Glossary of Terms

Glossary of Terms

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Accrued interest:
The interest that is allowed to accumulate and becomes payable in installments when the principal is due.


Adjustable rate:
A loan with a variable interest rate. When the rate changes (quarterly, semi-annually, or annually) the monthly payment is altered accordingly. Advantages: lower monthly payments, lower overall costs if rates drop, and annual increases are usually controlled. Disadvantages: vulnerability to rate hikes, difficulty of budgeting for increases, and (sometimes) lack of availability.


Adjusted Gross Income (AGI):
All taxable income less IRS adjustments to income. This figure comes from IRS tax forms.


Process of gradually repaying a loan over an extended period of time through periodic installments of principal and interest.


Annual Percentage Rate (APR):
Some lenders charge lower interest but add high fees. The APR allows you to compare loans on comparable terms. It combines fees with a year of interest charges to give you the “true cost of the loan.”


Asset Protection Allowance:
A sum subtracted from a family’s total assets when determining the EFC (see below) to college costs. This provides a safety net for families, and the allowance increases with the age of the parents.


Award Year:
The period of time between July 1 and June 30 of the following year.



Base Year:
The twelve month period ending on December 31 preceding the year in which a student will enroll. Applicants seeking aid for 2000-2001 will use 1999 as the base year.


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



Provision under which the loan need not be repaid; usually because of the borrower’s death or total disability. It is important to note that while all federal loans maintain cancellation provisions, most private loans do not. Cancellation can also refer to programs that repay loans or portions of loans when borrowers participate is specified activities, such as practicing in designated specialties and geographic areas.


The addition of unpaid accrued interest to unpaid principal. If you choose a lender that capitalizes once a year or more, you may be paying interest upon interest.


Compounded (or Capitalized Interest):
Accumulated and unpaid interest that is added to the principal to create a new and higher principal balance.


Consolidation Loan:
This loan combines several loans into one bigger loan. Consolidation loans sometimes result in a lower interest rate, as when a consumer loan is used to pay off credit card balances. Such loans often reduce the size of the monthly payment by extending the term of the loan. An extension of the term of the loan may also increase the overall cost of the loan.



Failure to repay your student loan. You are considered in default if you have not made payments for 270 days and you are not in your grace period, deferment or forbearance.


Postponement of loan repayment for designated periods of time, usually due to participation in a specified activity (e.g. internship or residency).


Failure to make a loan payment when it is due. It begins with the first missed payment.


Dependent Student:
An undergraduate student whose parents provide more than half of their financial support. A dependent student is not married, under 24 years of age, has no legal dependents, is not an orphan or ward of the court, nor a veteran of the U.S. Armed Forces.


The date the lender issues the loan check or transmits funds to the school.


Direct Repay:
Borrowers authorize automatic transfers of funds from checking or savings accounts to cover monthly education loan payments.


Disclosure Statement:
Statement of the actual cost of a loan, including the interest costs and the loan fee.


Due Diligence:
Rules or guidelines that must be followed within specific timeframes by lenders in order to meet the default prevention regulations with FFELP. If a borrower fails to make payments on their loan according to the terms on their promissory note, the federal government requires the lender of the loan to make frequent attempts to contact the borrower to encourage him or her to repay the loan.



Expected Family Contribution (EFC):
The amount that the federal government expects you and your family to contribute to your education. The EFC is based on information submitted in your FAFSA form. The EFC only reflects what the government believes your parents can pay.



FAFSA (Free Application for Federal Student Aid):
This application is available from high schools and colleges and must be filed to qualify for any need-based financial aid at St. Olaf, and at most other schools.



Federal Family Education Loan Program (FFELP):
The federally guaranteed loan program through which Federal Stafford and PLUS loans are offered. The federal government makes the rules that govern the FFELP program and subsidizes the interest for borrowers of need-based Stafford loans.


Federal Methodology:
The need analysis formula mandated by law to determine a student’s eligibility for student aid programs.


A form of financial aid given to graduate students to help support their education. Some fellowships include a tuition waiver or a payment in lieu of tuition. Most fellowships include a stipend to cover reasonable living expenses (e.g., just above the poverty line). Fellowships are a form of gift and do not have to be repaid.


Financial Need:
The difference between the EFC and the cost of attendance. Fixed Expense: An established required payment (e.g. rent, mortgage, automobile loan, and student loan payments). The amount of the payment does not vary from one month to the next.


A temporary end to or reduction of payments, which may be granted in cases of financial difficulty when you are not eligible for a deferment. Interest continues to accrue on your account.



Grace Period:
A period of time that starts when you cease to be enrolled at least half time and your repayment period starts. You do not have to make loan payments during the grace period.


Graduated Repayment:
Under the graduated repayment schedule, the monthly payments are smaller at the start of repayment period and gradually become larger.


Guaranteed Cost Plans:
The ways in which you can hold St. Olaf based fees constant over the four years that a student is enrolled at St. Olaf College.



Income Contingent Repayment:
Under the income contingent repayment schedule, the size of the monthly payments depends on the income earned by the borrower. As the borrower’s income increases, so do the payments. The income contingent repayment plan is not available for PLUS loans.


Independent Student:
A student who is either married, 24 years of age or older, enrolled in a graduate or professional education program, has legal dependents other than a spouse, is an orphan or ward of the court, or a veteran of the U.S. Armed Forces.



Merit-Based Aid:
Scholarships made available to students in recognition of some achievement (academic, community service, etc.).


Minnesota State Grants:
State government grants for students who have graduated from Minnesota high schools who also attend colleges in the state and demonstrate need.



Need-Based Aid:
Scholarships, loans, grants, and student work that is made available to a student on the basis of their family’s ability to pay for college.



Pell Grants:
Federal government grants (ranging between $400-$2,900 for the 1999-2000 school year) available to students with high financial need.


Perkins Loan:
A 5% loan funded by the government but awarded by colleges to both undergraduate and graduate students.


PLUS (Parent Loans for Undergraduate Students):
Federally insured loan for parents of dependent students.  
The full amount you have borrowed, or that you have not yet repaid.


Promissory Note:
A document that you, the borrower, sign before the loan is disbursed. This states that you repay the loan and legally binds you to its terms and conditions.



SEO Grants (Supplemental Educational Opportunity Grants):
Federal Grants, also available to students with high financial need. The office of Student Financial Services determines the amount (up to $4000 a year).


Interest is paid by the government and therefore does not accrue to borrower during specified periods of the loan (e.g. during deferment periods).



Title IV Programs:
Federal aid programs authorized under Title IV of the Higher Education Act of 1965 as amended. (Includes Federal Pell Grants, Federal Perkins Loans, Federal Stafford Loans, Federal PLUS Loans, Federal Work-Study, Federal Direct Loans, Federal Direct PLUS Loans, and SSIG).



Interest accrues to borrower’s account, starting on the date the funds are disbursed.