Financial Aid Glossary

National of the United States

A U.S. citizen or eligible no-citizen with proof of residency. See also Eligible Non-citizen.

Need Analysis

Technique used to determine a student's need for financial assistance for college expenses. The analysis compares the family's ability to contribute to the student's education with the estimated Cost of Attendance.

Need Gap

Colleges and the federal government have a formula for determining how much a family is expected to contribute toward college education. There's also a formula to determine the cost of that education. The difference between those two figures is your need gap. Unless the college has the funds, you're responsible for filling that gap on your own.

Prepayment

Paying off all or part of a loan before it is due. Some lenders impose a penalty charge on a borrower who prepays.

Prime Rate

Rate of interest charged by commercial banks to their most creditworthy borrowers. The Prime Rate is a benchmark for calculating many variable interest rates.

Principal Balance

Amount borrowed that may increase as a result of interest capitalization; the amount on which interest is calculated.

Promissory Note

The binding legal document borrowers sign when obtaining a loan, which lists the conditions under which they're borrowing and the terms under which they agree to pay back the loan. It includes information about the interest rate and about deferment and cancellation provisions.

Reissue

Send a new disbursement to replace a lost disbursement.

Repayment Schedule

The repayment schedule discloses the monthly payment, interest rate, total repayment obligation, payment due dates, and the term of the loan.

Repayment Term

The number of years (or months) within which the loan is to be repaid. A document with this information is presented to the borrower before the beginning of the repayment period.

Scholarship

Awards that usually do not have to be paid back, typically given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art, or other disciplines. Scholarships are sometimes included in the financial aid package and outlined in the award letter.

Secured Loan

A loan backed by collateral. Auto loans and home mortgages are examples of secured loans. Educational loans generally are not secured.

Service Provider

An organization that collects payments on a loan and performs other administrative tasks associated with maintaining a loan portfolio. Loan service providers disburse loan funds, monitor loans while the borrowers are in school, collect payments, process deferments and forbearances, respond to borrower inquiries, and ensure that the loans are administered in compliance with federal regulations and guarantee agency requirements, if applicable.

Simple Interest

Interest that is paid only on the principal balance of the loan and not on any accrued, unpaid interest.

Stale Date

The day, 30 days after disbursement, that a student loan is automatically canceled if the check has not been presented to the lender for payment.

Student

A person enrolled in an eligible educational institution.

Student Aid Report (SAR)

A profile of financial and other information reported by the student on the Federal Application for Student Aid (FAFSA). The student's eligibility for aid is calculated by subtracting the Expected Family Contribution (EFC), which is printed on the front of the SAR, from the Cost of Attendance (as determined by the school's Financial Aid Officer.)

Subsidized Loan

The type of loan on which the government pays the interest that accrues while the borrower is in school or during authorized periods of deferment.