Financial Aid Terms

Financial Aid Terms

Ability to Benefit (ATB)
A classification of students who do not have a high school diploma or GED, but are determined to be qualified for acceptance into post-secondary education.

Academic Year
A minimum period of at least thirty weeks in which a full-time student is expected to complete 24 semester hours or 900 clock hours.

Accrued Interest
The interest that accumulates on the unpaid principal balance of a loan.

Adjusted Gross Income
Taxable income less IRS allowable adjustments reported on specified lines of the Federal Income Tax Return.

Alternative Loan
Private educational loan used as a supplement or in place of Federal financial aid programs. Most require a co-signer with a minimum stable income and a good credit history.

American Education Services (AES)
AES is a division of Pennsylvania Higher Education Assistance Agency (PHEAA).

America Reads/America Counts
Federal programs that train and employ college students to serve as tutors in reading and math for school children. The goal is to improve literacy by fostering the development of language skills in grades K-3 and mathematics education from elementary to ninth grade.

A national and community service program. For each year of full-time service within the program, participants will receive education awards to help finance their post-secondary education or pay back their student loans.

Gradually reducing the loan amount to zero through regularly scheduled payments of principal and interest spread over a predetermined length of time.

Annual Loan Limit
The maximum loan amount a student may borrow for each academic year of study under the Stafford student loan program.

Annual Percentage Rate (APR)
The interest maintained on a loan for a one-year period.

Savings and checking accounts, trust funds, stocks, bonds, money market funds, mutual funds, real estate (not principal residence), and business value.

Award Letter
Written notification of the financial assistance being offered to a student. The award letter usually provides information on the types and amounts of aid offered, the student's responsibilities in accepting the aid, and other terms and conditions governing the award. (Some schools post financial aid award notices online using PINs and passwords to ensure privacy.)

An individual who obtains money from a lending institution by the extension of credit for a period of time. The borrower signs a promissory note as evidence of the debt.

Budget (also known as Cost of Attendance)
The total amount it will cost a student to go to school. The educational cost includes tuition and fees, on campus room and board (or a housing and food allowance for off-campus students), books, supplies, transportation, child care, costs related to disability, and miscellaneous personal expenses.

Business Assets
Property that is used in the operation of a trade or business, including real estate, inventories, buildings, machinery and other equipment, patents, franchise rights, and copyrights. Considered in determining the Student Aid Index (SAI) under the regular formula.

Campus-Based Aid Programs
Financial aid programs funded by the Federal Government but administered by the school, using Federal guidelines. The programs are the Supplemental Educational Opportunity Grant (SEOG) and the Work-Study Program.

Claim Paid
Unlike other consumer loans, the balance of a Federal education loan may be considered claim paid upon death or permanent disability of the borrower.

The addition of unpaid accrued interest applied to the principal balance of a loan which increases the total debt outstanding.

Community Service Learning
Work programs that place students in positions that will benefit the clients of community service organizations.

Commuter Student
A student who does not live on campus; typically refers to a student living at home with his or her parents, or at the home of another relative (grandmother, uncle, etc.).

Combining numerous education loans into a new loan with a new payment schedule and interest rate. By extending the repayment period and allowing a single monthly payment, consolidation loans can make loan repayment more manageable for borrowers with high loan balances.

Continuing Education (also known as Extended Learning or Lifelong Learning)
A student taking continuing education courses, and who is not in a degree or certificate program, is ineligible for federal or state financial aid programs.

A credit-worthy individual who signs the promissory note of a loan in addition to the borrower. This party, by signing, is responsible for the obligation if the borrower does not repay the loan.

Having a good credit history per the criteria established by the lender, or no credit history.

Failure to repay a loan in accordance with the terms of the promissory note. Default can occur after 270 days of nonpayment on an account. Defaults are reported to national credit bureaus, which may effect a borrower's ability to receive credit in the future.

An authorized period of time during which a borrower may postpone payments on the principal of a loan. Deferments are generally available while borrowers are in school at least half-time and during periods of unemployment or economic hardship.

Dependent Student
A student who is under 24 years of age by December 31 of the award year, is not an orphan or ward of the court, is not a veteran, is not enrolled in a graduate or professional program, and does not have any legal dependents for whom they provide over half of their support.

Direct Loan
On March 30, 2010, President Obama sign the Health Care and Education Affordability Reconciliation Act of 2010 ("HCEARA- H.R. 4872) into law. This program mandates that effective July 1, 2010, all federal student loans (Stafford, PLUS, Grad PLUS) will be originated through the Federal Direct Loan Program These loans are funded, guaranteed and insured by the Federal Government. These loans may be contracted to private companies for servicing.

The release of loan funds to the school for delivery to the borrower. Depending on regulations in effect at the time of disbursement, disbursements are usually made in equal multiple installments co-payable to the borrower and the school.

Disclosure Statement
A statement of the actual loan costs, including the interest rate and any additional fees, which is presented to the borrower at the time the loan is made.

U.S. Department of Education (ED, DOE, or DE)
Government agency that administers several student financial aid programs, including the Federal Pell Grant, the Federal Work/Study Program, the Federal Perkins Loan, the Federal Direct Stafford and Federal Direct PLUS Loans.

Electronic Funds Transfer
The automatic transfer of loan funds to a school on the student's behalf.

Eligible Non-Citizen
Someone who is not a U.S. citizen but is nevertheless eligible for Federal student aid. Eligible non-citizens include U.S. permanent residents who are holders of valid green cards, U.S. nationals, holders of form I-94 who have been granted refugee or asylum status, and certain other non-citizens. Non-citizens who hold student visas or exchange visitor visas are not eligible for student aid. (See the FAFSA instructions for more details.)

Eligible Program
A course of study that leads to a certificate, diploma, or degree.

Enrollment Status
At those institutions using semesters, trimesters, quarters, or other academic terms and measuring progress by credit hours, enrollment status equals a student's credit hour workload categorized as either full-time, three-quarter-time, half-time, or less-than-half-time.

Entrance Interview
Online counseling session on educational loan responsibilities which occurs prior to the crediting of loan funds to the student's account.

Exit Interview
Online counseling session providing information on loan repayment, deferments, consolidation, and other pertinent loan information before the student leaves school.

FAFSA (Free Application for Federal Student Aid)
The financial aid application and need analysis document used to determine eligibility for federal student aid programs including Stafford loans.

Family Educational Rights and Privacy Act, also known as the Buckley Amendment. FERPA ensures privacy to educational records.

Financial Aid Package
The total amount of financial aid a student receives. Federal, state, institutional, and private sources of aid, such as loans, grants, scholarships, and work-study are combined in a "package" to help fill the student's financial need.

Financial Aid Transcript (FAT)
A form used by post-secondary institutions to collect data about any financial aid awards that a student received at other educational institutions.

Financial Need
The difference between the student's cost of education and the student's aid index, determinded by the FAFSA.

Fixed Interest
Rate of interest that does not change during the life of the loan.

An authorized period of time during which a lender agrees to postpone loan payments because of financial hardship. Interest continues to accrue during forbearance and will capitalize on to the balance of the loan principle when the forbearance ends. You may pay the interest during the forbearance period to avoid capitalization.

Full-Time Student
Generally, a student who is taking a minimum of 12 credits per semester.

Gift Aid
Grants or scholarships that do not have to be repaid.

Grace Period
For Federal Stafford Loans and Perkins loans, this is the period between the time borrowers leave school or drop below half-time study and when they are obligated to begin repaying their loan. The grace period is usually six months for Stafford and nine months for Perkins.

Graduate Assistantship
A full-time graduate student who works a particular number of hours in exchange for a stipend and tuition waiver.

Graduate Student
A student enrolled in an academic program of study above the baccalaureate level leading to a master's degree at an institution of higher education.

Funds that do not have to be repaid and are awarded on the basis of financial need.

Guarantor (or Guaranty Agency)
A state, regional or national organization acting as an agent for the federal government to administer and insure Federal Family Education Loans made by lenders.

Hope Scholarship
Not a scholarship, but a tax credit for the first two years of college or other post-secondary school. Maximum tax credit per year is $1,500. There are specific requirements and income guidelines.

Income Protection Allowance
An allowance against income for the basic cost of maintaining family members in the home. The allowance is based upon consumption and other cost estimates of the Bureau of Labor statistics for a family at the low standard of living.

Independent Student
A student is considered independent for financial aid filing purposes if that student:

  1. is 24 years or older or
  2. is working on a master's or doctoral program or
  3. is married (also applies if separated but not divorced) or
  4. has a child for whom the student provides more than half of that child's support or
  5. has legal dependents (other than a child or spouse) who live with the student and receive more than half of their support from the student or
  6. is an orphan or ward of the court or was a ward of the court until age 18 or
  7. is a veteran of the U.S. Armed Forces.
  8. is currently serving on active duty in the U.S. Armed Forces for purposes other than training.
  9. is or was an emancipated minor as determined by a court in the state of the student's legal residence.
  10. is or was in a legal guardianship as determined by a court in the state of the student's legal residence.
  11. the high school or school district homeless liaison determined the student was an unaccompanied youth who was homeless on or after the date of July, 1 of the previous year.
  12. the director of an emergency shelter or transitional housing program funded by the U.S. Department of Housing and Urban Development determined the student was an unaccompanied youth who was homeless on or after the date of July, 1of the previous year.
  13. the director of a runaway or homeless youth basic center or transitional living program  determined the student was an unaccompanied youth who was homeless or self-supporting and at risk of being homeless on or after the date of July, 1 of the previous year.


The fee (a percentage of the balance) that is charged by the lender when money is borrowed. Interest accrues and is paid over the life of the loan.

Job Location & Development (JLD)
A federal program designed to locate and develop off-campus jobs for currently enrolled students, regardless of financial need, during and between periods of attendance. The JLD program encourages students to participate in community service activities.

Leave of Absence
A break in enrollment that is requested by the student and approved by the school based upon the school's published leave of absence policy.

Any organization that lends money through a student loan programs.

Less then Half-Time
A student enrolled for less than 6 credits per semester.

Lifetime Learning Tax Credit
A tax credit for family members returning back to school. Applies to undergraduate and graduate education expenses. There are specific guidelines and calculations to determine eligibility.

Master Promissory Note (MPN)
The promissory note is the legal agreement signed with a lender to accept a loan. The MPN can generally be used for ten years.

National Student Loan Data System (NSLDS)
A database comprised of information from guarantors, schools, lenders and the U.S. Department of Education which contains historical student loan, Pell grant and enrollment information.

Origination Fee
A fee paid to the guaranty agency to insure the loan. The amount of the fee is deducted from the dollar amount of the loan upon disbursement.

Occurs when the student's financial aid exceeds the need or cost of education.

A student's natural, adoptive or stepmother or father. Does not include a student's legal guardian.

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

Pell Grant
A Federal grant program for financially eligible undergraduate students. Must be working towards first bachelor's degree.

Perkins Loan
A loan from the federal government that is no longer offered to students.

The Pennsylvania Higher Education Assistance Agency is the state agency for higher education in the Commonwealth. Also known as American Education Services (AES).

PLUS Loan (Parent Loan for Undergraduate Student)
A Federal educational loan for parents of dependent undergraduate students. PLUS loans require the parent borrower to be creditworthy. The repayment begins six months after the student graduates or drops below half time enrollment (six credits); however, deferment options are available . The parent may borrow up to the difference between the student's educational costs and other financial aid.

Prepaid Tuition Plan
A college savings plan that is guaranteed to rise in value at the same rate as college tuition. For example, if a family purchases shares that are worth half a year's tuition at a college, they will always be worth half a year's tuition, even ten years later when current tuition rates will be much higher.

The amount borrowed in a loan and the amount upon which interest will be charged.

Professional Judgment
The ability of the financial aid administrator to adjust the Student Aid Index (SAI), dependency status, cost of education or academic progress based upon unusual circumstances or special conditions experienced by the student or family. Exercised on a case-by-case basis.

A reduction of the standard annual loan limit for an undergraduate student. Pro-ration is required if the remainder of the student's program is less than a full academic year in length. (For example, if a student will graduate at the end of the fall semester and will not be enrolled for spring, the amount of the student's fall loan will be pro-rated.)

Refund Period
Refers to the length of time during a period of enrollment when charges and financial aid are adjusted due to a student withdrawing from the institution. The school calculates the amount of applicable institutional charges and, as part of a federally mandated process, determines the amount of financial aid that can be retained and the amount that must be returned under the appropriate refund policy.

Satisfactory Academic Progress (SAP)

Financial aid that does not usually have to be paid back. Given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art, or other disciplines.

Financial aid which must be earned (work-study) or repaid (loans).

A company contracted by a lender to perform the administrative tasks, such as processing the loan and collecting payments, that are associated with educational loans.

State Grant Program
State funding coordinated by PHEAA that provides grants to needy Pennsylvania residents who meet the eligibility criteria and are pursuing post-secondary education.

Student Aid Index (SAI)
The amount that the student's family is expected to contribute towards the cost of the education based on FAFSA data. This federal calculation is an eligibility index number that your college's financial aid office uses to determine how much federal student aid you would receive if you attended the school. (Note: It is not the amount of the semester's bill.)

Student Aid Report (SAR)
An output document of the information reported on the FAFSA, sent to the student by the US Department of Education. Reflects calculation of the Student Aid Index.

A loan for which the Federal Government pays the interest while the student is in school at least half-time, and during grace and deferment periods.

Supplemental Educational Opportunity Grant (SEOG)
A grant funded by the Federal Government and administered by the school. Limited to students with exceptionally high need who meet the institution's filing deadline. Must be working toward first bachelor's degree.

Teacher Certification
A student enrolled at least half-time in a certification program leading to an instructional certificate to teach may borrow under the Stafford student loan program.

Teacher Shortage Area
A federally designated geographic area, grade level, or academic, instructional, subject matter, or discipline that has been classified as a shortage area as defined by the U.S. Department of Education. Teachers who teach in teacher shortage areas may qualify for some or all of their student loan balances to be cancelled.

Tuition Assistance Program
Pre-paid tuition program established by the Pennsylvania Treasury Department. Visit

Tuition Waiver
A form of financial aid in which the school lowers or eliminates tuition changes for qualified students.

Unsubsidized Loan
A loan that requires the student to pay interest during the in-school and grace periods. Interest accrues on the loan from the date of the disbursement until the loan is paid in full. Interest not paid when it is due is capitalized and added onto the principal of the loan.

Untaxed Income
Refers to that type of income reported on the FAFSA including earned income credit, welfare benefits, certain Social Security benefits, payments to tax-deferred pension plans, IRA and KEOGH contributions, child support received, untaxed portions of pensions and worker's compensation.

Variable Interest
Rate of interest that is tied to a certain index (depending on the loan) and changes periodically as the index changes. Interest rates for Federal Stafford and PLUS loans are set by the government each year and change annually on the first of July.

A school's procedure of comparing, for accuracy, data reported on the FAFSA to a student's and parents' federal tax returns.

Vocational Rehabilitation
Programs administered by state departments of vocational rehabilitation services to assist individuals who have a physical or mental disability that is a substantial handicap to employment.

Withdrawal Date
The date the student withdraws, as determined by the school. For student's who notify an institution they are leaving, the withdrawal date is considered the date the student begins the school's withdrawal process. For students who receive financial aid, the withdrawal date determines the amount of aid that the school must return and the amount it is able to retain (see Refund Period)

Work-Study Program
A work program funded by the Federal Government and administered by the school. Postsecondary students work part-time in on- or off-campus jobs in exchange for a paycheck. Hourly rate of pay is at least minimum wage.