Student Loan Terms and Financial Aid Dictionary

One of the criteria used to establish student eligibility in order to receive Title IV program assistance is that a student must have earned a high school diploma or its equivalent. Students who are not high school graduates (or who have not earned a General Educational Development [GED] Certificate*) can demonstrate that they have the “ability to benefit” from the education or training being offered by passing an approved ability-to-benefit (ATB) test.

Academic Year
A period of time schools use to measure a quantity of study. For example, a school’s academic year may consist of a fall and spring semester during which a full-time undergraduate student must complete 24 semester hours. Academic years vary from school to school and even from educational program to educational program at the same school.

The school must have accreditation from an accrediting body recognized by the U.S. Department of Education to be eligible to participate in the administration of federal student aid programs. Accreditation means that the school meets certain minimum academic standards, as defined by the accrediting body.

Award Letter
An award letter from a school states the type and amount of financial aid the school is willing to provide if you accept admission and register to take classes at that school.

Capitalized Interest
With certain loans, such as subsidized Direct and FFEL Loans, the U.S. Department of Education pays the interest that accrues on these loans while the student is enrolled at least half-time* and during periods of deferment. However, with subsidized loans in forbearance, unsubsidized loans or PLUS Loans, the student or the student’s parents are responsible for paying interest as it accrues on these loans. When the interest is not paid, it is capitalized or added to the principal* balance, which increases the outstanding principal amount due on this loan. Interest that is capitalized and, therefore, has been added to the original amount of the loan subsequently accrues interest, adding an additional expense to the loan.

Cost of Attendance (COA)
The total amount it will cost you to go to school—usually expressed as a yearly figure. It’s determined using rules established by law. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care. It also includes miscellaneous and personal expenses, including an allowance for the rental or purchase of a personal computer. Costs related to a disability are also covered. The COA includes reasonable costs for eligible study-abroad programs as well.

For students attending less than half-time, the COA includes tuition and fees and an allowance for books, supplies, transportation and dependent care expenses; and can also include room and board for up to three semesters or the equivalent at the institution. But no more than two of those semesters, or the equivalent, may be consecutive. Talk to the financial aid administrator at the school you’re planning to attend if you have any unusual expenses that might affect your cost of attendance.

Failure to repay a loan according to the terms agreed to when you signed a promissory note. For the FFEL and Direct Loan programs, default is more specific—it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently). The consequences of default are severe. Your school, the lender or agency that holds your loan, the state and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This may affect your credit rating for as long as seven years. For example, you might find it difficult to borrow money from a bank to buy a car or a house. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. Also, you may be liable for loan collection expenses. If you return to school, you’re not entitled to receive additional federal student financial aid. Legal action also might be taken against you. In many cases, default can be avoided by submitting a request for a deferment, forbearance, discharge or cancellation and by providing the required documentation.

Eligible Non-Citizen
You must be one of the following to receive federal student aid:
• U.S. citizen
• U.S. national (includes natives of American Samoa or Swain’s Island)
• U.S. permanent resident who has an I-151, I-551, or I-551C (Permanent Resident Card)

If you’re not in one of these categories, you must have an Arrival-Departure Record
(I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:

• “Refugee”
• “Asylum Granted”
• “Cuban-Haitian Entrant, Status Pending”
• “Conditional Entrant” (valid only if issued before April 1, 1980)
• Victims of human trafficking, T-visa (T-2, T-3, or T-4, etc.) holder
• “Parolee” (You must be paroled into the United States for at least one year and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose and that you intend to become a U.S. citizen or permanent resident.) If you have only a Notice of Approval to Apply for Permanent Residence (I-171 or I-464), you’re not eligible for federal student financial aid.

If you’re in the United States on certain visas, including an F1 or F2 student visa, or a J1 or J2 exchange visitor visa, you’re not eligible for federal student financial aid. Also, people with G series visas (pertaining to international organizations) are not eligible for federal student financial aid. For more information about other types of visas that are not acceptable, check with your school’s financial aid office. Citizens and eligible noncitizens may receive loans from the FFEL Program at participating foreign schools. Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau are eligible only for certain types of federal student aid. These applicants should check with their schools’ financial aid office for more information.

Eligible Program
A program of organized instruction or study that leads to an academic, professional or vocational degree or certificate, or other recognized educational credential. To receive federal student financial aid, you must be enrolled in an eligible program, with two exceptions:

• If a school has told you that you must take certain course work to qualify for admission into one of its eligible programs, you can get a Stafford Loan for up to 12 consecutive months while you’re completing that preparatory course work. You must be enrolled at least half-time*, and you must meet the usual federal student financial aid eligibility requirements.
• If you’re enrolled at least half-time* in a program to obtain a professional credential or certification required by a state for employment as an elementary or secondary school teacher, you can get a Federal Perkins Loan, Federal Work-Study, a Stafford Loan, or your parents can get a PLUS Loan, while you’re enrolled in that program.

Expected Family Contribution
Your Expected Family Contribution (EFC) is the number that’s used to determine your eligibility for federal student financial aid. This number results from the financial information you provided in your FAFSA application. Your EFC is reported to you on your Student Aid Report* (SAR).

Financial Aid Administrator (FAA)
An individual who works at a college or career school and is responsible for preparing and communicating information on student loans, grants or scholarships and employment programs. The FAA and staff help students apply for and receive student aid. The FAA is also capable of analyzing student needs and making professional judgment changes when necessary.

Financial Aid Package
The total amount of financial aid (federal and nonfederal) a student is offered by the school. The financial aid administrator* at a postsecondary institution combines various forms of aid into a “package” to help meet a student’s education costs. Using available resources to give each student the best possible package of aid is one of the aid administrator’s major responsibilities. Because funds are often limited, an aid package might fall short of the amount a student needs to cover the full cost of attendance.* Also, the amount of federal student aid in a package is affected by other sources of aid received (scholarships, state aid, etc.).

General Educational Development (GED) Certificate
This is a certificate students receive if they’ve passed a specific, approved high school equivalency test. Students who have a GED may still qualify for federal student aid. A school that admits students without a high school diploma must make available a GED program in the vicinity of the school and must inform students about the program.

Guaranty Agency
The guaranty agency is an organization that administers the Federal Family Education Loan
(FFEL) Program in your state. This agency can give you information on FFEL Loans. For the name, address and telephone number of the agency serving your state, you can contact the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243).

Half-time Enrollment
At schools measuring progress in credit hours and semesters, trimesters, or quarters, “half-time” is at least six semester hours or quarter hours per term for an undergraduate program. At schools measuring progress by credit hours but not using semesters, trimesters or quarters, “half-time” is at least 12 semester hours or 18 quarter hours per year. At schools measuring progress by clock hours, “half-time” is at least 12 hours per week. Note that schools may choose to set higher minimums than these. You must be attending school at least half-time to be eligible for a Stafford Loan. Half-time enrollment is not a requirement to receive aid from the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work-Study and Federal Perkins Loan programs.

National Student Loan Data System (NSLDS)
NSLDS is our database for federal student financial aid where you can find out about the aid you’ve received. If you’ve only just applied for aid, you won’t find any information on NSLDS yet. NSLDS receives data from schools, guaranty agencies* and U.S. Department of Education programs. The NSLDS Web site is generally available 24 hours a day, seven days a week. By using your PIN, you can get information on federal loan and Pell Grant amounts, outstanding balances, the status of your loans and disbursements made. You can access NSLDS at

The amount of money borrowed by the student. Interest is charged on this amount.

Promissory Note
A promissory note is a binding legal document you sign when you get a student loan. It lists the conditions under which you’re borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what deferment and cancellation provisions are available to the borrower. It’s very important to read and save this document because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.

Regular Student
A regular student is one who is enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate or other recognized education credential offered by that institution. Generally, to receive federal student financial aid from the programs discussed in this guide, you must be a regular student. There are exceptions to this requirement for some programs.

Satisfactory Academic Progress
To be eligible to receive federal student financial aid, you must meet and maintain your school’s standards of satisfactory academic progress toward a degree or certificate offered by that institution. Check with your school to find out its standards.

Selective Service Registration

If you are a male born on or after Jan. 1, 1960, are at least 18 years old, and are not currently on active duty in the U.S. Armed Forces, you must register, or arrange to register, with the Selective Service System to receive federal student aid. (Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau are exempt from registering.)

Student Aid Report (SAR)
After you apply for federal student financial aid, you’ll get your FAFSA results in an e-mail report within a few days after your FAFSA has been processed or by mail in a few weeks. This report is called a Student Aid Report or SAR. Your SAR details all the information you provided on your FAFSA. If there are no corrections or additional information you must provide, the SAR will contain your Expected Family Contribution (EFC), which is the number that’s used to determine your eligibility for federal student aid. Whether you applied online or by paper, we will automatically send your data electronically to the schools you listed on your FAFSA.