Glossary of Financial Aid Terminology


1040 Form, 1040A Form, 1040EZ Form
These are the official names of federal tax returns by individuals. Any American earning income must file one by April 15 every year.

1099 Form
The 1099 is a form businesses use to report money paid to non-employees, such as contractors. It’s also used by banks to report interest paid to their customers. The 1099 is filed with the IRS.

401 (k)
The 401(k) derives its name from the governing section of the IRS code. It’s a retirement fund sponsored by employers which allows workers to set aside a tax deferred portion of their present earnings toward their retirement. Many employers also contribute to their employees’ 401(k) plans. You may borrow money from your 401(k) toward paying for your own or your child’s education.

Academic Year
The part of the year that colleges and universities actually hold classes. It’s at least 30 weeks long, and at most colleges begins in early September and ends in late May.

Accrue
To grow, or accumulate, usually referring to interest in the context of financial aid.

Accrual Date
The actual date when interest charges begin accruing, and becoming part of your loan balance.

Achievement Tests (SAT II)
Achievement tests are used by colleges and universities to gauge a student’s aptitude for college level work, and proficiency in specific subject matters. The two most popular achievement tests are the SAT and the ACT.

Adjusted Available Income
Adjusted Available Income is what the federal government uses to figure how much you can contribute to you or your child’s education costs. It’s based on your discretionary net worth, such as savings accounts, certificates of deposit, etc., added to your income (after taxes and allowances) for the year.

Admit-Deny
Admit-Deny is the name of a policy where a school admits students whom they’re not sure are academically ready for college, but doesn’t give them financial aid. This policy rarely used any more.
Glossary of Financial Aid Terminology
Advanced Placement Test (AP)
Advanced Placement Tests are tests given for specific subject areas, such as English, Algebra, History, etc., by a company called ETS. The tests are held every spring. High school students who score well on the tests may be able to skip and get credit hours for introductory college courses in that subject. The lowest score is a 1 and the highest score is a 5. AP tests are a great way for high academic achievers to reduce the time and money spent acquiring a college education, and to spend their college years in more advances courses.

Alternative Loans
The same thing as Private Loans.

American College Test (ACT)
The ACT is one of the two major college entrance exams used by American colleges and universities. It measure proficiency in English, math, reading, and science. There is an optional Writing test, which involves writing an essay.

Amortization
Amortization is simply a term for reducing a loan balance by paying it back in regular installments.

Appeal
A student who’s denied financial aid, or been granted less than they think they qualify for, may file an appeal with the college or university. If an appeal is approved, the financial aid office will look at the student’s situation in more depth, and will ask the student to explain why the decision should be changed, and provide documentation of their actual need and extenuating financial circumstances.

Asset
An asset is something of value. For financial aid purposes, this would include things such as savings accounts, home equity, equity in a business, real estate such as rental properties, certificates of deposit, stocks, rare coin collections, etc. Anything that has substantial monetary value, except for approved retirement funds, is an asset.

Asset Protection Allowance
Federal guidelines have been created to outline how much a family is expected to contribute to their child’s college costs, based on their finances. However, not everything parents own is counted. The portion of the parents’ assets that isn’t counted is known as the Asset Protection Allowance. For the typical family, this is around $40,000, but that’s an average, and it varies widely. And the older the parents are, the larger the asset protection allowance is.

Associate Degree
A two year degree.

Award Letter
The award letter is the also known as Financial Aid Notification. It’s the official document issued by a college or university containing all the details of the financial aid package awarded to a student. It will explain how they figured the student’s need, list the various types of aid given, and discuss terms and conditions of the aid offered, and how much it will cost for the student to attend. The student must sign a copy of the letter, either accepting or rejecting the offer, and return it to the financial aid office of the school.

Award Year
The school year for which financial aid is being applied for.

Bachelor’s Degree
A four year degree.

Balloon Payment
A balloon payment is a lump sum payment at the end of an installment loan repayment schedule, which is much larger than the regular monthly payments. It can also refer to a lump sum payment of the remaining balance at any time during the term of the loan. Most education loans will allow a person to pay it off early without penalty.

Bankruptcy
Bankruptcy is a legal term for not having enough money to pay one’s debts. When declared bankrupt by a court, much of a persons debts can be wiped out, along with the obligation to repay them. Student loans, however, cannot be dissolved in bankruptcy.

Base Year
The base year is the calendar year immediately prior to the award year. For a student applying for financial aid for 2007-2008, the base year is 2006. For high school students this will be the last half of their junior year and the first half of their senior year.

Borrower
The person actually borrowing the money. This can be the student, or the student’s parent(s).

Budget
The entire amount needed to get through school-tuition, room and board, books, lab fees, transportation, living expenses, etc.

Bursar’s Office
The bursar‘s office administers the actual billing and receiving of financial aid

Campus-based Aid
Although the vast majority of financial aid is issued through the college or university, only some of it is actually administered by the school, as opposed to state and federal governments. Programs actually administered by the school are known as campus based aid, and include the Federal Work Study Program, Federal Supplemental Education Opportunity Grants, and Federal Perkins Loans. Unlike Direct Loans from the government, the amounts that schools can award in campus based aid is limited, and there’s no guarantee that they’ll have enough of this aid to help every student. It’s therefore extremely important to apply for aid as early as possible.

Cancellation
Cancellation of repayment of a student loan is possible under some circumstances. If the borrower dies, or becomes permanently disabled, the loan can be canceled. Other situations where a loan repayment can be canceled are when the borrower joins the military and the armed services would repay a part of the loan for every year the student serves. Likewise, many state and local governments have programs to encourage students to pursue careers in critical needs areas, such as inner city school teachers, or rural health care practitioners, and will often agree to pay off the student loans of people who agree to serve in these capacities for a certain number of years.

Capital Gain
The difference between what someone paid for an asset, such as stocks or real estate, and what it was worth when they sold it, if that amounts greater than what they paid for it.

Capitalization
Capitalization is also called “compounding”. It simply means that any unpaid interest is added to the balance of the loan, increasing the principal, or the amount owed. Interest is then compounded on the new balance. Capitalization will cost a student loan user more money in the long run, so if it’s possible to pay the interest while you’re in school, it would be in your long term financial interest to do so.

Collateral
Collateral is any property that is used as security, or a guarantee, for a loan. If the borrower defaults, the collateral can be sold to satisfy the debt. Most of the time collateral is a house, but it can be anything of substantial value.

Collection Agency
A business that makes money by trying to collect payment from people who’ve defaulted on their loans.

College Board
A nonprofit association of colleges, universities, educational systems and other educational institutions which designs and administers standardized testing programs, such as the SAT and Advanced Placement tests, nationwide.

College Work-Study (CWS)
Not to be confused with the Federal Work Study Program, college work study is any part time job either on or off campus.

Color of Federal Forms
To help students ensure that they’re filing the correct forms for the correct years, the government prints the FAFSA and SAR in different colors over a four year rotation: Green (2005-2006), Blue (2006-2007), Yellow (2007-2008), and Pink (2008-2009). The parents form is always purple.

Common Law Marriage
In some states, a man and woman are considered to be legally married if they live together, and consider themselves man and wife, even if they’ve never gone through a wedding ceremony.

Community Property
In states that observe the community property legal system, the husband and wife each have an equal share in all income and property acquired during the marriage, unless it’s been specifically excluded by contract.

Commuter Student
A student who attends school near his home and chooses not to use campus housing.

Compounded Interest
Interest is added to the remaining loan balance. The total becomes the new principal, and interest is then figured on this amount. This process is called compounding.

Consolidation Loan
A consolidation loan is a loan that combines the debts from several different loans from different lenders into one single loan and one payment. The company offering the consolidation loan pays off the other debts, and the new debt is paid to them. Student loan consolidation can often be a money saving proposition for student borrowers.

Co-operative Education
Co-operative education is a structured program where a student divides their time between academic study in a classroom, and actual employment in a job related to their field.

Cosigner
If someone has little credit history, or bad credit, they may need someone else to vouch for them by promising to pay the loan if the borrower doesn’t. That person is called a cosigner, and they’ll owe the debt if the other person defaults.

Cost of Attendance (COA)
The entire amount needed to get through school-tuition, room and board, books, lab fees, transportation, living expenses, etc. Each school will have a cost of attendance figured for students in different circumstances, and they will use that figure in coming up with a total financial aid package.

Credit Rating
A credit rating is an evaluation of a person’s income, past credit history, and likelihood of paying back or defaulting on a loan based on those and other factors. Credit bureaus provide the credit rating, and lenders use the rating to decide whether to make a loan and at what interest rates. Many entering college students won’t have a credit rating, but that won’t affect their chances of getting a federal student loan, as a student’s credit rating is not taken into account when making these loans.

Custodial Parent
In the case of a student whose parents are divorced or separated, whichever one the student lived with for a greater amount of time over the last 12 months is the custodial parent, and their finances will be used in determining a student’s need and financial aid.

Default
To default on a loan is to miss several scheduled payments in a row, usually three or more before default technically occurs. Once a borrower defaults on a student loan, the school, the government, and the lender will have the right to pursue legal action against the borrower. This can include wage garnishment, withholding of income tax refunds, ineligibility for government employment, and court judgments.

Deferment
The deferment period is the time period after you‘ve taken out the student loan, but before you‘re required to start making payments on it. Usually, as long as you‘re in school at least half time, you can defer repayment until several months after graduation. If your loan is unsubsidized, interest will begin accruing immediately, however. The interest will be added to your principal which must be repaid.

Delinquent
Being late with a payment by more than the grace period will cause a borrower to be considered delinquent, which will hurt their credit rating, and they will probably be charged late fees. Missing several payments will cause the loan to go into default.

Dependency Status
Whether or not a student is financially independent and self supporting, or depends on parents or guardians for financial support.

Dependent
A child or step child who receives at least half of their financial support from a parent or guardian.

Direct Loans
Student loans that come directly from the government, instead of simply being guaranteed by the government. In direct loans, the federal government actually loans the student the money and administers the program, as opposed to loans through third parties where the colleges and lenders administer the loans. Officially named the William D. Ford Federal Direct Loan Program.

Disbursement
Disbursement is when the loan money is actually given to the school for use by the student. Loans are made out in the name of both parties, the school and the student. Tuition, fees and room and board are paid first, and if there’s any surplus, the school will write a check to the student for the difference. Any loans above $500 are disbursed in two installments.

Discharge
This means the same thing as Cancellation-if a loan is discharged, the borrower is no longer obligated to repay the loan.

Disclosure Statement
This is a form that all lenders must provide to borrowers before issuance of a loan, and it includes all the terms and conditions, such as amount, interest rate, bank fees, repayment information, etc.

Discretionary Net Worth
This is the portion of a family’s net worth that they’re expected to contribute to paying for their child’s college. The amount varies greatly by income. Families with incomes below $50,000 which is earned from employment aren’t expected to contribute any of their net worth. Families with substantial income and assets can be expected to contribute well over ten thousand dollars a year, depending on other factors.

Doctorate
The highest degree granted by college and university graduate schools. Several examples are the MD (medical doctor), JD (juris doctor, for lawyers), and PhD (doctor of philosophy) in various programs.

Due Diligence
The federal government guarantees lenders that the student loans they make will be repaid. But a lender can’t simply report to the government that a borrower has quit paying, and expect the government to pay up. They must first make good faith efforts to contact the borrower and attempt to collect payment. This process is called due diligence.

Early Action
Some colleges and universities, in an effort to recruit top academic students, offer what’s known as Early Action. The student may apply for admission before the regular deadlines, and be granted admission, but is not obligated to attend the school, and may apply to other schools also. This flexibility on the part of the student is what distinguishes Early Action from Early Decision.

Early Admission
Under Early Admission, if a college or university offers this program, academically gifted high school juniors may skip their last year of high school and enroll directly in a full time college program.

Early Decision
Somewhat similar to Early Action, Early Decision is an option some students use when applying for college. It allows for earlier deadlines and notification dates, enabling the student to make plans earlier. However, if accepted to a college under Early Decision, the student is then obligated to attend that school. One major drawback of Early Decision is that a student doesn’t know for sure how much financial aid they’ll be receiving if accepted. Thus, Early Decision should only be used if a student is absolutely certain that the college is the only one they want to attend.

Electronic Data Exchange (EDE)
The electronic data exchange allows schools to receive Student Aid Reports from the federal government electronically, saving lots of time, postage, and paperwork. These days, students may also file their Free Application for Federal Student Aid online. Filing online is not only faster, but it’s the method the government prefers students use.

Educational Testing Service (ETS)
Educational Testing Service is the non-profit company that actually develops and produces the standardized tests that are administered by the College Board.

Electronic Funds Transfer (EFT)
Electronic Funds Transfer is a more technical term for Direct Deposit. Having your student loans handled by EFT saves time and paperwork, enabling you to get your funds faster and easier.

Electronic Student Aid Report
The Student Aid Report (SAR) in electronic, rather than paper, format.

Eligible Non-Citizen
Some residents of the USA who aren’t citizens are eligible for Federal student aid; some are not. Permanent residents with valid green cards and non-citizens who have been granted refugee or asylum status by the US government are generally eligible. People in America on student visas or exchange visitor visas are ineligible for aid.

Emancipated
Anyone who has attained the age of 18 is considered emancipated, that is, their parents are no longer responsible for their actions. This should not be confused with financial independence. Even though someone is legally an adult, until they’re 24 years old and whether or not they’re still living at home or on their own, they cannot claim independent financial status, except in certain circumstances, even though being emancipated, they‘re considered adults. This is the case for students between under 23 years old. Once a person reaches age 24, unless severely disabled, they cannot be claimed as a dependent by anyone.

Endowment
These are permanent funds that colleges and universities invest in order to receive income for operating expenses. At some schools the endowment is in the billions of dollars. And since income from endowments is often used to provide financial aid, schools with bigger endowments are often more generous with financial aid than schools with smaller endowments.

Enrollment Status
A measurement of how many credit hours per semester a student is enrolled in, generally divided into full-time, half-time, and part-time students. Students whose credit hours fall below half-time status usually are ineligible for financial aid. Some financial aid sources require that recipients maintain full-time status.

Entitlement
An entitlement program is a financial aid program that, unlike many scholarships and fellowships, is non-competitive. Everyone who meets the qualifications gets the aid. Some example of an entitlement would be Pell Grants and Federal student loans.

Entrance Interview
The federal government now requires Entrance Interviews for anyone receiving their first federally guaranteed student loan. The interview is designed to inform the borrower of their rights and responsibilities, and the principles of financial planning and debt management.

Equity
The difference between the what something is worth, and what’s owed on it.

Interview
Very similar to an Entrance Interview, an Exit Interview occurs when a student leaves college. In it, the student meets with the college’s financial aid office, and is reminded of their loan obligations and the necessity of good financial planning and debt management.

Expanded Lending Option (ELO)
A program where some schools can offer higher loan amounts on Perkins loans than normally allowed. Only available at schools with low rates of student defaults on Perkins loans.

Expected Family Contribution (EFC)
The Expected Family Contribution is the amount the federal government expects a college student, and their parent(s), to contribute toward paying for a college education.
A standard formula is used to figure this amount, and it’s based on several factors-dependency status, family income, family assets, the size of the family, the age of the parent(s), etc. The EFC appears in the top front page of the Student Aid Report.

Federal Direct Student Loan Program (FDSLP)
Under the Federal Direct Student Loan Program, student loans are made directly to students and parents by the federal government, without going through a bank or other lender. The loans go through the college, but there is no outside party involved. This program can include PLUS loans and Stafford Loans.

Federal Family Education Loan Program (FFELP)
Under the Federal Family Education Loan Program, the federal government doesn’t make the student loan directly to the student and parents itself. Instead, a third party lender such as a bank or credit union loans the money, and the federal government guarantees that the loan will be repaid, protecting the lender in case of default. Perkins Loans, Plus Loans, and Stafford Loans can all fall under this program.

Federal Methodology
The Federal Methodology is the official formula used by the federal government to figure a family’s Expected Financial Contribution (EFC).

Federal Processor
The Federal Processor receives and analyzed the millions of Free Application for Federal Student Aid applications turned in every year to determine who’s eligible for financial aid, and for how much. There are two federal processors in the country.

Federal Work-Study (FWS)
Federal Work-Study is a program funded by the federal government which pays for a portion of their wages for a part time job. Because the wages are subsidized, the student may find it easier to get a job, especially one that fits their class schedules. This is especially helpful for students who need money for living expenses, as theirs wages are their to keep, and do not have to be applied toward their student loans. In addition, FWS wages do not count as income for purposes of figuring need based financial aid

Fellowship
A fellowship is a form of financial aid for graduate students. It usually includes full tuition and money for living expenses. Fellowships are not loans, and do not have to be repaid.

Financial Aid
Financial aid includes all money that a student receives from outside sources to help for their college education. This can include loans, scholarships, work study, and grants. Some financial aid is based on demonstrated financial need, but some is strictly merit based, and some is awarded on a combination of need and merit.

Financial Aid Administrator (FAA)
This is one of the people at the college financial aid office who’s in charge of handling and processing student financial aid. They’re also known as financial aid counselors and advisors.

Financial Aid Form (FAF)
The was the name of the old application for Federal student aid. It hasn’t been used in about 10 years, being replaced by the FAFSA.

Financial Aid Notification (FAN)
This is the same thing as an Award Letter. It’s the official document issued by a college or university containing all the details of the financial aid package awarded to a student. It will explain how they figured the student’s need, list the various types of aid given, and discuss terms and conditions of the aid offered, and how much it will cost for the student to attend. The student must sign a copy of the letter, either accepting or rejecting the offer, and return it to the financial aid office of the school.

Financial Aid Office (FAO)
This is the office at the college or university that handles everything related to student financial aid.

Financial Aid Package
This is the sum total of all financial aid -grants, loans, scholarship, and work-study-that a student receives from all sources, whether from the federal or state government, the college, or private sources. It does not include loans taken out by the parent(s).

Financial Aid Transcript (FAT)
This is a form required by the federal government. The student must fill one out and turn it in at every school they attend if they’re using federal financial aid. In addition, if a student transfers to another school and used federal aid there, they must supply an FAT from every college or university they’ve attended, even if they didn’t use federal aid there.
Plans are underway to make the FAT entirely electronic, at which point it will all be handled by computer, and students will no longer need to turn in the form.

Financial Need
This is the difference between what a student and their family are expected to contribute toward the cost of the student’s college education, and the cost of that education.

Financial Safety School
Just as every student should have a safety school-a school that’s not their first choice but they’re sure they will be admitted to-they should also have a financial safety school. This would be a school that the student is sure they’ll be admitted to, and which they can afford with little or no financial aid.

First-Time Borrower
A person who’s never taken out a student loan before. For first time borrowers, funds aren’t released until thirty days after enrollment in school. Borrowers with existing student loans don’t have this waiting period.

Fixed Interest
This simply means that the interest rate on a loan isn‘t adjustable, but stays the same for the life of the loan

Forbearance
Student loan debtors going through a rough patch financially may apply to the lender for a forbearance. If granted, the borrower is given a temporary reprieve from repaying the principal, but is required to continue making the interest payments. Lenders don’t have to grant forbearances, but often will, especially if the only other alternative is defaulting on the loan.

Free Application for Federal Student Aid (FAFSA)
This is the form that anyone applying for any kind of Federal student aid must fill out and submit.

Gap
A student’s financial need that is unfilled.

Garnishment
Legally taking a part of someone’s wages directly from the employer to honor an unpaid debt. Borrowers who default on student loans are subject to having their wages garnished.

Gift Aid
Financial aid that doesn’t have to be repaid, such as grants, fellowships, and scholarships

Grace Period
Some student loans grants students a grace period immediately after graduation, during which they don’t have to begin paying on their loans. This gives a graduate time to look for a job, without feeling pressured to take the first one offered simply because loan payments are due. The grace period is six months for Stafford loans and nine months for Perkins loans. PLUS loans, since they’re made to parents, don’t have grace periods. And bear in mind, it’s not just graduation that will begin a grace period-should you drop out of school for some time, or fall below half time enrollment, you will also trigger the grace period, and will have to begin making payments when the six or nine months has passed.

Grade Point Average (GPA)
A student’s total grades on a numerical scale, added together and divided by the number of classes. Most schools use a 4.0 scale (A=4, B=3, C=2, and D=1).

Graduate Assistantship
A form of financial aid for graduate students. TA’s, or teaching assistants assist professors in the teaching and grading of undergraduate courses. RA’s, or research assistants, assist professors doing research, usually in libraries or laboratories. TA’s and RA’s pay lower or no tuition, and usually receive some money toward living expenses. Assistantships do not have to be repaid.

Graduate Student
A student who possesses a bachelor’s degree, and is enrolled in a master’s or doctoral program.

Graduated Repayment
Some student loans offer graduated repayment programs, which means that when repayment begins, the monthly payments are relatively low, but get larger as time progresses. This can be a boon for new graduates, who can expect to be getting raises as they progress in their careers.

Grant
Financial aid that’s based on need, not merit, and which doesn’t have to be repaid. The most common by far is the Pell Grant.

Gross Income
This is simply income before any taxes and deductions are taken out.

Guarantee Agency or Guarantor
These are the agencies that guarantee student loans against the student’s default, disability, or death. There are approximately forty of them throughout the country. They take a small sum from each loan they guarantee and use that to fund a pool that insures the loans.

Guarantee Fee
The fee that the loan guarantor charges on each student loan. It’s usually 1% of the loan amount, and cannot exceed 3%.

Guaranteed Student Loan (GSL)
Student loans made by private lenders, but whose payment is guaranteed by a government agency, funded by guarantee fees paid on each loan.

Half-Time
Taking half of a full credit load at a college or university. This is the minimum credit hour requirement for most financial aid, but some programs require full time status.

Health Education Assistance Loan (HEAL)
An old student loan program offered by the US Department of Health and Human Services for students in medical school. HEAL loans were discontinued in 1998.

Health Professions Student Loan (HPSL)
This is a loan program run by the US Department of Health and Human Services that provides student loans for people pursuing graduate study in specialized medical fields. Eligible programs are dentistry, optometry, pharmacy, podiatry, and veterinary medicine (not including
veterinary technician schools; only full fledged veterinarian programs.)

Holder
The lender who holds legal title to a loan. It’s usually the bank, institution, or agency that issued the loan, unless it’s been sold to a collection agency due to default.

Home Equity
The difference between a home’s current value and any remaining mortgage debt and/or outstanding liens.

Horizontal Equity
The idea that people in substantially similar financial circumstances should be treated pretty much the same, and not be penalized because their proportions of assets and income aren’t exactly the same.

In-State Student
A legal resident of a state, who therefore is entitle to reduced tuition at public colleges and universities in that state

Income
Wages and salary from a job, and/or money received as child support, disability payments, pensions, and Social Security, and/or profit from investments and businesses owned.

Income Contingent Repayment
Some student loans are have income contingent repayment, which means that as the borrower’s income increases, so does the amount of the monthly payment.

Independent
Many people are confused about what “independent” means for financial aid purposes, wrongly supposing that as long as they’re not living with their parents, they’re independent. This is not the case. To be considered independent with regard to financial aid, a student must be at least 24 years old by January 1 of the academic year, or be a veteran, or an orphan or former ward of the court, or be a graduate or professional student, or be married, or have a legal dependent who’s not their spouse. The fact that a student’s parents won’t help with their education costs doesn’t change their expected financial contribution under the Federal Methodology.

Individual Retirement Account (IRA)
A popular self funded retirement fund. Unlike 401k’s, a person may not borrow from their IRA to help pay for a child’s education.

Installment Loan
A loan that is paid back in monthly installments.

Institutional Methodology (IM)
Some colleges and universities don’t use the Federal Methodology to determine a student’s financial need. Instead they use their own formula, which is called the institutional methodology.

Institutional Student Information Report (ISIR)
This is simply the electronic, or digital form of the Student Aid Report which is sent to schools.

Insurance Fee
This is the fee associated with student loans that’s paid to the agency that guarantees the loan, which is usually about 1%. It’s the same thing as a Guarantee Fee.

Interest
Money paid to a lender for granting you a loan, in excess of the loan amount, which is called the principal.

Internal Revenue Service (IRS)
The federal agency that collects taxes.

Internship
Employment for a student arranged by a college or university that’s directly related to the student’s major, and is considered part of their college work. An internship can be a part time job during the school year, or a full time job during the summer. It’s usually paid, and can often lead to full time employment with the same firm after graduation.

Lender
A provider of guaranteed student loans, such as a bank or credit union.

Leveraging
Leveraging is when a school offers goes above and beyond ordinary financial aid in order to attract gifted students.

Line of Credit
A line of credit is different than a standard loan. You must be pre-approved by your lender, and once you are, you may choose if and when you may use the money. You simply write a check for the amount you need, and that becomes a loan that you must pay back. You may continue writing more checks as long as you still have credit available.

Loan
Financial aid that needs to be repaid is a loan. Student loans typically have much better interest rates than standard consumer loans, and don’t require credit approval. They’re also more flexible than regular loans in many way.

Loan Consolidation
See Consolidation Loan.

Loan Forgiveness
Under certain circumstances the federal government will cancel the required repayment of a student loan. To qualify, a borrower usually has to join the military, do certain volunteer work, or take a job in a critical needs area such as an inner city or rural area.

Loan Interviews
When a student first borrows money for college, and again when they graduate, they are required to meet with an advisor from their school’s financial aid office to discuss their rights and responsibilities, and discuss general financial planning and debt management principles. Also called Entrance and Exit Interviews.

Master’s Degree
The next degree above a bachelor’s, requiring one or two years study in graduate school.

Matriculate
To enroll in college for the first time.

Maturity Date
The due date on a loan when payment in full is required.

Merit-based
Merit based refers to financial aid that isn’t based on your financial need, but on the talents you’ve demonstrated in some area, such as sports, music, academics, art, etc., or some combination of your schoolwork and life achievements in general.

Mortgage
A loan used to purchase a house, where the house is used as collateral to guarantee repayment, and may be seized in case of default.

Multiple Data Entry Processor (MDE)
When a student fills out and submits the Free Application for Federal Student Aid, the forms aren’t actually sent to the federal government. They’re sent to companies called Multiple Data Entry Processors, who do the actual handling and processing of the forms.

National Health Corps Scholarship (NHSC)
Administered by the US Department of Health and Human Services, the National Health Corps Scholarship is a very generous scholarship program. It pays for tuition, supplies and fees, and provides a monthly stipend for up to four years of medical school for students with financial need, who agree to practice in areas with severe health care provider shortages after graduation.

National Merit Scholarship Qualifying Test (NMSQT)
A standardized test taken by high school students to give them practice on the SAT. Those students who do well can also qualify for National Merit Scholarships. Also called the PSAT

Need
This is the difference between what a student and their family are expected to contribute toward the cost of the student’s college education, and the cost of that education. Need and Financial Need are the same thing for purposes of financial aid.

Needs Analysis
This is the method financial aid offices of colleges and universities use to determine how much financial aid a student qualifies for based on their demonstrated financial need, by using the information the student reports on the FAFSA and PROFILE.

Need-Based
Need-based aid is not based on your academic achievements or your athletic abilities, but simply on how much money you need to get through college. Pell Grants, and many other forms of government aid, are strictly need-based.

Need-Blind
Admissions decisions made without regard to a prospective student’s financial need. This is the admissions method used in most colleges and universities today.

Need-Sensitive
This is the opposite of need-blind admissions, where the college or university does consider a prospective student’s financial need, or lack thereof, when making decisions on who to admit. Under this policy, a marginal student who can pay their own way will sometimes be admitted where a student with the same grades but in need of financial aid wouldn’t be.

Net Income
Gross income minus taxes and deductions. Also called take home pay.

Net Worth
Net worth is a key concept in the determining a family’s expected contribution, and is based on the value of the assets that they own (not including their home). Net worth is the total value of any real estate besides the family home, stocks, bonds, certificates of deposit, saving accounts, rare coin collections, any business owned, mutual funds, accounts receivable, etc., minus any debts.

New Borrower
Same as First Time Borrower.