Glossary of Terms

Assets: Elements of your and your family's financial worth; includes real estate other than your primary residence, stocks, bonds, cash savings, college savings plans, but generally not a family farm, retirement, or prepaid tuition assets.

Award letter: A letter notifying financial aid applicants of the types and amounts of aid offered.

Capitalization: When interest is added to the principal balance of a loan rather than being paid as it accrues; any future interest is then based on the higher loan amount.

Citizen/eligible non-citizen: A U.S. citizen, U.S. national (includes natives of American Samoa and Swain's Island), or a U.S. permanent resident who has an I-151, I-551, or I-551C (Alien Registration Receipt Card). Or a student who has an Arrival-Departure Record (I-94) from the INS with one of the following designations: Refugee; Asylum Granted; Indefinite Parole and /or Humanitarian Parole; Cuban-Haitian Entrant (Status Pending); or Conditional Entrant (valid only if issued before April 1, 1980). Students who have only a Notice to Apply for Permanent Residence (I-171 or I-464) are not eligible for federal student aid.

Cost of attendance: The total cost of college for the school year, also called student budget; includes tuition, fees, books, supplies, transportation, food, housing, and personal expenses.

Default: Failure to make loan payments or otherwise honor a loan's terms; reported to credit bureaus and can influence future credit and ability to receive financial aid.

Deferment: A postponement of up to three years in repaying a loan; not for loans in default.

Dependent student: A student under 24 years old who doesn't qualify as an independent student by federal guidelines and whose parental income and asset information is used in calculating his or her expected family contribution. Dependent students must include parental information on the FAFSA to be considered for financial aid.

Expected Family Contribution (EFC): The portion of your and your family's financial resources that should be available to help pay educational costs, based on a federal formula.

FAFSA (Free Application for Federal Student Aid): The financial aid application used to determine your eligibility for federal, state, and institutional need-based aid.

Federal methodology: The federal formula defined by Congress that is used to determine your expected family contribution.

Federal processor: The federal government's computer system that analyses the information on your FAFSA, calculates how much you and your family could pay toward college, and sends out the Student Aid Report; also called central processing service.

Financial aid eligibility: The Cost of Attendance minus your Estimated Family Contribution equals the amount of financial aid you are eligible to receive.

Financial aid package: The total amount of financial aid awarded, usually a combination of scholarships, grants, loans and employment opportunities.

Forbearance: When a lender allows the borrower to temporarily postpone repaying the principal, but interest continues to accrue, even on subsidized loans; not for loans in default.

Grace period: The short time period after graduation during which the borrower isn't required to begin repaying his or her loan; six months for Stafford loans, nine months for Perkins loans. There is no grace period for PLUS loans.

Grant: Financial aid that doesn't need to be repaid, based on financial need.

Guarantee: A promise to pay a debt if the borrower fails; the government or guaranty agency guarantees student loans make by banks.

Guarantee agency: The agency that insures Federal Family Education loans against default.

Home Equity: Current home value minus the amount still owed.

Independent college: A non-profit private college, not run by a government organization.

Independent student: A student who is 24 years old or older, or who is not 24 but is an orphan; a ward of the court; a veteran; married; a graduate or professional student; has legal dependents other than a spouse; or has special circumstances.

Institution-based aid: Financial assistance programs offered and controlled by the individual colleges.

Interest: The fee charged to borrowers by lenders for using loan money.

Need-based: Financial aid that depends on your or your family's financial situation; most government sources of financial aid are need-based.

PIN: Personal identification number from the U.S. Department of Education that serves as your e-signature on the electronic FAFSA.

Promissory note: A legally binding contract between a borrower and lender listing all terms and conditions of a student loan.

Satisfactory academic progress: The progress you must maintain toward a degree to receive financial aid.

Scholarship: gift award based on grades, financial need, or other achievement.

Selective Service registration: if required by law, you must register, or arrange to register, with the Selective Service to receive federal student aid; applies to males born on or after January 1, 1960, who are at least 18 years old, citizens or eligible non-citizens, and not currently on active duty in the armed forces. (You can register online at www.sss.gov.)

Student Aid Report (SAR): the report summarizing the information you provided on your FAFSA.

Untaxed income: all income received that's not reported to the IRS, or is reported, but not taxed; may include Social Security benefits, Earned Income Credit, welfare payments, untaxed capital gains, interest on tax-free bonds, military allowances, and others.

Verification: the procedure in which a college checks the information you reported on the FAFSA, usually by requesting a copy of your signed tax returns or your parents' returns.

Veteran: a person who served on active duty in the U.S. armed forces and was released under an honorable condition or who attended a service academy and was released under a condition other than dishonorable (see the FAFSA).