreditation: Process by which a school demonstrates that its programs meet a certain set of academic and educational standards as determined by a regional or national accrediting association.

Acknowledgment Report: A form that summarizes the financial data from the financial aid form and shows the Estimated Family Contribution. Parents will receive this form in order to confirm the information and make changes if necessary.

Advanced Placement Exam: A test offered by the College Board during a student’s senior year in high school; allows you to earn credit toward college requirements.

American College Testing Program (ACT): One of two standard college entrance examinations; the other is the SAT test.

Americorps: A community service program introduced by the Clinton Administration as a way to repay past loans or fund future study.



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Assets: Anything that is owned. When determining financial need, assets include: cash, real estate, personal property, investments, savings accounts, etc.

Award Letter (Financial Award Letter): A letter that is sent to the student from the financial aid office outlining the financial aid package offered to the student. The student then needs to sign and return this letter to accept the aid that is offered.

Campus-Based Financial Aid Program: A financial aid program that is sponsored by the federal or state government, but administered locally by the individual schools; typically run by the school’s financial aid office.

Cancellation (Forgiveness): A deduction from the original balance a student owes on a load. Cancellations are granted for work in a certain profession or under other specific conditions.

College Scholarship Service (CSS): One of the two services that the government and colleges rely on to determine the family’s expected contribution.

Congressional Methodology: A standard formula developed by Congress under the Higher Education Amendment of 1986; this formula is used to evaluate parents’ income and assets, in conjunction with the number of children in the family who are college-aged and their anticipated college costs; this evaluation helps determine the Estimated Family Contribution (EFC) figure and the student’s eligibility for financial aid.

Conditional Scholarship: A type of scholarship where specified conditions must be met, and, if they are not, the scholarship is revoked or converted into a loan.

Consolidation: A payment option for students with multiple loan debts. Consolidation allows borrowers to combine the principals and pay in one monthly installment for up to twenty-five years.

Cooperative Educational Plan (Co-Op): A program that allows students to split time between work and study in order to earn money to finance their education. This can be done either through work and study during the same te00rm or alternating one term for work and one for study. The job usually pertains to the student’s major.

Default: The failure to repay a student loan according to the terms that were specified in the promissory note. Upon default, the school, lender, or government agency can take legal action to ensure repayment.

Deferment: A postponement of the payment of the principal and the interest on a loan to a future date. Many of the federal loan programs have some sort of deferment program.

Dependent Student: A classification that says that the student is dependent on his or her parents for financial support.

Disbursement: The paying out of money from a scholarship, grant, or other source.

Dislocated Worker: A state agency must determine that a person has been unemployed for a specific amount of time, notified of termination, or previously self-employed but economic conditions resulted in job loss. If spouses or parents of aid recipients are classified as dislocated workers, the expected amount of family contribution may be less.

Education IRA: An account in which parents can deposit up to $500 a year that is slated specifically for future college expenses.

Eligible Non-Citizen: A government term for people who are not citizens of the United States, but through special circumstances still qualify for federal student assistance programs.

Eligibility: The degree to which a student qualifies for financial aid, usually expressed in a dollar figure; eligibility is based on a number of criteria.

Emergency Loan: Temporary, low- or no-interest loan assistance given to students to help them cover costs until their financial aid is received; usually granted immediately and without question.

Estimated Family Contribution (EFC): The estimated amount of money a student’s family can contribute to the student’s total cost of college; a standard formula, called the Congressional Methodology, is used to compute the EFC and combines both the parents’ and student’s estimated contributions; the total EFC figure is used in calculating a student’s eligibility for financial aid.

Estimated Student’s Contribution: The calculated amount you should be able to provide to cover a portion of the expenses incurred while attending college. It is calculated from your expected income, assets, and benefits.

Federal Direct Student Loan (FDSL): A Stafford, PLUS, or consolidated loan that is sponsored by the federal government.

Federal Family Education Loan Program (FFELP): Federally backed program through which private lenders provide PLUS or consolidated loans to students.

Federal Supplemental Education Opportunity Grants (FSEOG): Government grants administered through each school’s financial aid office.

Federal Work-Study: Campus-based program through which students are paid a government-subsidized wage to work; work-study jobs are usually related to the student’s field of study and are typically allocated for students who have demonstrated adequate financial need.

Financial Aid Package: The total aid that is given to the student, including public and private funds. This will include all scholarships, grants, loans, and work/study that are included for the student. The financial aid package is shown in detail in the award letter.

Financial Aid Profile Form: A new form and procedure, administered by the College Board/College Entrance Examination Board.

Financial Aid Transcript: A record of all the federal financial aid that a student has ever received. Many schools require this form from the student when transferring to another school.

Financial Need: Used to describe a family’s financial situation relative to anticipated college costs; typically, a low-income family will have a high degree of financial need and, therefore, qualify for any number of need-based aid programs.

Financing Programs: Commercially offered services that often provide sound additions to federal- and state-funded loan programs.

Forbearance: Specified amount of time in which a loan does not need to be paid back; usually used by students who don’t qualify for deferment but are unable to make loan payments.

Forgiveness: (see Cancellation)

401(k) Plan: A program in which employees of participating companies automatically transfer a percentage of their pre-tax salaries into mutual funds; companies often match a certain percentage of these funds to encourage employees to save.

Free Application For Federal Student Aid (FAFSA): Federal form widely used to apply for federal aid.

Free Money: Financial aid that accrues no interest and does not need to be paid back.

Grace Period: A period of time after college graduation–typically six to twelve months–in which a student does not have to begin repaying a loan.

Grant: Financial gift that does not need to be paid back; most grant awards are based on the financial need of the student.

Guarantee Agency: The state agency that administers the governmental aid programs in their state. This agency deals with insuring the loans and sets limitations within federal guidelines.

Guaranteed Student Loan: More commonly known as the Stafford Loan.

Guaranteed Tuition Plan: Guarantees a single, agreed-upon student tuition rate from enrollment to graduation; often used as an incentive for enrollment.

Half-Time: A student must be attending school at least half-time in order to qualify for many types of federal aid. The criteria for half-time varies from college to college. General guidelines are as follows:

  • For schools using semester, trimester, or quarter systems, a minimum of six semester or quarter house per term.
  • For schools not using academic terms to measure progress, at least twelve semester hours or eighteen quarter hours are required.
  • For schools using clock hours to measure progress, a minimum of twelve clock hours per week.

Hope Scholarship: This is not an actual scholarship granted by an organization but rather a tax credit plan that began in 1998 in which parents get a deduction for college expenses they can’t otherwise cover.

Income Contingent: A loan repayment schedule based on the borrower’s ability to pay.

Independent Student: A student who is financially independent. In order to be classified as independent, a student must meet certain federal criteria.

Interest: Charge for borrowed money; generally a percentage of the amount borrowed (see Principal).

Lifetime Learning Credit: A tax credit plan in which taxpayers can get a credit of up to $10,000

Loan: Money that is borrowed from the government, a bank, credit union, or other lender that must be paid back; usually accompanied by interest charges.

Loan Consolidation: A repayment option for students with more than one outstanding loan; this lowers monthly payments and makes the repayment process simpler.

Loan Default: The failure to repay a loan according to the terms agreed to in the promissory note; a lender may take legal action to get the money back.

Loan Deferment: A postponement of a loan’s repayment; many federal loan programs have a deferment program.

Loan Delinquency: Failure to make loan payments when they are due; delinquency can result in loan default.

Loan Dismissal: Also known as cancellation of forgiveness; a situation in which a loan, or portion of a loan, no longer needs to be paid back; almost always based on very specific and limited circumstances.

Need Analysis: The actual process that the CSS and the ACT use when determining the amount of financial need for each student.

Origination Fee: A fee that a lender may charge in order to subsidize the cost of a low-interest loan. This fee is taken out as a percentage of the loan when it is originally issued.

Parental Contribution: The expected amount contributed by your parents toward your college expenses.

Parental Loans for Undergraduate Students (PLUS): Loans given by the same financial institutions that give Stafford Loans.

Pell Grant: Need-based type of federal financial aid that does not need to be paid back; only available to undergraduate students.

Pell Grant Index (PGI) Number: An index number appearing on your Student Aid Report (SAR) that determines the amount of Pell Grant money to be included in your financial aid package: the number is the result of a series of calculations based on your SAR.

Perkins Loan: A low-interest, need-based loan given by schools; payback begins nine months after a student leaves school.

Pre-Scholastic Aptitude Test/ National Merit Scholarship Qualifying Test (PSAT/NMSQT): Taken during junior year of high school; a preparation for the SAT and a qualifying test for the National Merit Scholarship.

Principal: In terms of loans, this represents the amount of money borrowed, not including any interest charges (see Interest).

Promissory Note: A legal note that a student must sign when awarded a loan; stipulates conditions and repayment terms.

NMSQT: (see Pre-Scholastic Aptitude Test/ National Merit Scholarship Qualifying Test)

Reserve Officer Training Corps (ROTC): A program offered by the Air Force, Army, Marines, and Navy that provides scholarships and on-campus officer training.

Satisfactory Academic Progress: A certain level of academic achievement, usually measured by grade point average, that must be achieved and maintained by the student while earning a degree. The grade point average standard is different for each school, so you must check each school to find their standard for academic progress.

Scholarship: A financial gift that does not need to be paid back; scholarships are awarded based on a variety of criteria, including academic excellence, demonstrated talent, race, religion, group affiliations, state of residence, etc.; scholarships can also be awarded on the basis of need.

Scholastic Aptitude Test (SAT): One of two standard college entrance examinations; the other is the ACT test.

Specialized Aid: Aid programs based on a wide range of criteria intended to encourage targeted populations of people to pursue higher education.

Stafford Loan: A loan given by banks, credit unions, loan associations, and schools; also known as the Guaranteed Student Loan, or GSL.

Statement of Education Purpose: This is sent with the Student Aid Report (SAR) and you must sign it to assure the government that the money awarded will go exclusively to education-related expenses. The school you attend or apply to may have a similar report that you must sign.

Student Aid Report (SAR): Report sent to students who have applied for federal financial aid; contains information used by financial aid officers to help them evaluate students eligibility for government aid.

Student Loan Interest Deductions: Tax deductions provided for qualified independent students who are paying off college loans.

Student Loan Reform Act (SLRA): An act passed by Congress in 1993 that alters the way students obtain and repay educational loans; brought about the direct lending program and introduced the idea of community service as a repayment option.

Subsidized Loan: A loan that does not accrue interest until the recipient leaves school.

Supplemental Education Opportunity Grants (SEOG): A campus-based grant program that usually is a supplement to Pell Grants.

Tax Relief Act of 1997: Recent tax law changes benefiting students and their parents who are paying for college.


Title-IV: The section of the federal code that defines government aid programs; schools that participate in Title IV programs are all assigned a code for students to use when applying for aid.

Total Cost of Attendance: An estimated total of all college costs used in determining a student’s eligibility for financial aid; total costs include such expenses as tuition, books and supplies, housing, meals, personal expenses, transportation/travel, and miscellaneous expenses.

Tuition Prepayment Plan: Allows future tuition to be paid at current rates; some plans allow for payment years in advance.

U.S. Armed forces Reserve Officer Training Corps Program (ROTC): Administered by the military’s college-based officer training program; participants can receive full college tuition plus a monthly stipend, typically in return for a time commitment of active and reserve duty in the Armed Forces.

Unsubsidized Loan: A loan that accrues interest while a student is still in school.

Waiver: An arrangement by the school that allows non-residents (out-of-state students and foreign students) to attend that school at the resident tuition rate.

Work-Study: (see Federal Work-Study)

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