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College Student Loan Terminology

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

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

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

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

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; extended delinquency can result in loan default

Loan Forgiveness: demand for repayment of the balance of a loan is waived because of extenuating circumstances on the student’s part, such as financial hardship or, in some cases, in compensation for community service

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

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

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

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