Accrue: To be added as a matter of periodic gain or advantage, as interest on money

Capitalization: The process of adding unpaid interest to the principal loan amount, thereby increasing the balance that future interest accrues on, and the total amount to be repaid. To save money, pay interest before it is capitalized.

Consolidation Loan: A loan that combines all previous federal loans taken out into one loan and has a fixed interest rate.

Dependent Student: A student who is considered dependent for Federal financial aid purposes is not any of the following:

• Over 24 years of age
• Married
• Have a dependent child who receives at least 50% of support from student
• Have a dependent person who receives at least 50% of support from student
• A veteran of the armed forces
• An orphan or ward of the court

Default: Failure to pay your loan according to the terms of your promissory note. If you default your school loan, the holder of your loan, and state and federal governments can all take action to recover the money. Plus, the default will be reported to national credit bureaus, which could jeopardize your ability to get credit in the future.

Disbursement: Loan funds delivered to your school as a check to sign over to you or by electronic funds transfer to deposit in your school account. Disbursements are normally made in equal multiple installments.

Disclosure Statement: Before you receive the loan proceeds, you’ll receive this document listing the principal amount of your loan, fees that have been deducted, the interest rate, and the total amount of your indebtedness (principal plus interest).

Expected Family Contribution: The amount you and your family are expected to pay toward your college expenses based on federal calculations used on the Free Application for Federal Student Aid (FAFSA).

Federal Family Education Loan Program: The FFEL program includes Subsidized and Unsubsidized Federal Stafford Loans, Federal PLUS Loans for parents, and Federal Consolidation Loans. The loans are provided by private lenders, insured by guaranty agencies and backed by the federal government.

Financial Aid: Financial assistance in the form of scholarships, grants, employment opportunities, and education loans.

Financial Need: The difference between the cost of attendance at your school and your expected family contribution. The amount you are eligible to borrow is determined by your financial need less other financial aid for which you qualify.

Fixed Interest: The fee that is charged in exchange for borrowing money does not change (be variable) as the economy changes. Most students seek fixed interest while the interest rates are low.

Forbearance: An authorized period of time during which the holder of your loan allows you to postpone repayment because of financial difficulty.

Grace Period: The period between the time you leave school or drop below half time and the time you’re obligated to begin repayment.

Guarantee Fee: An insurance premium deducted from your loan proceeds prior to disbursement and paid to the guaranty agency that insures your loan.

Guaranty Agency: A state, regional, or national organization that insures Federal Family Education Loans made by lenders.

Holder: The institution with legal title to your loan. It could be your original lender, a secondary market, or in the event of default, a guaranty agency.

Independent Student: A student who is considered independent for Federal financial aid purposes must be one of the following:

• Over 24 years of age
• Married
• Have a dependent child who receives at least 50% of support from student
• Have a dependent person who receives at least 50% of support from student
• A veteran of the armed forces
• An orphan or ward of the court

Interest: A fee charged in exchange for borrowing money. The Federal Stafford Loan variable interest rate is adjusted annually but cannot exceed 8.25 percent.

MPN (The Federal Stafford Loan Master Promissory Note): – legal document listing the terms and conditions under which you repay the loan. As of 7/01/2000, a borrower can sign one MPN, one time, which remains in force and effect for ten (10) years. The student can then make annual requests for loan funds against the original MPN using a loan amount request form.

Need Analysis: A process, based on detailed family financial information used to determine your financial need.

New Borrower: One who has no outstanding (unpaid) loan balances on the date the promissory note is signed.

Notification of Loan Transfer: If your loan is sold and transferred to another servicer, you’ll receive this document providing the name, address and phone number of the new servicer and holder. It will also explain where to send your monthly payments and communications of all types.

Origination Fee: A fee charged by the federal government and deducted from loan proceeds prior to disbursement to partially offset administrative costs of the Federal Family Education Loan Program.

Principal: The amount borrowed. Interest is charged on this amount.

Repayment Schedule: When it’s time to begin repaying your loan, you’ll receive this document detailing your loan balance, estimated total amount of interest owed, amount of each monthly payment, the total number of payments to be made and the date your first payment is due.

Secondary Market: An organization established to purchase education loans from lenders, which enables lenders to make new loans.

Servicer: A company that performs administrative tasks associated with education loans.

Subsidized Stafford Loan: A loan for students on which interest is paid by the federal government while the borrower is in school and during grace and other deferment periods. To qualify, you must prove financial need.

Unsubsidized Stafford Loan: A student loan for which the borrower is responsible for all interest from the date the loan is disbursed.

Variable Interest: The fee that is charged in exchange for borrowing money can change (be variable) as the economy changes.