As you are going through the college loan application process, you may run into a number of words or loan options that you are unfamiliar with. Before walking away a confused borrower, use this list of terms to gain a better understanding of broad student loan concepts.
Annual Cost of Education: The total amount your education will cost each year. This is the sum of tuition, room and board, school fees, and any other related expenses. A student loan calculator can help you determine your education related expenses.
Default: Neglecting to make student loan payments according to repayment terms set in your promissory note.
Deferment: Deferment is the postponement of loan repayment for a designated amount of time. Deferment may be an option on federal or private student loans depending on loan terms. If your loans are subsidized, interest will not accrue during the deferment period.
Direct Stafford Loans: Loans borrowed from the U.S. Department of Education. These loans are guaranteed by the Federal Government and therefore typically available at lower interest rates than private student loans. Federal Direct student loans can be issued as either subsidized or unsubsidized loans, depending on financial needs.
Expected Family Contribution (EFC): The amount your family is expected to pay towards the cost of your college education as determined by your Free Application for Federal Student Aid. This amount will be presented to you in your student aid report.
Free Application for Federal Student Aid (FAFSA): The federal loan application you are required to fill out if you are seeking federal student loans, grants or work study money. You must file by the application deadline to qualify.
Federal student loans: Loans issued by the U.S. Department of education and guaranteed by the government.
Federal Direct PLUS Loans: PLUS translates to Parental Loans for Undergraduate Students. These are loans parents can take out to pay for their child’s education. Loan eligibility is based on your parent’s credit history.
Forbearance: The postponement of loan repayment for a designated amount of time. Different than deferment, interest does accrue on loans during the forbearance period. Unpaid interest during the forbearance period is then added to the principal of the loan and subject to interest itself at the end of the forbearance period.
Private student loans: Private student loans are borrowed from private lenders rather than the U.S. Department of Education. These loans are a great supplement to federal lending options.
Repayment Schedule: Your loan repayment schedule accounts for everything from the date you will begin to repay your student loans, to the amount of money you will pay, and how long it will take you to repay your loans in full.
Student Aid Report (SAR): A report created by the Federal Government after you submit your FAFSA that details your financial situation. It is sent to both you and your school, helping them to determine your financial need and expected family contribution.
Student loan interest rates: The interest rate charged on money borrowed to pay for tuition and other eligible student loan expenses. Student loan interest rates are typically lower on federal loans than they are on private student loans because federal loans are backed by the government.
Credit score: For private and some federal student loans, your credit score is used to determine your eligibility for borrowing. It serves as a measurement of your past debt repayment record and is provided to your lender by credit reporting agencies.
Subsidized Loans: Federal student loans where the interest is paid by the government while the borrower is enrolled in school and during the grace period that follows. Borrower must be enrolled in school at least half time to qualify. Awarded money is based solely on financial need and not on a credit score.
Unsubsidized Loans: Federal student loans where the borrower is responsible for paying the interest on the loan during the entire disbursement period and until it is paid in full. Awarded money is not based on financial need.
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