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FINANCIAL AID TERMS FOR THE COLLEGE-BOUND 

 
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While researching sources of financial aid for college, you may come across such terms as “COA” and “Promissory Note.” Below is an explanation of some of the more common terms you may encounter.

Academic Year: A period of time schools use to measure a quantity of study. For example, a school’s academic year may consist of a fall and spring semester during which a student must complete 24 semester hours. Academic years vary from school to school and even from educational program to educational program at the same school.

Accreditation: Accreditation means that the school meets certain minimum academic standards, as defined by the accrediting body. The school must have accreditation from an accrediting body recognized by the U.S. Department of Education to be eligible to participate in the administration of federal student aid programs.

Award Letter: A letter the student receives from the college or university stating the type and amount of financial aid the school is willing to provide if the student accepts admission and registers to take classes at that school.

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

Cost of Attendance (COA): The total amount it will cost you to go to school, usually expressed as a yearly figure. It’s determined using rules established by law. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care. It also includes miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Costs related to a disability are also covered.

Default: Failure to repay a loan according to the terms agreed to when you signed a promissory note. The consequences of default are severe. The lender may take action to recover the money, including notifying national credit bureaus of your default which will affect your credit rating. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. If you return to school, you’re not entitled to receive additional federal student aid. In many cases, default can be avoided by submitting a request for a deferment, forbearance, or discharge (cancellation) and by providing the required documentation.

Eligible Program: A program of organized instruction or study that leads to an academic, professional, or vocational degree or certificate, or other recognized educational credential. You must be enrolled in an eligible program to receive federal student aid.

Expected Family Contribution (EFC): The number that’s used to determine your eligibility for federal student financial aid. This number results from the financial information you provided in your FAFSA application. Your EFC is reported to you on your Student Aid Report (SAR).

Financial Aid Package: The total amount of financial aid (federal and nonfederal) a student receives. The financial aid administrator at a postsecondary institution combines various forms of aid including scholarships, grants, work study and loans into a “package” to help meet a student’s need. The amount of federal student aid in a package is affected by other sources of aid received (outside scholarships, state aid, etc.)

General Education Devel-op-ment (GED) Certificate: A certificate students receive if they’ve passed a specific, approved high school equivalency test. Students who have a GED can still qualify for federal student aid.

Grace Period: After borrowers graduate, leave school, or drop below half-time enrollment, loans that were made for that period of study have several months before payments are due. This period is called the "grace period." During the grace period, no interest accrues on subsidized loans. Interest accrues on unsubsidized loans during grace periods, and this interest is capitalized when borrowers’ loans enter repayment.

Principal: The amount of money borrowed by the student. Interest is charged on this amount.

Promissory Note: The binding legal document you sign when you get a student loan. It lists the conditions under which you’re borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what the deferment and cancellation provisions are. Save this document because you’ll need to refer to it later when you begin repaying your loan.

Regular Student: One who is enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate, or other recognized educational credential offered by that institution.

Student Aid Report: The document that summarizes the information you submit on your Free Application for Federal Student Aid (FAFSA) and provides you with your Expected Family Contribution (EFC).

Subsidized Loan: A loan for which a borrower is not responsible for the interest while in an in-school, grace, or deferment status.

Unsubsidized Loan: A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.

Source: U.S. Department of Education. “Funding Education Beyond High School: The Student Guide, 2011-2012.”


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