Financial terms you need to know...

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

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

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

Consolidation: Combining numerous education loans into a new loan with a new payment schedule and interest rate.

Default: The 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.

Deferment: An approved temporary suspension of loan payments based on certain events and criteria.

Delinquency: The failure to make scheduled monthly loan payments when they are due.

Disbursement: A transaction that occurs when a lender releases loan funds.

Expected Family Contribution (EFC): The dollar amount that a family is expected to pay toward a student’s education costs. This federal calculation is based on family earnings, assets, number of students in college and family size.

FDSLP: The Federal Direct Student Loan Program.

Federal Pell Grant: Unlike a loan, does not have to be repaid. Generally, Pell Grants are awarded only to undergraduate students who have not earned a bachelor's or professional degree. For many students, Pell Grants provide a foundation of financial aid to which other aid may be added.

Financial Need: The difference between the student’s education costs and the Expected Family Contribution (EFC).

FFELP: The Federal Family Education Loan Programs formerly known as the GSL-Guaranteed Student Loan Programs. Includes Federal Stafford, Federal PLUS, and Federal Consolidation loans.

FFEL Stafford Loan: Direct and FFEL (Federally Funded Educational Loan) Stafford Loans are either subsidized or unsubsidized. You can receive a subsidized loan and an unsubsidized loan for the same enrollment period.

Forbearance: The approved temporary suspension of loan payments due to financial hardship, during which interest continues to accrue.

Free Application for Federal Student Aid (FAFSA): The application students must first complete in order to apply for virtually all forms of student aid.

Grace Period: The period after a student either graduates or leaves school and before loan payments must begin.

Grants: Financial aid that does not have to be paid back is awarded to students based on student need.

Guarantor: The agency or institution that insures up to permissible limits against loss to lenders in the event of default in the FFELP.

Independent Student: Someone who is over 24 years of age, married, veteran, graduate students, orphan or ward of the court, or students whose parents have been denied a PLUS loan.

Interest: A charge for a loan which is usually a percentage of the amount of the money borrowed.

Lender: The institution that provides the money to be borrowed through the student loan program.

Promissory Note: The legal and binding contract signed between the lender and the borrower which states that the borrower will repay the loan as agreed upon in the terms of the contract.

PLUS Loans: “Parent Loan for Undergraduate Students.” If your parents want to borrow funds to help pay for your education, they may borrow up to the difference between your education costs and other student aid each year from a bank or other lending institution through the program.

Scholarships: Awards that usually do not have to be paid back. They are given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art, or other disciplines.

Servicer: An organization that acts on behalf of the lenders to administer their student loan portfolios and is sometimes paid a fee to do so.

Student Aid Report (SAR): The form students receive after filing a FAFSA application that notifies student of their eligibility for federal student aid.

Subsidized Loan: Loans on which the federal government pays the interest until the student enters repayment. In addition, the federal government will pay the interest during any approved period of deferment.

UnsubsidizedLoans: Loan on which the student is responsible for paying the interest that accrues on the loan from the date of disbursement until the loan is paid in full, regardless of enrollment status. If you allow interest to accumulate, it will be capitalized. Loan is not awarded on the basis of need.

Verification: The process where the Financial Aid Office reviews an applicant's file to ensure that the applicant is receiving financial aid that he or she is truly eligible for. The Department of Education or the school may select a federal aid applicant's file to be verified. BBC&S requests that those students selected for verification submit a copy of both the parent and the student's signed federal tax returns and W-2's. Also, the student and parent are both required to complete and sign the verification worksheet. After all documents are submitted, your FAFSA application will be reviewed for accuracy. Your financial aid processing will be put on hold until verification is complete and your financial aid package may change as a result of verification.

If you are not able to find the term you are looking for, or feel that another topic should be added to this page, please let us know.

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