College Planning Glossary

Assembled by our dedicated staff of education lending specialists, Key's college planning glossary is a valuable resource to help you through the education financing process.

A    B    C    D    E    F    G    H    I    J    K    L    M    N    O    P    Q    R    S    T    U    V    W    X    Y    Z


Academic scholarships — Funding awarded for academic achievement or class rank.

Academic transcript — An official high school or college report listing all courses taken and grades earned during your enrollment.

Academic year — At least 30 weeks of instruction during which a full-time student must complete at least 24 semester or trimester hours or 36 quarter hours at an institution measuring program length in credit hours; or at least 900 clock hours at one measuring in clock hours.

Accrued interest — Interest steadily accumulating on unpaid balance of your student loan principal.

Aggregate debt — The total amount you'll owe at the time you begin to make payments.

Amortization — Gradual reduction of education loan debt through periodic interest and principal payments.

Annual Percentage Rate (APR) — A percentage calculation reflecting total annual cost of a loan (interest plus all fees).

Assets — Any property with monetary value. Common types are cash, bank accounts, homes, land, stocks, bonds and other investments. Cars, boats, jewelry, etc. may also be considered. College financial aid offices consider family assets in determining financial aid eligibility.

Athletic scholarships — Funding, based on athletic achievement, awarded to a college's or university's participants in competitive sports.

Award letter — The notice outlining the amount and type of financial aid awarded and any conditions attached. This can include, but is not limited to scholarships, grants and other gift aid, federal student loans (such as a Stafford loan), and work study. Review this document carefully. Notify the college of your decision, and follow instructions for acceptance of the financial aid award.

Award year — Varies by school, usually includes fall through spring semesters/quarters. Funding for Federal Pell Grant and campus-based programs is provided on the basis of the award year. A student receives funding for a particular award year.

back to top


Borrower — Anyone who obtains funds in loan form. A signed promissory note serves as the formal, legal promise to repay.

Budget — A spending plan developed for a specified period.

Bursar — University office responsible for money management. The Bursar or Business Office processes student loan checks and Electronic Funds Transfer (EFT) transactions.

back to top


Campus-based program — Government funding that college financial aid offices administer and award to students in accordance with federal guidelines. Funding includes the Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (SEOG) and Federal Work-Study.

Capitalization — The interest that accumulated while you were in school that is added to the amount borrowed at periodic intervals.

Citizen/Eligible Noncitizen Status — To receive federal student aid a student (or parent if a PLUS borrower) must be a:

  • U.S. citizen (or)
  • U.S. national including Samoa or Swain's Island natives (or)
  • U.S. permanent resident holding an I-141, I-551, or I-551C Alien Registration Receipt Card.

Co-applicant — Someone who enters a loan or credit agreement to enable a borrower lacking sufficient credit history to qualify. Both parties become legally responsible for repayment.

Collection agency — A business organization that agrees, for a fee, to collect on loan accounts that are delinquent or in default.

Commuter student — Student not residing in on-campus housing, or one attending a college which does not offer housing.

Consolidation — The combination of several loans into one new loan. Though it can lower monthly payments by extending repayment terms, it may cost more interest over the loan's life. To consolidate loans, the borrower must already be in repayment or a grace period.

Cooperative education — A program allowing students to alternate periods of enrollment with employment.

Cost of Attendance (COA) — Total amount needed to cover education expenses including tuition, fees, room, board, books and supplies, transportation and personal expenses. Also known as Cost of Education.

Credit bureau — An agency that compiles and reports financial information to lenders and other creditors. Information may include a borrower's payment habits, number of credit accounts, account balances, place and length of employment and records of financial transactions.

Credit history — A credit bureau report showing a borrower's financial records over time.

back to top


Death or disability — In the event of death or permanent and total disability of a Federal Education Loan Program (FFELP) student loan borrower, the loan may be canceled. Upon death or permanent and total disability of a parent PLUS borrower, the loan may be canceled.

Debt — An amount of money owed by a student.

Default — Failure to repay a loan, education-related or otherwise, according to promissory note terms. Defaults are recorded on your permanent credit record and have long-term adverse consequences.

Deferment — As approved by your lender, postponement of repayment of principal and/or interest or temporary postponement of payments for specific circumstances. You must apply to your lender and qualify under specific guidelines.

Delinquency — Failure to make payments when due.

Department of Education — The U.S. government agency that ensures equal access to education and promotes education excellence for all Americans.

Dependency status — Based on U.S. Department of Education criteria, a student is deemed either dependent or independent.

Dependent student — A student who relies on parents for financial support.

Disbursement Date — The date on which the lender issues your loan check and sends it to your college.

Disclosure statement — Lender's statement of total amount and cost of a borrower's approved loan, including amount, interest rate, any additional finance charges and repayment rights and responsibilities.

Discretionary income — Money available after fixed expenses are paid (such as food, clothing, housing, utilities, insurance, car payment, etc.).

back to top


Electronic Funds Transfer (EFT) — Moving money between entities electronically (in the case of student loans, disbursing funds electronically to the borrower's college or university).

Eligible institution — An institution of higher education, vocational school, post secondary vocational institution or proprietary institution of higher education which meets all criteria for participation in student loan programs.

Eligible program — A program of study requiring certain minimum hours of instruction and leading to a degree or certificate.

Enrollment status — A student's standing as a full- or part-time undergraduate, graduate, or professional student, whether seeking a degree or not.

Entrance counseling — A loan repayment and debt management counseling session federal regulations require of students before they receive any disbursement of their first education loans.

Exit counseling — A loan repayment and debt management counseling session federal regulations require of students graduating from or leaving school.

Expected Family Contribution (EFC) — Based on federal criteria, the amount a family is expected to pay toward education.

Expenses — Items for which money is spent. Student expenses include tuition, room and board, and other living costs.

back to top


Federal Consolidation Loan — A program that permits combining several types of student loans into one new loan.

Federal Direct Student Loan (FDSL) — A program allowing students and parents at participating institutions to obtain education loans funded directly by the federal government rather than by traditional lenders. Also known as the William D. Ford Federal Direct Loan Program.

Federal Family Education Loan Program (FFELP) — Federal Stafford, Federal Unsubsidized Stafford and Federal PLUS loan programs funded by private lenders and guaranteed by the federal government.

Federal methodology — A national standard of need analysis authorized by the 1992 Reauthorization of the Higher Education Act.

Federal Pell Grants — The largest federal grant program. It awards funds to millions of lower-income students each year.

Federal Perkins Loan — A federal loan program administered by colleges and based on financial need. The fixed interest rate is 5%, and repayment begins nine months after graduation.

Federal PLUS Loan — A federal loan for parents of dependent undergraduates and not based on financial need. A parent can borrow as much as the cost of education minus financial aid. Repayment on this student loan begins immediately.

Federal Subsidized Stafford Loan — A federal student loan program based on financial need. The federal government pays (subsidizes) interest student borrowers incur during in-school, authorized deferment and grace periods. The college financial aid office determines loan amounts, subject to program limits. Repayment is deferred until six months after graduation.

Federal Supplemental Educational Opportunity Grants (FSEOG) — A need-based federal grant that supplements the Federal Pell Grant. Maximum award depends on college policy, availability of funds, total cost of education and amount of other financial aid awarded.

Federal Unsubsidized Stafford Loan — A federal student loan program not based on need. Students, responsible for all loan interest, may pay it during in-school, deferment and grace periods, or have it added to the loan balance. The financial aid office determines student loan amounts, subject to program limits. Repayment is deferred until six months after graduation.

Federal Work-Study Program — Part-time employment for students needing assistance with postsecondary education costs. A combination of federal and college or agency funds pays at least the federal minimum wage to eligible student employees.

Fellowship — A grant for postgraduate study that may require teaching or research.

Finance charge — A fee charged for the use of money over time. For example, fees resulting from carrying an unpaid balance on a credit card.

Financial aid — Funding granted students, in gift aid and self-help, to assist with college costs. Though generally based on financial need, non-need or merit-based aid is also available.

Financial aid administrator (FAA) — An individual who prepares and communicates information, supervises functions and provides advice regarding student loans, grants, scholarships and employment programs. Responsibilities include interpreting, announcing and implementing federal, state and institutional policies and regulations, and responding to student and employee needs.

Financial aid package — Total amount of financial aid a student receives. To help meet need, federal and nonfederal aid such as grants, loans or work-study are combined in a package. The school's Financial Aid Administrator uses available resources to give each student the best possible aid package.

Financial aid transcript — An official report listing all financial aid and education loans received during your college enrollment.

Financial need — The Cost of Attendance minus expected family contribution as determined by federal criteria.

Fixed interest rate — An interest rate that will remain unchanged by circumstances.

Free Application for Federal Student Aid (FAFSA) — The form colleges use to determine financial aid eligibility for federal programs.

Forbearance — The lender agrees to accept a temporary rest from loan payments, an extension of time for making payments, or smaller payments that were previously scheduled based on hardship.

back to top


Garnishment of wages — Deduction of a portion of a borrower's pay, with or without his or her consent. A lender or the government may take this action to force repayment of a defaulted loan.

Gift aid — Financial aid not requiring repayment (e.g., scholarships and grants).

Grace Period — The period of time before you start making payments, yet interest is still accumulating.

Graduate school — Additional education beyond the baccalaureate at an institution of higher education.

Graduated repayment — A plan beginning with lower-than-standard payments in early years and increasing in later years.

Grant — A form of student aid requiring no repayment.

Guarantee Fee — A percentage of principal charged the borrower as an insurance premium and deducted from loan proceeds.

Guaranty agency — A government agency or non-profit institution that manages student loan insurance programs protecting lenders against losses due to borrower default, death, disability or bankruptcy.

back to top

H | I | J

Hardship — A period of financial difficulty during which the lender allows the borrower to delay repayment or decrease monthly payments.

Holder — The institution that owns your student loan.

Income-sensitive repayment — A loan repayment option with payments set at a percentage of your income and reviewed annually. To qualify, you must provide your lender with income documentation including tax returns each year.

Independent student — For financial aid purposes, students meeting the federal definition must be: 24 years old or older, or married, or a veteran, or an orphan or a ward of the court, or have a legal dependent other than a spouse or be a graduate or professional student. Contact the financial aid office about documented special circumstances.

Installment loan — A loan requiring scheduled payments over a specified period. Student loans, auto loans and personal loans are among them.

Institutional grant — A form of student gift aid funded by the college or university.

Insurance premium — Also known as guarantee fee, percentage of principal the guarantor charges the borrower.

Interest — The cost you pay over time to use a lender's money.

Internship — Work experience, paid or unpaid, acquired while in college.

back to top

K | L | M

Lender — The bank, savings and loan, credit union or other financial institution that provides money through loans.

Lender Code — A number assigned to a lender by the U.S. Department of Education to designate the lender's participation in the Federal Education Loan Programs.

Liabilities — Money owed to others.

Loan application — The form prospective borrowers must complete to initiate a loan request.

Loan fee — An amount calculated as a percentage of principal and deducted from loan proceeds.

Loan period — The academic year – or a portion – in which the applicant is enrolled and seeking education loans.

Maker — The borrower.

Master Promissory Note (MPN) — Created to replace Federal Stafford Subsidized and Unsubsidized education loan notes, the MPN simplifies the yearly borrowing process for students by allowing them to take advantage of a multi-use feature. Depending on the type of institution attended (either 2-year or 4-year); a student may be able to re-use a note to request additional funds on either a yearly or multi-year basis.

Merit-based assistance — Financial aid based on the student's academic or creative achievements and abilities.

Military scholarship — Reserve Officer Training Corps (ROTC) scholarship available for the Air Force, Army and Navy at many colleges and universities throughout the United States. In addition to covering tuition and fees, books and supplies, it includes a subsistence allowance.

back to top


National Credit Bureau — see Credit Bureau.

Need analysis — A method used to determine EFC and determine financial aid eligibility.

Notice of Guarantee — A disclosure statement specifying terms of a borrower's approved Stafford or PLUS student loan and provided before, or with, the initial loan disbursement. It tells the amount approved, interest rate, fees and date the loan funds will be disbursed.

back to top


Origination Fee — A processing fee calculated as a percentage of principal and deducted from the loan upon each disbursement.

back to top


Principal — The total amount borrowed, plus the interest and fees.

Promissory Note — A written promise to repay a loan, signed by the borrower and co-applicant (if applicable). This legal document describes loan conditions and repayment terms. Federal Stafford Loans require the use of the new Master Promissory Note.

Proprietary school — A for-profit educational institution usually offering training for specific occupations.

back to top

Q | R | S

Repayment schedule — Statement of repayment terms sent to the borrower before first payment is due.

Repayment — The period during which you make payments on a student loan.

Restricted scholarship — Gift aid limited to applicants meeting limited, specific criteria.

Satisfactory Academic Progress — The level of academic progress required of a student by the Higher Education Act in order to receive federal aid, including Federal Stafford, PLUS, or SLS loans. Each school must establish a standard for evaluating a student's efforts to achieve an educational goal within a given period of time. In making this evaluation, the school must establish the normal time frame for completion of the course of study in which the student is enrolled, and a method, such as work projects completed, to measure the quality of the student's performance.

Scholarship — Based on academic, athletic, creative or other achievement, a form of gift aid that does not require repayment.

Secondary market — A lender, agency or institution that buys education loans from originating lenders. Funds gained enable lenders to make new loans.

Self-help — A form of financial aid including employment and education loans.

Servicer — A company that handles billing, collections, deferments and other administrative duties for the lender or holder. Many education loan accounts are assigned to servicers.

State grant — State funding usually based on financial need and reserved for students attending college in their home states.

Student Aid Report (SAR) — Based on information the student provided on the FAFSA, the report verifying submitted data, reporting the Expected Family Contribution, and informing the student of eligibility for the Federal Pell Grant.

back to top

T | U | V

Term — The number of months or years during that you'll be paying back your education loans.

Terms — Loan conditions as specified in the promissory note, generally including items such as the interest rate, amount of fees and monthly payment amount.

Tuition — Cost to enroll in classes.

Tuition reimbursement — An employee benefit program that will cover full or partial costs of college courses. As programs vary greatly, check with your employer for more information.

Variable interest rate — Rate of interest that can change periodically as specified in the promissory note.

back to top

W | X | Y | Z

back to top of college planning glossary