Student Loan Glossary of Terminology and Vocabulary

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91-Day Treasury Bill: The U.S. government issues short-term debt at a discount at a competitive auction, usually on a weekly basis. The terms can range from 91 to 182 days. The 91-day rate is used as an index for various variable rate loans, particularly Stafford and PLUS education loans.

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 accumulates on the unpaid principal balance of a loan.

Administrative Cost Allowance (ACA): Monies the federal government may pay a guaranty agency as reimbursement for administrative expenses incurred in the operation of its program. Agencies apply annually and are paid quarterly for ACA.

Alternative Loans: See Private Loans.

Annual Percentage Rate: The APR is a measure of all the costs associated with your loan, expressed as a percentage of the loan that you pay each year.

Anticipated Separation Date: The expected date when a borrower will officially separate from school. See Separation Date.

Beacon Score: A Beacon score is a credit scoring system used by Equifax, one of the major credit bureaus. This score is used by many lenders to evaluate one’s ability or creditworthiness to repay loans. See also FICO Score.

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

Campus-Based Aid: Federal government financial aid programs that are administered directly by the financial aid office at participating colleges and universities. The Perkins Loan program is a campus-based aid program.

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. Capitalizing is also known as compounding.

Cash Reserve Ratio: The amount of cash reserves that an agency holds divided by the original principal of outstanding loans.

Cash Reserves: An agency’s cumulative sources of funds minus an agency’s cumulative uses of funds to pay.

Certified Student Loan: A student loan that has been certified by a school’s financial aid office. Certified student loans usually do not exceed the Cost of Attendance (COA), and the funds are paid directly to the college or university. See also Uncertified Student Loan.

Co-Borrower: See Co-signer.

Co-Signer (or Cosigner): A co-signer is a person who, along with the primary borrower, accepts responsibility for repaying the debt. Also referred to as co-borrowers or co-applicants, co-signers are often required when the primary borrower applying is not creditworthy for one reason or another.

Cohort: Borrowers who enter repayment in a given fiscal year.

Cohort Default Rates: The rate calculated by dividing the number of borrowers who defaulted at the end of the specified time interval, by the total number of borrowers in the cohort. A cohort of student borrowers who entered repayment in the same year may be tracked over a specific time interval to determine the percentage of students who default on their loans. (A cohort default rate may also be based on the total dollar amount loaned to students. In this case, the rate would be expressed as the percentage of dollars borrowed that are defaulted.)

Collection Costs: Costs the government incurs when collecting a delinquent or defaulted loan. These costs are charged to the borrower.

Collections: Amounts collected by guaranty agencies or the federal government from borrowers after default claims are paid to lenders.

Commitment (Direct Loans): For the Federal Direct Loan Program (FDLP), a commitment occurs when the Department receives and accepts an origination record and a signed promissory note from the borrower.

Commitment (Federal Family Education Loans): In the Federal Family Education Loan program (FFELP), a commitment occurs when the guaranty agency issues a commitment to the lender for a loan.

Congressional Budget Office (CBO): The Congressional Budget Office determines the costs of government programs and of changes being proposed by Congress.

Consolidation: Refinancing several different Federal Student loans into a single loan with new repayment terms and a fixed interest rate.

Constant Dollars: Dollars adjusted using a price index to eliminate inflationary factors. This adjustment facilitates direct comparison over time.

Cosigner Release: A cosigner release is an option for a cosigner’s responsibility and liability on a specific loan to be removed once the primary borrower (for private student loans, the student borrower) meets two conditions: (1) makes the requisite number of on-time monthly payments of loan principal and interest as stipulated by the loan agreement and (2) establishes and maintains a positive credit history and credit score that meets Lender requirements. (Other restrictions may apply.) Once the cosigner release is issued, the cosigner will no longer be liable for any payments should the primary borrower be late with, or default on, loan repayments. The benefit of the cosigner release means that the cosigner’s responsibility is not for the life of the loan but rather a much shorter period of time.

Cost of Attendance (COA): The COA is inclusive of tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care, costs related to a disability, and miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Also included are reasonable costs for eligible study-abroad programs.

Default: Failure to repay a loan according to the terms of the promissory note. This failure must persist for 270 days.

Deferment: A deferment means you may postpone making payments on your loan under certain specific conditions. On an unsubsidized loan, the interest is accrued, which means it’s added to the principal of the loan. No interest will accrue during deferment on subsidized loans.

Delinquency: Failure to make loan payments when due. Delinquency can lead to default.

Department of Education: The federal agency that acts as the regulatory body for the federal student loan industry. In addition, the Department of Education processes all FASFA applications.

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.

Direct Loans: A student loan issued under the William D. Ford Federal Direct Student Loan (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. The program includes Federal Direct Stafford/Ford (Direct Subsidized) loans, Federal Direct Unsubsidized Stafford/Ford (Direct Unsubsidized) loans, Federal Direct PLUS (Direct PLUS) loans, and Federal Direct Consolidation (Direct Consolidation) loans.

Disbursement: A payment of loan proceeds to the student or parent borrower. Borrowers must meet certain requirements to be eligible for discharges.

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.

Educational Credit Management Corporation (ECMC): Educational Credit Management Corporation is a federally-funded guaranty agency, which guarantees loans for lenders in various states.

Eligible School: To be eligible for our Private Educational Loan Program, you must attend a school that has been approved for participation in our program. We have over 25,000 eligible schools, representing elementary, secondary, two-year and four-year public and private institutions for virtually all levels of education. Contact our representatives today toll-free at 877-663-7467 to find out if your school participates in our private student loan program.

Enrollment Status: This is the status that your school reports you as being in. It can be part time, half time or full time. For our higher education loans, you must be attending either half time or full time.

Enrollment Verification: A document from the school verifying the studentï¿½s enrollment in that school, used by lenders to confirm one’s eligibility for specific types of education loans. Acceptable proof includes, but is not limited to, a letter of acceptance, financial aid award letter, invoice for tuition, room, board, and other fees, or an academic transcript.

Entitlement: A contractual right, granted by the law, for a person or entity to demand a payment or other benefit from the government.

Exit Counseling: A group or individual session during which borrowers who are leaving school or dropping below half-time enrollment receive information about their repayment obligations and update information about themselves.

Exit Interviews: See Exit Counseling.

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).

Extended Repayment Plan: The amount that a family can be expected to contribute toward college costs according to federal financial aid formulas.

FAFSA (Free Application for Federal Student Aid): This is the application each student must complete once a year to qualify to receive federal student aid. Obtain your FAFSA application here.

FICO Score: This is a credit scoring system developed by TRW in association with Fair, Isaac, and Company, and used by Experian, a major credit bureau. The FICO Score enables lenders and credit providers to identify the creditworthiness of prospects. The term “FICO/Beacon Score” simply refers to the combination of both FICO and Beacon scores.

Federal Direct Loan Program: See Direct Loans.

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).

Federal Family Education Loan program (FFELP): A federal education loan program to help students and their parents obtain low-cost education loans to help pay for higher education. FFELP loans include unsubsidized and subsidized Stafford loans, PLUS loans for parents and Direct Consolidation Loans.

Finance Charge: The finance charge is the interest paid over the life of the loan plus any origination fee.

Financial Aid: Money that is provided to the student outside of any savings or family contributions, such as scholarships, grants, Federal and private student loans.

Fiscal Year: The annual accounting year for the federal government begins on October 1 and ends the following September 30. The fiscal year is designated by the calendar year in which it ends. For example, the FY 2008 begins on October 1, 2007 and ends on September 30, 2008.

Forbearance: Temporary postponement or reduction of student loan payments, based on financial hardship during repayment period. Awarded on a case-by-case basis through lender or loan servicer, the borrower will still be responsible for paying the interest that accrues during the forbearance period. If you’re unable to make payments on your federally guaranteed student 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.

Foreign Borrowers: Borrowers who attend eligible foreign institutions.

Full-Time Student: This is a student that is carrying a ï¿½full academic workloadï¿½ as determined by the school, and is reported by the student’s school to the lender.

Government Accountability Office (GAO): The Government Accountability Office (formerly the U.S. General Accounting Office) is the auditing arm of Congress, and is led by the Comptroller General of the United States.

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, either through graduation or withdrawal from school. Loan payments are deferred (not due) during the grace period.

Graduated Repayment Plan: A plan that allows monthly payment amounts to start out at one level and then increase every two years during the repayment period. Borrowers have up to 30 years to repay, depending on the amount they borrowed. The minimum payment must cover interest that accumulates monthly and must be at least half of the payment that would be required under the Standard Repayment Plan. The maximum amount may not be more than 1-1/2 times the payment that would be required under the Standard Repayment Plan.

Graduation: The date when a student receives a diploma. Graduation date may or may not be the same as a separation date.

Grant: Financial assistance that does not need to be repaid.

Guarantee Agency (GA): A state or private nonprofit agency that has an agreement with the Secretary to administer the FFEL (Guaranteed Student Loan) programs. The agency insures lenders against losses due to a borrower’s default. Also called “guarantor” or “guaranty agency.”

Half-time Student: A student who is carrying an academic workload that is considered at least one-half the workload of a full-time student (as determined by the school).

Health Professional Student Loan (HPSL): Long-term, low interest rate loan to full-time, financially needy students to pursue a degree in dentistry, optometry, pharmacy, podiatric medicine, or veterinary medicine. Participating schools are responsible for selecting loan recipients, making reasonable determinations of need and providing loans that do not exceed the cost of attendance (tuition, reasonable educational expenses and reasonable living expenses).

Higher Education Act (HEA): Higher Education Act (HEA) of 1965 is the current legislation that provides for funding of Federal student aid programs. The Higher Education Act of 1965 has multiple components, or titles, relating to specific areas of education. (See Title IV.)

IRS Offset: When other collection efforts fail, the Department of Education turns over a defaulted borrower’s account to the Internal Revenue Service (IRS). This IRS offsets the debt against the defaulter’s income tax refund.

In-School Period: Under the Stafford Subsidized loan program, the period during which a borrower pursues his or her studies as at least a half-time student at a participating school. This period begins with the date of disbursement and ends with the beginning of the grace period. During the in-school period, borrowers are not charged interest (in FFELP, the federal government pays lenders interest benefits and special allowance).

Income Contingent Repayment Plan: Available only in the Federal Direct Loan Program, this plan that allows the monthly payment amount to vary with the borrower’s income, with any amounts remaining after 25 years forgiven.

Income Sensitive Repayment Plan: A plan that allows the monthly payment amount to vary with the borrower’s income, except that all principal and interest must be fully repaid within 25 years.

Income Verification: Providing evidence of employment and/or earnings.

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.

Insurance Premium: The amount charged to a borrower by a guarantee agency for insuring the lender against losses on guaranteed loans.

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

Interest Benefits: Under the Subsidized Stafford loan program, the government covers a borrower’s interest payments during the in-school and grace periods, and during any authorized deferment periods.

LIBOR (London Interbank Offered Rate): A loan index used to determine the actual interest rate of your loan. The 1-month LIBOR index is equal to the average of the 1-month London Interbank Offered Rate made available by the British Banker’s Association (11:00 AM London Daily Posting) on the first business day of each of the calendar months immediately preceding each quarterly adjustment date. The LIBOR index may change quarterly.

Lender Code: A 6-digit identification number assigned by the US Department of Education to lenders that participate in Title IV higher education loan programs. This number is required to process your Federal Stafford or PLUS loan with the guarantor and lender. OneSimpleLoan’s lender code is 834205.

Lenders’ Default Claims Rate: The ratio of default claims paid since program inception to all loans that have entered repayment (matured paper) since program inception. The default rate does not reflect any collection activity subsequent to the default. Commonly referred to as the gross default rate.

Less Than Half-Time: This status refers to students who, as reported by the school, are in a part-time status. During this status, the borrower will be considered separated from school and repayment could begin. To continue to qualify to have your loans deferred because of attendance in school, your school must report you as either half-time or full-time.

Loan: Money borrowed that must be repaid.

Loan Limits: Limits placed on student borrowers in terms of the maximum numbers of dollars they may obtain through federally funded student financial assistance programs. Loan limits vary by type of loan, academic level, program length, and whether a student is dependent or independent. Click here for current loan limits.

Loan Principal: The total sum of money borrowed.

Loan Volume: Refers to the dollar amount or number of loans committed.

Loan fee: An expense of borrowing deducted proportionately from each loan disbursement.

Loans in Repayment: Loans that have entered the repayment period after expiration of the grace period.

Mandatory Assignments: Assigned to the Department of Education after the guaranty agency has made the required effort to collect on defaulted loans.

Master Promissory Note (MPN): A Master Promissory Note is a promissory note that can be used to make one or more loans for one or more academic years (up to 10 years). See Promissory Note.

Matured Paper: The cumulative dollar amount of loans that have ever entered repayment. It is a measurement equal to the cumulative dollar amount of loans disbursed since the program’s inception less the dollar amount of loans in the in-school and grace periods.

Needs Based Student Loans: A Federal student loan awarded based on financial need.

Net Cost of Loan Defaults: The cost of the loan default claims minus the collections that are made on the defaulted loans.

Non-Federal Student Loans: See private loans.

Nursing Student Loan Program: Long-term, low-Interest rate loans to full-time or half-time financially needy students pursuing a course of study leading to a diploma, associate, baccalaureate or graduate degree in nursing. Participating schools are responsible for selecting loan recipients and for determining the amount of assistance a student requires.

Office of Management and Budget (OMB): The Office of Management and Budget is responsible for the overall budget of the United States government and for the efficient operation of government agencies.

Operating Expenses: Expenses incurred by a guaranty agency, such as salaries, travel, computer hardware and software, equipment, rent, supplies, and contractor costs.

Origination Fee: A fee charged and deducted from the proceeds of a loan before the loan is disbursed. In the federal loan programs, the origination fee is paid to the government to offset its costs.

PLUS Loans (Parent Loans for Undergraduate Students): These loans are made to parents of dependent undergraduate students based on credit worthiness, not financial need. Parents may borrow up to the total cost of education, minus any financial aid received by the student. The first payment is due within 60 days after the loan is fully disbursed.

Part-Time Student: This enrollment status refers to a student who, as reported by the school of attendance, is carrying half of a full academic workload.

Payoff Amount: The total dollar amount required to pay off a loan in its entirety. This amount includes original principle amount, accrued interest, and any other related charges on the loan.

Payoff Authorization Letter: A Loan Pay-Off Authorization letter gives explicit pay-off instructions to the current holders of your loans. Your completion of this form allows the Private Loan Consolidation process to be completed more quickly and efficiently. This letter is part of the application package.

Perkins Loan: A needs-based federally guaranteed loan set at a fixed 5% interest rate and available through the school (limited funding available). This loan has a 9-month grace period.

Prepayment: Any amount paid on a loan by the borrower before it is required to be paid under the terms of the promissory note. There is never a penalty for prepaying principal or interest on federal student loans.

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

Principal at Repayment: Your principle balance at the time you enter repayment on your loans. It is inclusive of your original principle balance and all interest charges that have accrued while attending school.

Private Student Loans: Private student loans, also known as alternative loans or Non-Federal student loans, help bridge the gap between the actual cost of education and the limited amount the federal government allows students and parents to borrow under the federal FFELP and direct loan programs. Private lenders offer private loans and there are no federal forms to complete.

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.

Proprietary Institutions: Postsecondary institutions that are operated for profit.

Reconsolidation: The ability to consolidate student loans that have previously been consolidated. Reconsolidation may occur if a borrower either received a new eligible loan since the consolidation or omitted an eligible loan from of the original student loan consolidation.

Rehabilitation loans: When 12 consecutive payments have been made on a formerly defaulted loan, it can become a rehabilitation loan. Once a loan becomes rehabilitated, it becomes a new loan. A borrower again becomes eligible for participation in Title IV programs.

Reinsurance Payments (Reinsurance Default Claims): Monies the federal government gives to a guarantee agency as reimbursement for payments made to lenders for losses due to borrower default.

Repayment period: The period during which a borrower is obligated to make payments on 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.

Secondary Market: An institution or organization that purchases eligible student loans and provides lenders with a source of liquidity to make new loans.

Secured Loan: A type of loan made with collateral which the lender would have recourse to should the borrower default on said loan. Our educational loans are unsecured loans.

Separation Date: A separation date is the day that the borrower becomes eligible for consolidation.
Separation is defined as a borrower:

   1) not taking any more classes; or
   2) taking less than 6 credit hours for their undergraduate degree; or
   3) being classified as “part time” by their school for graduate or post graduate work.

(Please note that a graduation date is the date of a graduation or when one has received a diploma. Unless officially separated from school, a borrower will not be eligible for consolidation even though he or she has graduated.)

Servicer: A third-party organization that handles all of the paperwork, funds disbursements, and recordkeeping for banks, credit unions and other financial institutions.

Special Allowance: A quarterly supplemental interest payment to lenders based on the outstanding principal balance of Stafford, PLUS, SLS and Consolidation loans. This payment assures that, as a complement to the borrower’s interest rate, the lenders receive a guaranteed yield on their loans even when interest rates change.

Special Repayment Plan: A plan that requires a borrower to pay at least $50 a month and allows up to 10 years to repay.

Spouse Consolidation Loan: A consolidated student loan that combines the federal student loans of both husband and wife into one consolidation loan. Effective July 1, 2006, spousal consolidation loans are no longer allowed by the Deficit Reduction Act of 2005.

Stafford Loans: Low-interest subsidized and unsubsidized loans guaranteed by the federal government and available to students to fund education.

Student Loan Servicers: Companies hired by lenders and secondary markets to handle the day-to-day management of student loan accounts. They send out statements, process payments, make address changes, handle requests for deferments and forbearance, and answer student questions.

Subsidized: Interest is paid by the federal government while the borrower is enrolled in school at least half-time and during grace and deferment periods. Eligibility for subsidized loans is based on financial need, as determined by the federal-need analysis process.

Subsidized Federal Stafford Loans: To qualify for a subsidized Federal Stafford Loan, you must demonstrate financial need. The federal government pays all of the interest that accrues (accumulates) on the loan while you’re enrolled in school at least half time and during grace and deferment periods.

Subsidy Rate: The current value, expressed as a percentage, of the long-term stream of income and expenses to the government from a direct or guaranteed loan. Generally does not include the government’s own administrative expenses.

Title IV: The portion of the Higher Education Act that deals specifically with student aid programs is Title IV. Most of the federal student aid programs fall under this title referred to as the Federal Title IV Financial Aid programs. These programs are in place specifically to assist students and families with meeting the costs associated with pursuing a post-secondary education.

Uncertified Student Loan: A type of student loan that is not certified by a school’s financial aid office. These loans, which are based only on the student’s credit or that of his or her cosigner, may exceed the Cost of Attendance (COA), and are paid directly to the student to be used for any education-related expenses. See also Certified Loan.

Unsecured Loan: A type of loan that is made with no collateral; approval is based on the borrower’s credit. For example, private student loans are usually unsecured loans.

Unsubsidized Federal Stafford Loans: Because an unsubsidized Federal Stafford Loan is not based on financial need, you’re responsible for the interest that accrues on the loan while you’re in school and during grace and deferment periods. You may opt to make interest payments during these periods. If you decide to wait, the interest is capitalized (accumulated and added to the principal balance of your loan).

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.

Warehousing Advances: Advances provided to lenders to invest in additional student loans. This enables the lenders to finance their new and outstanding student loan portfolios without depleting their funds.