Financial Aid Terms

Glossary of Terms

Academic Year

A period of time used to measure a unit of enrollment. Most often including the fall and spring terms. 

Aggregate Loan Limit

A limit on the total amount of subsidized and/or unsubsidized loans that you may borrow for your studies. If the total loan amount you receive over the course of your education reaches the aggregate loan limit, you are not eligible to receive additional loans. If you repay some of your loans to bring your outstanding loan debt below the aggregate loan limit, however, you could then borrow again, up to your remaining eligibility under the aggregate loan limit. 

Annual Loan Limit

The maximum federal student loan eligibility per academic year. These amounts vary by type of loan and grade level. Your school will tell you how much you are eligible to receive each academic year, and specific amounts can be found at

Capitalized Interest (Capitalization)

Unpaid interest that is added to the principal balance of a federal student loan. Future interest is charged on the increased principal balance, which may increase your monthly payment amount and the total amount you repay over the life of the federal student loan. 


The process of combining one or more loans into a single, new loan. 

Cost of Attendance (COA)

The total cost to attend school for the academic year, included actual charges (tuition, fees, room and board), as well as estimated additional costs (transportation, books and personal expenses).


Failure to repay a loan according to the agreed-upon terms. For the Direct Loan program, your loan is typically in default if you fail to make a payment for 270 days. Your lender is required to report the default to at least one national credit bureau. 


Allows you to temporarily stop making payments on your federal student loans. You are not charged interest on subsidized loans during deferment. Interest will continue to be charged on your unsubsidized loans and PLUS loans. Students enrolled at least half-time are eligible for in-school deferment. 

Direct Costs

Charges, including tuition and fees, that are set and billed by the university. For residential students, these also include room and board. 

Direct Subsidized Loan

A federal student loan for which, in some cases, a borrower is not responsible for paying the interest while in an in-school period, a grace period or a deferment period.

Direct Unsubsidized Loan

A federal student loan for which the borrower is fully responsible for paying the interest, regardless of the loan status. 

Estimated Family Contribution (EFC)

A measure of your family's financial strength that is used by schools to calculate the amount of federal student aid you are eligible to receive. EFC is calculated according to a formula established by law and considers factors such as your family's income, assets and benefits, as well as family size and the number of family members enrolled in college. The EFC is provided to colleges by the FAFSA. Your EFC is not the amount of money your family will have to pay for college, nor is it the amount of federal student aid you will receive. 

Financial Need

The cost of attendance (COA) minus your expected family contribution (EFC). 

Grace Period

A period of time that generally begins on the day after a borrower graduates, leaves school or drops below half-time enrollment and ends on the day before the repayment period begins. Grace periods for subsidized and unsubsidized loans made under the Direct Loan program are six months. 


Student grants are gifts to people who are pursuing higher education. Unlike student loans, grants do not require repayment.


The cost to borrow money. Interest is calculated as a percentage of the outstanding (unpaid) principal balance. 


Money that you borrow and repay with interest. 

Loan Fee (Origination Fee)

A fee charged for each federal student loan you receive that is a percentage of the total loan amount you are borrowing (gross amount). The loan fee is deducted proportionately from each disbursement of your loan. This reduces the actual loan amount you receive (net amount). The specific loan fee that you are charged is included in the disclosure statement you receive after the first disbursement of your federal student loan. You will be required to repay the gross amount. 

Master Promissory Note (MPN)

A legal document in which you promise to repay your federal student loan(s) and any accrued interest and fees to your lender or loan holder. There is one MPN for direct subsidized/unsubsidized loans and a different MPN for direct PLUS loans. Most schools are authorized to make multiple federal student loans under one MPN for up to 10 years. 

Borrower's Rights and Responsibilities: The MPN contains a Borrower's Rights and Responsibilities Statement that explains the terms and conditions of the loan(s) you receive. 

National Student Loan Data System (NSLDS)

The central database for student aid where you can see any Title IV grant (i.e. Pell) or loan (i.e. subsidized or unsubsidized loan) you receive. You can access the NSLDS at

Parent PLUS loan

Direct Parent PLUS loans are loans for eligible parents of dependent undergraduate students to help pay for the cost of the students' education. Students' loan information does not include PLUS loan taken out by parents on their behalf. 


The loan amount you borrowed plus any capitalized interest. 


To pay back money you borrowed by making scheduled payments to a loan holder or servicer. The repayment period may range for 10 to 30 years, depending on loan amount, loan type and repayment plan (which is the plan between a borrower and lender that determines the amount you pay each month and the number of payments you must make).

Student Aid Report (SAR)

A summary of the information you submit on your FAFSA that provides you with your expected family contribution (EFC). 

William D. Ford Federal Direct Loan Program

Student loans provided by the U.S. Department of Education to enable a student to pay for education after high school. Eligible students borrow directly from the U.S. Department of Education at participating schools. Direct loans include the following types of federal student loans: direct subsidized loans, direct unsubsidized loans, direct PLUS loans and direct consolidation loans. 



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