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Budget: See Cost of Attendance, below.


The practice of adding interest to the principal, or loan amount, instead of paying the interest while in school. Capitalization eliminates payments while in school, but does increase the amount owed after school.


Some loans provide for cancellation for part or all of the amount owed under certain circumstances, such as teaching in designated teacher shortage areas.

Consolidation Loan 

This is a loan that allows borrowers to lower their monthly payments by replacing their original loan(s) with a new loan. Consolidation loans usually have a longer period of repayment, and more interest that must be paid.

Cost of Attendance (Budget) 

A figure used to determine eligibility for financial aid, representing the average cost of education, generally for a school year. The Cost of Attendance is also known as the Budget; it includes fees, tuition, room and board, books and supplies, transportation and miscellaneous items.


Failure to repay or otherwise meet the terms and conditions of a loan. For most student loans, it takes six months of delinquent payments for a loan to go into default. The penalties for defaulting include loss of financial aid eligibility, a bad credit rating, withholding of tax refunds, garnishing wages, and loss of monthly payment options (the whole loan becomes due and payable at once).


A deferment is the postponement of the payments on a student loan. Most deferments are legal entitlements; if you meet the deferment criteria and apply for it properly, the deferment must be granted to you. (see also forbearance).


Failure to make a scheduled payment on a loan.


This means that parental information is considered in determining a student's eligibility for financial aid. Note that a student may be living away from home and not receiving any money from parents and still be dependent for financial aid purposes. Also, students are not considered independent just because their parents are not claiming them on their tax return. Generally, any student under age 24 is considered dependent.

Entrance Loan Counseling

A required on-line session for first time student borrowers during which the terms and conditions of the loan are explained.

Exit Loan Counseling 

A required on-line session for student borrowers who are graduating or otherwise leaving school, or drop below half time enrollment, during which the terms and repayment of the loan(s) are explained.

Expected Family Contribution (EFC)

Federal Student Aid (FSA) defines EFC as: An index number that financial aid uses to determine how much financial aid a student will receive. The information reported on the FAFSA is used to calculate an EFC.


This is the Free Application for Federal Student Aid used to apply for federal and state financial aid.


The FSA ID is issued by the US Department of Education, and is used by students to to: apply for financial aid online, electronically sign their applications, and access several other federal student aid websites. 

Fee deferral

Fee deferrals protect classes and delay the payment of tuition fees until after the semester begins.

Financial Need

This is the same as financial aid eligibility.


Forbearance is a way to postpone or reduce the payments on a student loan. Forbearance differs from a deferment in three ways:

  • It is not a legal requirement;
  • It is given at the lender's (or holder of the loan) discretion; and
  • Interest continues to acrrue even if forebearance is granted (see also deferment).


Withholding part of a borrower's paycheck to repay a loan, generally when that loan has been defaulted.

Grace Period

This is a period of time during which a borrower is not required to make payments on a student loan. Grace periods normally begin after the student is no longer enrolled at least half-time, and last from 6 to 9 months.


Parental information is not considered in determining a student's eligibility for financial aid. Any student who is age 24 by December 31 of the award year is automatically independent for financial aid purposes.

Master Promissory Note (MPN)

A written, legally binding promise to repay a loan. The Master Promissory Note (MPN) outlines the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy, and cancellation provisions. Under the Federal Direct Loan Program, the MPN must be signed every 10 years.


Need is the difference between the student's Cost of Attendance (budget) and expected family contribution. Eligibility is determined by a student's need.

Origination Fee

This is a fee deducted from student loans to help pay the administrative costs.


The amount borrowed or owed on a loan.

Student Aid Report (SAR)

The Student Aid Report (SAR) is sent to the student after applying for financial aid. The SAR determines eligibility for a Pell Grant.

Satisfactory Academic Progress

Refers to a schools policy concerning the minimum number of units that must be completed each semester, the maximum time frame, and the minimum GPA required while receiving financial aid.

Subsidized Loan

This is a loan that student borrowers do not have to pay interest on until after their grace period expires.

Unmet Need

The difference between the financial need and your financial aid offer is considered unmet need.

Unsubsidized Loan

This is a loan that student borrowers must pay all the interest on, including while they are enrolled. However, students can elect to capitalize the interest, and make their payments after they are out of school.


A review process through which a Financial Aid Office must request documentation from a financial aid applicant to verify the accuracy of the information provided on the FAFSA application.