Student Finance Glossary
30 terms — from FAFSA to work-study, defined in plain English.
C
The process of adding unpaid interest to the principal balance of a loan, increasing the total amount owed.
The total estimated cost of attending a school for one academic year, including tuition, fees, room & board, books, transportation, and personal expenses.
D
Failure to repay a loan according to the terms agreed upon. For federal student loans, default typically occurs after 270 days of missed payments.
A temporary postponement of loan payments, typically available during school enrollment, unemployment, or economic hardship. Interest may not accrue on subsidized loans during deferment.
A federal loan available to graduate students (Grad PLUS) or parents of undergraduates (Parent PLUS) to help pay for education expenses not covered by other financial aid.
E
The former name for the number calculated from FAFSA that schools used to determine financial aid eligibility. Replaced by the Student Aid Index (SAI) in 2024.
A required information session for first-time federal loan borrowers that explains the terms, conditions, and repayment obligations of student loans.
F
Free Application for Federal Student Aid. The form students file annually to qualify for federal grants, loans, and work-study. Also used by many states and colleges for their own aid programs.
The difference between a school's Cost of Attendance and the Student Aid Index (SAI). Determines eligibility for need-based financial aid.
A temporary reduction or suspension of loan payments. Unlike deferment, interest accrues on all loans during forbearance.
G
A set period after graduation, leaving school, or dropping below half-time enrollment before loan repayment begins. For most federal loans, this is 6 months.
Financial aid that does not need to be repaid, unlike loans. Grants are typically awarded based on financial need.
I
A federal repayment plan that caps monthly payments at 10–15% of discretionary income. Remaining balance is forgiven after 20–25 years.
An umbrella term for federal repayment plans that base monthly payments on income and family size: SAVE, PAYE, IBR, and ICR.
The percentage of the loan principal charged annually for borrowing. Federal student loan rates are set by Congress each year.
M
A legally binding contract between a borrower and the federal government listing the terms and conditions of a student loan.
N
The actual cost of attending a school after all grants and scholarships are subtracted from the Cost of Attendance. This is the amount you need to cover from savings, income, or loans.
P
A federal repayment plan that caps payments at 10% of discretionary income. Remaining balance is forgiven after 20 years.
The largest federal grant program for undergraduates with financial need. Awards up to $7,395 per year (2024–25) and do not need to be repaid.
The original amount borrowed on a loan, not including interest or fees.
A federal program that forgives remaining Direct Loan balances after 120 qualifying monthly payments while working full-time for a government or non-profit employer.
R
Taking out a new private loan to pay off one or more existing student loans, often to get a lower interest rate. Federal refinancing doesn't exist; refinancing federal loans with a private lender mean…Read more
S
The number calculated from your FAFSA that colleges use to determine your eligibility for need-based financial aid. Replaced the EFC in 2024. Can range from –$1,500 to 999,999.
Saving on a Valuable Education — a federal income-driven repayment plan that replaced REPAYE. Caps payments at 5–10% of discretionary income and forgives balances after 10–25 years.
Free money for education that does not need to be repaid, typically awarded based on academic merit, talent, identity, or field of study.
A federal student loan where the government pays the interest while you're in school at least half-time, during the grace period, and during deferment. Only available to undergrads with financial need…Read more
T
The section of the Higher Education Act that authorizes federal student aid programs including Pell Grants, federal loans, and work-study.
U
A federal student loan where interest accrues from the day funds are disbursed, regardless of enrollment status. Available to all eligible students regardless of financial need.
V
A process where a college checks the accuracy of FAFSA information by requesting additional documentation such as tax transcripts.
W
A federal program that provides part-time employment opportunities for students with financial need to help pay for education expenses.