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.

Borrower:
Person responsible for repaying a loan who has signed and agreed to the terms in the promissory note.

Capitalizing Interest:
Adding unpaid accumulated interest to the loan principal. Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan.

Cost of Attendance (COA):
The total amount it will cost a student to go to school-usually expressed as a yearly figure. It is determined using rules established by the U.S. Congress. 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, costs related to a disability, and miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Also included are reasonable costs for eligible study-abroad programs. An allowance (determined by the school) is included for reasonable costs connected with a student's employment as part of a cooperative education program. For students attending less than half time,* the COA includes only tuition and fees and an allowance for books, supplies, transportation, and dependent-care expenses. Talk to the financial aid administrator at the school you're planning to attend if you have any unusual expenses that might affect your cost of attendance.

Default:
Failure to repay a loan according to the terms agreed to when you signed a promissory note. Default also may result from failure to submit requests for deferment or cancellation on time. The consequences of default are severe. 

Deferment:
The temporary postponement of loan payments. During a deferment period, interest is not charged on Direct Subsidized Loans, but it is charged on Direct Unsubsidized Loans. The borrower has the option to pay the interest or have it capitalized.

Delinquency:
This occurs when payments are late or missed, as specified in the terms of the promissory note and the selected repayment plan.

Disbursement:
Amount of loan proceeds paid by the school to the student or parent borrower or applied to the student's account. Generally, a loan is paid in two installments or disbursements.

Discharge (Cancellation):
The release of borrowers from their obligations to repay their Direct Loans. Borrowers must meet certain requirements to be eligible for discharges: if the borrower dies, or becomes totally and permanently disabled, or in certain cases if the borrower files for bankruptcy, or the school either closes or falsely certified a student's loan.

Disclosure Statement:
Statement of the actual cost of a loan, including the interest costs, the loan fee, and other loan information.

Direct Loan Servicing Center:
The U.S. Department of Education's agent contracted to collect Direct Loans and handle deferments, forbearances, and repayment options.
 
Federal Direct Consolidation Loans:
Also referred to as a Direct Consolidation Loan, is a loan that allows borrowers to combine different types of federal student loans to simplify repayment. Even if the borrower has only one loan, the loan can be consolidated.

Federal Direct Loan Program:
The William D. Ford Federal Direct Loan Program, also referred to as the Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education. The loans are Federal Direct Stafford/Ford (Direct Subsidized) Loans, Direct Unsubsidized Stafford/Ford (Direct Unsubsidized) Loans, Federal Direct PLUS (Direct PLUS) Loans, and Federal Direct Consolidation (Direct Consolidation) Loans.
 
Federal Direct Stafford/Ford Loan:
Also referred to as a Direct Subsidized Loan, made on the basis of the student's financial need and other specific eligibility requirements. The federal government does not charge interest on these loans while borrowers are enrolled at least half-time, during a six-month grace period, or during authorized periods of deferment.

Federal Direct Unsubsidized Stafford/Ford Loan:
Also referred to as a Direct Unsubsidized Loan, made to students meeting specific eligibility requirements. Interest is charged throughout the life of the loan. During in-school, grace and deferment periods, the borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized (added to the loan principal).

Financial Aid Package:
The total amount of financial aid (federal and nonfederal) a student receives.

Forbearance:
An arrangement to postpone or reduce a borrower's monthly payment amount for a limited and specified period. Interest is charged during a forbearance period, regardless of the loan type.

General Education Development (GED) Certificate:
A certificate students receive if they've passed a specific, approved high school equivalency test. Students who don't have a high school diploma but who have a GED may still qualify for federal student aid. A school that admits students without a high school diploma must make a GED program in the vicinity of the school available to these students and must inform them about the program. Students who pass an approved ability-to-benefit (ATB) test may also be qualified. An applicant without a high school diploma or its recognized equivalent can be eligible for funds if he or she 1) passes an independently administered test, ATB, approved by the Department of Education and used for determining the student's ability to benefit from postsecondary education or 2) enrolls in a school that participates in a process that has been both prescribed by the state in which the school is located and approved by the Department. 

Grace Period:
A six-month period before the first payment must be made on a Direct Subsidized or Direct Unsubsidized Loan. The grace period starts the day after a borrower ceases to be enrolled at least half-time. During the grace period on a Direct Unsubsidized Loan, accumulating interest must be paid by the borrower or it will be capitalized.

Guaranty Agency:
The organization that administers the FFEL Program for your school. This agency is the best source of information on FFEL Program Loans. To find out the name, address, and telephone number of the agency serving your state, as well as information about borrowing, you can contact the Federal Student Aid Information Center.

Half Time:
At schools measuring progress by credit hours and semesters, trimesters, or quarters, half-time enrollment is at least six semester hours or quarter hours per term. At schools measuring progress by credit hours but not using semesters, trimesters, or quarters, half-time enrollment is at least 12 semester hours or 18 quarter hours per year. At schools measuring progress by clock hours, half-time enrollment is at least 12 hours per week. Note that schools may choose to set higher minimums than these.

You must be attending school at least half time to be eligible to receive Direct or FFEL Program loans. Half-time enrollment is not a requirement to receive aid from the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study, and Federal Perkins Loan programs.

Interest:
A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the principal amount (loan amount) borrowed.

Loan:
Money borrowed that must be repaid.

Loan Fee:
An expense of borrowing deducted proportionately from each loan disbursement. The loan fee charged for Direct Subsidized and Unsubsidized Loans is 3% of the amount you borrow.

Loan Principal:
The total sum of money borrowed.

Prepayment:
Any amount paid on a loan by the borrower before it is required to be paid under the terms of the promissory note. There is never a penalty for prepaying principal or interest on Direct Loans.

Promissory Note:
A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.

Regular Student:
One who is enrolled in an institution to obtain a degree or certificate. Generally, to receive aid from the programs you must be a regular student.

Repayment Schedule:
A statement provided by the Direct Loan Servicing Center to the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.

Satisfactory Academic Progress:
To be eligible to receive federal student aid, you must maintain satisfactory academic progress toward a degree or certificate. You must meet your school's written standard of satisfactory progress. Check with your school to find out its standard.

If you're enrolled in a program that's longer than two years, the following definition of Satisfactory progress also applies to you: You must have a C average by the end of your second academic year of study or have an academic standing consistent with your school's graduation requirements. You must continue to maintain satisfactory academic progress for the rest of your course of study.

Variable Interest Rate:
Rate of interest on a loan that is tied to the 91-day Treasury bill rate and changes annually every July 1 as the index changes.