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Glossary

Academic year

The measure of the academic work to be accomplished by a student each year as defined by the school. For instance, at a school that uses terms, the academic year must contain at least 30 weeks of instructional time in which a full-time student is expected to complete at least 24 semester or trimester hours, 36 quarter hours, or 900 clock hours.

Accrued Interest

Interest that builds gradually on the loan

Borrower

Person responsible for repaying a loan who has signed and agreed to the terms in the promissory note.

Capitalization

Adding accumulated interest to the loan principal rather than having the borrower make interest payments. Capitalizing interest increases the principal amount of the loan and the total cost of the loan.

Consolidation

The combining of existing loans into one totally new loan.

Co-signer

A person who signs the promissory note in additional to the borrower and is responsible for the repayment obligation if the borrower does not pay.

Default

Failure to repay a loan according to the terms of the promissory note. This failure must persist for 180 days.

Deferment

A deferment means you may postpone making payments on your loan under certain specific conditions.

Dependent student

A student who does not meet any of the criteria for an independent student. An independent student is at least 24 years old, married, a graduate or professional student, a veteran, an orphan, a ward of the court, or someone with legal dependents other than a spouse.

Disbursement

A payment of loan proceeds to the student or parent borrower.

Discharge

The release of a borrower from the obligation to repay his or her loan.

Disclosure statement

Statement of the actual cost of a loan, including the interest costs and the loan fee.

Direct Loan Servicing Center

The U.S. Department of Education's agent contracted to collect Direct Loans and handle deferments, repayment options, and consolidation.

Endorser

A signer of a promissory note who is secondarily liable for a loan obligation.

Expected Family Contribution (EFC)

The amount a student's family is expected to contribute toward college costs. The U.S. Department of Education calculates a student's EFC based on information provided on the Free Application for Federal Student Aid (FAFSA).

Federal Direct Loan Program

The William D. Ford Federal Direct Loan Program, also referred to as Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education.

Federal Direct Stafford/Ford Loan

Also referred to as Direct Subsidized Loan. A federally financed and subsidized student loan made on the basis of the student's financial need and other specific eligibility requirements. The federal government does not charge interest on these loans while borrowers are enrolled at least half-time, during a six-month grace period, or during authorized periods of deferment.

Federal Direct Unsubsidized Stafford/Ford Loan

Also referred to as Direct Unsubsidized Loan. A federally financed student loan made to students meeting specific eligibility requirements. Interest is charged throughout the life of the loan. The borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized (added to the loan principal).

Forbearance

If you're unable to make payments on your Direct Loan for reasons such as unexpected personal problems or poor health and you don't qualify for a deferment, you may request forbearance of loan payments.

Grace period

A six-month period before the first payment must be made on a Direct Subsidized or Unsubsidized Loan. The grace period begins the day after the borrower ceases to be enrolled at least half time.

Independent student

A student who is at least 24 years old, married, a graduate or professional student, a veteran, an orphan, a ward of the court, or someone with legal dependents other than a spouse.

Interest

An expense of borrowing money that is calculated as a percentage of the amount borrowed.

Loan

Money borrowed that must be repaid.

Loan fee

An expense of borrowing deducted proportionately from each loan disbursement.

Principal balance

The amount owed on a loan or loans at any given time. The principal balance may include capitalized interest.

Promissory note

A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.

Repayment period

The period during which a borrower is obligated to make payments on his or her loan(s).

Repayment schedule

A statement provided by the Direct Loan Servicing Center to the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.

Variable interest

Rate of interest on a loan that is tied to a stated index and changes annually every July 1 as the index changes.