Financial Aid Terms

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Ability to Benefit (ATB)
A classification of students who do not have a high school diploma or GED, but are determined to be qualified for acceptance into post-secondary education.

Academic Year
A minimum period of at least 30 weeks in which a full-time student is expected to complete 24 semester hours or 900 clock hours.

Accrued Interest
The interest that accumulates on the unpaid principal balance of a loan.

Adjusted Gross Income
Taxable income less IRS allowable adjustments reported on specified lines of the Federal Income Tax Return.

Alternative Loan
Private educational loan used as a supplement or in place of Federal financial aid programs. Most require a co-signer with a minimum stable income and a good credit history.

America Reads/America Counts
Federal programs that train and employ college students to serve as tutors in reading and math for school children. The goal is to improve literacy by fostering the development of language skills in grades K-3 and mathematics education from elementary to ninth grade.

Gradually reducing the loan amount to zero through regularly scheduled payments of principal and interest spread over a predetermined length of time.

Annual Loan Limit
The maximum loan amount a student may borrow for each academic year of study under the Stafford student loan program.

Annual Percentage Rate (APR)
The interest maintained on a loan for a one-year period.

Savings and checking accounts, trust funds, stocks, bonds, money market funds, mutual funds, real estate (not principal residence) and business value.

Associates Degree
The degree given for successful completion of undergraduate curriculum at a two-year community college that can be transferred to a four-year college or university as part of the baccalaureate degree.

Award Letter
Written notification of the financial assistance being offered to a student. The award letter usually provides information on the types and amounts of aid offered, the student's responsibilities in accepting the aid, and other terms and conditions governing the award. (Some schools post financial aid award notices online using PINs and passwords to ensure privacy.)

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Bachelor's Degree
The degree given for successful completion of undergraduate curriculum at a four-year college or university, also called a baccalaureate degree.

An individual who obtains money from a lending institution by the extension of credit for a period of time. The borrower signs a promissory note as evidence of the debt.

Budget (also known as Cost of Attendance)
The total amount it will cost a student to go to school. The educational cost includes tuition and fees, on-campus room and board (or a housing and food allowance for off-campus students), books, supplies, transportation, child care, costs related to disability, and miscellaneous personal expenses.

Business Assets
Property that is used in the operation of a trade or business, including real estate, inventories, buildings, machinery and other equipment, patents, franchise rights and copyrights. Considered in determining the estimated family contribution (EFC) under the regular formula.

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Campus-Based Aid Programs
Financial aid programs funded by the Federal Government but administered by the school using Federal guidelines. The two programs are the Supplemental Educational Opportunity Grant (SEOG) and the Work-Study Program.

Unlike other consumer loans, the balance of a Federal education loan may be canceled upon death or permanent disability of the borrower.

The addition of unpaid accrued interest applied to the principal balance of a loan which increases the total debt outstanding.

Central Processing System (CPS)
The computer system to which the student needs analysis data is electronically transmitted by the federal processor. The CPS performs database matches and calculates the official Expected Family Contribution (EFC).

Community Education
A student taking community education courses in certain certificate programs, may be eligible for federal financial aid programs.

Community Service Learning
Work programs that place students in positions that will benefit the clients of community service organizations.

Commuter Student
A student who does not live on campus; typically refers to a student living at home with his or her parents, or at the home of another relative (grandmother, uncle, etc.).

Combining numerous education loans into a new loan with a new payment schedule and interest rate. By extending the repayment period (up to 30 years depending on the loan amount) and allowing a single monthly payment, consolidation loans can make loan repayment more manageable for borrowers with high loan balances. (See also Income-Sensitive Repayment Schedule, Standard Repayment Schedule, and Consolidation.)

A credit-worthy individual who signs the promissory note of a loan in addition to the borrower. This party, by signing, is responsible for the obligation if the borrower does not repay the loan.

Cost of Attendance (COA) or Cost of Education (COE)
The total amount it will cost a student to go to school. The educational cost includes tuition and fees, on-campus room and board (or a housing and food allowance for off-campus students), books, supplies, transportation, child care, costs related to disability, and miscellaneous personal expenses.

Credit Bureau
An agency that compiles, maintains and distributes credit and personal information to creditors. This information may include a borrower's payment habits, number of credit accounts, balance of those accounts, place of employment, length of employment, and records of financial transactions. Lenders check with credit bureaus to learn whether a potential customer seeking a loan is likely to repay based on the way other credit obligations have been handled in the past. Note: You have the right to examine your credit file and to explain or correct the information contained in the file. Usually a fee is charged when you exercise that right. However, no fee is charged if you have recently been denied credit based on information in the file.

Having a good credit history per the criteria established by the lender, or no credit history.

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Failure to repay a loan in accordance with the terms of the promissory note. Default occurs after 270 days of non-payment on an account. Defaults are reported to national credit bureaus, which may affect a borrower's ability to receive credit in the future.

An authorized period of time during which a borrower may postpone payments on the principal of a loan. Deferments are available while borrowers are in school at least half-time, enrolled in a graduate fellowship program or rehabilitation training program for the disabled, and during periods of unemployment or economic hardship.

The failure to make scheduled monthly loan payments when they are due. A loan is considered delinquent if a payment has not been received by the day after the payment due date.

Dependent Student
A student who is under 24 years of age by Dec. 31 of the award year, is not an orphan or ward of the court, is not a veteran, is not enrolled in a graduate or professional program, does not have any legal dependents for whom they provide over half of their support and is not married.

The release of loan funds to the school for delivery to the borrower. Depending on regulations in effect at the time of disbursement, disbursements are usually made in equal multiple installments co-payable to the borrower and the school.

Disclosure Statement
A statement of the actual loan costs, including the interest rate and any additional fees, which is presented to the borrower at the time the loan is made.

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ED, DOE, USED, or DE (U.S. Department of Education)
Government agency that administers several student financial aid programs, including the Federal Pell Grant, the Federal Work/Study Program, and the Federal Direct and Federal Direct PLUS Loans.

Electronic Funds Transfer
The automatic transfer of loan funds to a school on the student's behalf.

Eligible Non-Citizen
Someone who is not a U.S. citizen but is nevertheless eligible for Federal student aid. Eligible non-citizens include U.S. permanent residents who are holders of valid green cards, U.S. nationals, holders of form I-94 who have been granted refugee or asylum status, and certain other non-citizens. Non-citizens who hold student visas or exchange visitor visas are not eligible for student aid. (See the FAFSA instructions for more details.)

Eligible Program
A course of study that leads to a certificate, diploma or degree.

Enrollment Status
At those institutions using semesters, trimesters, quarters, or other academic terms and measuring progress by credit hours, enrollment status equals a student's credit hour workload categorized as either full-time, three-quarter-time, half-time, or less-than-half-time.

Entrance Interview
Counseling session (can be face-to-face, paper or online) on educational loan responsibilities which occurs prior to the crediting of loan funds to the student's account.

Exit Interview
Counseling session (can be face-to-face, paper or online) providing information on loan repayment, deferments, consolidation, and other pertinent loan information before the student leaves school.

Expected Family Contribution (EFC)
The amount that the student's family is expected to contribute toward the cost of the education based on FAFSA data. This federal calculation is based on the family earnings, assets, number of students in college and size of family. (Note: It is not the amount of the semester's bill.)

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FAA (Financial Aid Administrator)
A college or university employee who is involved in the administration of financial aid. Some schools call FAAs "Financial Aid Advisors" or "Financial Aid Counselors."

FAFSA (Free Application for Federal Student Aid)
The financial aid application and need analysis document used to determine eligibility for federal student aid programs including Stafford loans.

Federal Direct Loan Program
An umbrella of Federal student loan programs including subsidized and unsubsidized Federal Stafford Loans, Federal PLUS Loans and Federal Consolidation Loans. These loans are funded by the federal government.

Federal Methodology
The need analysis formula mandated by law to determine a student's eligibility for student aid programs.

Family Educational Rights and Privacy Act, also known as the Buckley Amendment. FERPA ensures privacy to educational records.

Financial Aid
A form of monetary assistance for students attending a post-secondary educational institution. Financial aid consists of scholarships, grants, loans and work-study employment opportunities.

Financial Aid Administrator (FAA)
A staff member at an eligible school who is charged with the administration of financial aid programs.

Financial Aid Package
The total amount of financial aid a student receives. Federal, state, institutional and private sources of aid, such as loans, grants, scholarships and work-study are combined in a "package" to help fill the student's financial need.

Financial Need
The difference between the student's cost of education and the student's expected family contribution.

Fixed Interest
Rate of interest that does not change during the life of the loan.

An authorized period of time during which a lender agrees to postpone, reduce or extend loan payments because of financial hardship. Interest continues to accrue during forbearance, however, so the total amount ends up increasing.

Free Application for Federal Student Aid (FAFSA)
The financial aid application and need analysis document used to determine eligibility for federal student aid programs including Stafford loans.

Full-Time Student
Generally, a student who is taking a minimum of 12 credits per semester.

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Garnishment of Wages
The deduction of a portion of a borrower's paycheck, with or without the borrower's consent; an action which a lender or the government may take to force repayment of a loan that is in default.

Gift Aid
Grants or scholarships that do not have to be repaid.

Grace Period
For Federal Direct Loans, this is the period between the time borrowers leave school or drop below half-time study and when they are obligated to begin repaying their loan. The grace period is usually six months for Stafford.

Graduated Repayment Schedule
A repayment schedule in which the borrower begins to repay loans with smaller monthly payments that increase over time. This repayment is based on the fact that the borrower's income will grow over time to cover increasing loan payments. The amount of interest is slightly higher in this plan as compared to the standard repayment plan. (See also Income-Sensitive Repayment Schedule, Standard Repayment Schedule, and Consolidation.)

Funds that do not have to be repaid and are awarded on the basis of financial need.

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Hope Scholarship
Not a scholarship, but a tax credit for the first two years of college or other post-secondary school. Maximum tax credit per year is $1,500. There are specific requirements and income guidelines.

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Income Protection Allowance
An allowance against income for the basic cost of maintaining family members in the home. The allowance is based upon consumption and other cost estimates of the Bureau of Labor statistics for a family at the low standard of living.

Income-Sensitive Repayment Schedule
A repayment schedule for some loans in which borrowers make payments based upon a percentage of monthly gross income. The monthly payment amount is adjusted annually based on the borrower's expected total monthly gross income and has to be equal to the monthly accrued interest. (See also Graduated Repayment Schedule, Standard Repayment Schedule, and Consolidation.)

Independent Student
A student is considered independent for financial aid filing purposes if that student:

  1. is 24 years or older; or
  2. is working on a master's or doctoral program; or
  3. is married (also applies if separated but not divorced); or
  4. has a child for whom the student provides more than half of that child's support; or
  5. has legal dependents (other than a child or spouse) who live with the student and receive more than half of their support from the student; or
  6. is an orphan or ward of the court or was a ward of the court until age 18; or
  7. is a veteran of the U.S. Armed Forces.

The fee (a percentage of the balance) that is charged by the lender when money is borrowed. Interest accrues and is paid over the life of the loan.

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The organization that lends money through the federal student loan programs. In most cases, the lender is the federal government.

Less then Half-Time
A student enrolled for less than 6 credits per semester.

Lifetime Learning Tax Credit
A tax credit for family members returning back to school. Applies to undergraduate and graduate education expenses. There are specific guidelines and calculations to determine eligibility.

A type of financial aid that must be repaid. The entity lending the money (federal government) usually charges interest for use of the money. The amount borrowed (called the principal) is typically repaid with interest over a period of time.

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Master Promissory Note (MPN)
The promissory note is the legal agreement signed with a lender to accept a loan. The MPN is designed to be used as a single-year note or a multi-year note depending on the school. At approved schools, the MPN usually needs to be signed only once for a maximum 10-year period.

Maturity Date
The date upon which a promissory note becomes due and payable.

Monthly Payment
This is the amount that you must pay each month on your loan during repayment.

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National Student Loan Data System (NSLDS)
A database comprised of information from guarantors, schools, lenders and the U.S. Department of Education which contains historical student loan, Pell grant and enrollment information.

Need Analysis
A standardized assessment, derived from FAFSA data, of the ability of a student and his family to contribute toward educational expenses.

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Occurs when the student's financial aid exceeds the need or cost of education.

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The total amount of financial assistance a student receives, including grants, scholarships, work-study and loans, as listed in the college's financial aid award letter.

A student's natural, adoptive or stepmother or father. Does not include a student's legal guardian.

Payment Schedule
A summary of the terms of a loan, which includes the total principal amount, the date payment begins and the interest rate.

Pell Grant
A Federal grant program for financially eligible undergraduate students. Must be working toward first bachelor's degree.

PLUS Loan (Parent Loan for Undergraduate Student)
A Federal educational loan for parents of dependent undergraduate students. PLUS loans require the parent borrower to be credit-worthy. The interest rate is low, but repayment begins six months after the student graduates or drops below half-time enrollment (six credits). The parent may borrow up to the difference between the student's educational costs and other financial aid.

Education beyond the high school level.

Prepaid Tuition Plan
A college savings plan that is guaranteed to rise in value at the same rate as college tuition. For example, if a family purchases shares that are worth half a year's tuition at a college, they will always be worth half a year's tuition, even 10 years later when current tuition rates will be much higher.

The amount borrowed in a loan and the amount upon which interest will be charged. During repayment, it refers to the portion of the amount still owed.

Professional Judgment
The ability of the financial aid administrator to adjust the family contribution, dependency status, cost of education or academic progress based upon unusual circumstances or special conditions experienced by the student or family. Exercised on a case-by-case basis.

Promissory Note
A legal document signed by the borrower when obtaining a loan. It lists the conditions under which the loan is made and the terms under which the borrower agrees to pay back the loan.

A reduction of the standard annual loan limit for an undergraduate student. Pro-ration is required if the remainder of the student's program is less than a full academic year in length. (For example, if a student will graduate at the end of the fall semester and will not be enrolled for spring, the amount of the student's fall loan will be pro-rated.)

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Refers to the legislative process - generally carried out every five years in the case of the Higher Education Act - whereby Congress reviews and either renews, terminates or amends existing federal financial aid programs.

Refund Period
Refers to the length of time during a period of enrollment when charges and financial aid are adjusted due to a student withdrawing from the institution. The school calculates the amount of applicable institutional charges, and, as part of a federally mandated process, determines the amount of financial aid that can be retained and the amount that must be returned under the appropriate refund policy.

Repayment Schedule
A plan which sets forth the principal and interest due in each installment, numbers of payments required to pay the loan in full, the interest rate, and the due dates of the first and subsequent payments.

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Satisfactory Academic Progress (SAP)
In order to continue to maintain eligibility for financial aid, a typical full-time student must earn 24 new credits in an academic year. Also, after completing 30 credits, the student must also have an overall QPA of 2.0.

Financial aid that does not usually have to be paid back. Given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art or other disciplines.

Financial aid which must be earned (work-study) or repaid (loans).

Simple Interest
Interest calculated on the original principal only.

Standard Repayment Schedule
A repayment schedule in which the maximum repayment period is 10 years, not counting periods of deferments or forbearances. The minimum monthly payment is $50.00 and will increase based on the amount borrowed. The borrower may pay the same amount for each installment period or pay an amount that is adjusted to reflect annual changes in the loan's variable interest rate. (See also Graduated Repayment Schedule, Income-Sensitive Repayment Schedule, and Consolidation.)

State Grant Program
State funding coordinated by PHEAA that provides grants to needy Pennsylvania residents who meet the eligibility criteria and are pursuing post-secondary education.

Statement of Educational Purpose
A legal document in which the student agrees to use the financial aid for educational expenses only.

Student Aid Report (SAR)
An output document of the information reported on the FAFSA, sent to the student by the US Department of Education. Reflects calculation of a family's expected contribution to education.

A loan for which the Federal Government pays the interest while the student is in school at least half-time, and during grace and deferment periods.

Supplemental Educational Opportunity Grant (SEOG)
A grant funded by the Federal Government and administered by the school. Limited to students with exceptionally high need who meet the institution's filing deadline. Must be working toward first bachelor's degree.

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Title IV Student Aid
Financial aid programs authorized by the Federal Government in the Higher Education Act.

Tuition Assistance Program
Pre-paid tuition program established by the Pennsylvania Treasury Department.

Tuition Waiver
A form of financial aid in which the school lowers or eliminates tuition changes for qualified students.

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A student who has not received a first bachelor's degree.

A loan that requires the student to pay interest during the in-school and grace periods. Interest accrues on the loan from the date of the disbursement until the loan is paid in full. Interest not paid when it is due is capitalized and added onto the principal of the loan.

Untaxed Income
Refers to that type of income reported on the FAFSA including earned income credit, welfare benefits, certain Social Security benefits, payments to tax-deferred pension plans, IRA and KEOGH contributions, child support received, untaxed portions of pensions and worker's compensation.

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Variable Interest
Rate of interest that is tied to a certain index (depending on the loan) and changes periodically as the index changes. Interest rates for Federal Direct and PLUS loans are set by the government each year and change annually on the first of July.

A school's procedure of comparing, for accuracy, data reported on the FAFSA to a student's and parents' federal tax returns.

Vocational Rehabilitation
Programs administered by state departments of vocational rehabilitation services to assist individuals who have a physical or mental disability that is a substantial handicap to employment.

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Withdrawal Date
The date the student withdraws, as determined by the school. For student's who notify an institution they are leaving, the withdrawal date is considered the date the student begins the school's withdrawal process. For students who receive financial aid, the withdrawal date determines the amount of aid that the school must return and the amount it is able to retain (see Refund Period).

Work-Study Program
A work program funded by the Federal Government and administered by the school. Post-secondary students work part-time in on- or off-campus jobs in exchange for a paycheck. Hourly rate of pay is at least minimum wage.

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