College Sense: How to Pay for College
how this site works
your senior year
ask the expert
student resources
parent/family resources
contact us
Higher Education Services Corporation
New York GEAR UP
 Frequently Asked Questions

Financial Aid Glossary
Some terms you may enounter on the road.

Award Letter — Issued by a college's financial aid office, this official document lists all of the financial aid awarded to a student.

Co-Borrower — A co-borrower is a second or additional party who received the loan proceeds and agreed to repay the loan.

Cost of Attendance — The total amount it will cost a student to attend a particular school. This includes tuition and fees, room and board, books, supplies, transportation costs and personal expenses.

Expected Family Contribution (EFC) — The amount the federal government, via the FAFSA process, estimates that a family should contribute to the cost of a college education, based on income, assets and other circumstances.

Federal Family Education Loan Program (FFELP) — A loan program authorized by the federal government in the Higher Education Act. This program includes Federal Stafford, PLUS and consolidation loans. These loans are funded by banks, guaranteed by guaranty agencies and ultimately insured by the federal government.

Federal Supplemental Education Opportunity Grants (FSEOG) — Government grants distributed by colleges, in accordance with federal conditions, to students based on need.

Financial Aid Package — The total amount of financial assistance a student receives, including grants, scholarships, work-study and loans, as listed in the college's financial aid award letter.

Free Application for Federal Student Aid (FAFSA) — The federal form which determines eligibility for all federal financial aid programs.

Grants — A form of financial aid, similar to scholarships, that does not have to be repaid.

Guarantee Fee — A fee, which is put in an insurance fund, that protects the lender against any loan default and maintains the stability of the education loan program.

Guaranty Agency — An agency that insures the student loans made by lenders.

Interest — The fee charged to borrow money, usually a percent of the outstanding loan amount, which accrues and is paid over the life of the loan.

Loan — A sum of money borrowed (principal) usually for a specific reason (e.g. to obtain an education). The entity lending the money (e.g. bank) usually charges interest for use of the money. The amount borrowed is typically repaid with interest over a period of time.

Monthly Payment — This is the amount that you must pay each month on your loan during repayment.

Origination Fee — The fee charged by the government to offset the cost of processing the loan. The amount of the fee is deducted from the dollar amount of the loan.

Parent Loan for Undergraduate Students (PLUS) — These are loans under the FFELP and are for parents of undergraduate students. They require a credit check. The interest rate is low but repayment begins immediately.

Payment Schedule — A summary of the terms of a loan, which includes the total principal amount, the date payment begins and the interest rate.

Principal — The amount of the loan that must be repaid upon maturity, and the amount upon which interest will be charged.

Promissory Note — The binding document that a borrower signs before receiving the loan proceeds. The note includes information about the terms and conditions of the loan.

Student Aid Report (SAR) — This report is sent to you by the government about 4-6 weeks after you submit your FAFSA. This report will inform you of your EFC (Expected Family Contribution).

Scholarships — Scholarships, like grants, do not have to be repaid. These are available from many sources including community groups, schools and private corporations. Scholarships can be awarded based on a variety of criteria including scholastic achievement, hobbies and majors.

Stafford Loan-Loans under the FFELP awarded on the basis of financial need. These loans can be made from a bank, credit union or other eligible lender or obtained directly from the government under the Direct Lending Program.

Subsidized Stafford Loan — A loan in which the government pays the interest for you while you are in school at least half-time and during periods of grace and deferment.

Unsubsidlzed Stafford Loan — A loan that is not based upon need (i.e. Unsubsidized Federal Stafford Loan or Federal PLUS Loans). The borrower is always responsible for paying the interest on the loan including during in-school, deferment, forbearance and grace periods.

Variable Interest — Interest rates that change periodically (e.g., quarterly, annually). The interest rates for Federal Stafford and PLUS Loans are set by the government each year and change annually on the first of July.

Work-Study — Part of the Federal Student Financial Assistance Program, work-study provides part-time employment for post-secondary students who need income to help meet education costs.


Word for the Wise