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Financial Aid Glossary

College financial aid has its own vocabulary which can make the financial aid process a challenge, especially for those students and parents who are applying for aid for the first time .  To assist you in understanding some of the common terms and acronyms used by financial aid professionals, we are pleased to provide this comprehensive list.

Accruing Interest (on a loan): The cost of the loan, represented by the interest rate, is adding up prior to the repayment period or prior to a payment installment.

Adjusted Gross Income (AGI):  All taxable income as reported on a U.S. income tax return.

Award Letter: A means of notifying successful financial aid applicants of the assistance being offered. The award letter provides information on the types and amounts of aid offered.

Budget: See Cost of Attendance.

Campus-based Programs: The term commonly applied to those U.S. Department of Education federal student aid programs administered directly by institutions of postsecondary education.  Includes:  Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (FSEOG), and Federal Work-Study (FWS) programs.

Central Processing System (CPS): The computer system to which the student's need analysis data is electronically transmitted by the FAFSA processor. The Central Processing System performs database matches, calculates the student's official Expected Family contribution (EFC), and prints out the Student Aid Report (SAR).

Commuter Student: A student who does not live on campus; typically, "commuter" refers to a student living at home with his or her parents, but can also mean any student who lives off-campus.

Cost of Attendance (COA): (link to our Cost of Attendance page) Generally, this includes the tuition and fees normally assessed a student, together with our estimate of the cost of room and board, transportation and commuting costs, books and supplies, and miscellaneous personal expenses.  In addition, student loan fees, dependent care, reasonable costs for a study abroad or cooperative education program, and/or costs related to a disability may be included, when appropriate.  Also referred to as "cost of education" or "budget."

Credit (or Credit Hour): The unit of measurement some institutions give for fulfilling course requirements.

Custodial Parent: The parent with whom the dependent student lives, and whose financial information is used in the need analysis when parents are divorced or separated.

Deferment (of loan): A condition during which payments of principal are not required, and, for Federal Perkins and subsidized Federal Stafford and Direct Subsidized Loans, interest does not accrue.  The repayment period is extended by the length of the deferment period.

Department of Education, U.S. (ED): The federal government agency that administers assistance to students enrolled in postsecondary educational programs under the following programs: Federal Pell Grant, Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), Federal Family Education Loan (FFEL) Programs, and William D. Ford Federal Direct Loan (Direct Loan) Program.

Dependent Student: A student who does not qualify as an independent student and whose parental income and asset information is used in calculating an Expected Family Contribution (see Independent Student).

Expected Family Contribution (EFC): The amount a student and his or her family are expected to pay toward the student's cost of attendance as calculated by a Congressionally-mandated formula known as Federal Methodology.  The EFC is used to determine a student's eligibility for the student financial assistance programs.  Please note that the EFC is not necessarily what the student is actually expected to pay out-of-pocket.

FAFSA: See Free Application for Federal Student Aid.

FAFSA Express: New electronic method for students to apply for federal student financial assistance directly to the Department of Education.

Federal Family Education Loan (FFEL) Programs: The collective name for the Federal Stafford (subsidized and unsubsidized), Federal PLUS Loan, and Federal Consolidated Loan programs.  Funds for these programs are provided by private lenders and the loans are guaranteed by the federal government.

Federal Pell Grant: A federal grant program for needy postsecondary students who have not yet received a baccalaureate or first professional degree; administered by the U.S. Department of Education.

Federal Perkins Loan: One of the campus-based programs; a long term, low interest loan program for both undergraduate and graduate students at a current interest rate of 5%.  May also be called the Carl D. Perkins National Direct Student Loan Program.

Federal PLUS Loan: Long-term loans made available to parents of dependent students.  Interest rates but may not exceed 9%.  May be used to replace EFC; annual amount borrowed limited to the cost of attendance minus estimated financial assistance.

Federal Direct Loan (subsidized and unsubsidized): Long term, low interest loans administered by the Department of Education through private guarantee agencies.  Formerly known as Guaranteed Student Loans (GSLs).  Variable interest rate, not to exceed 8.25%.  Unsubsidized Federal Stafford Loans may be used to replace EFC.

Federal Supplemental Educational Opportunity Grant (FSEOG): One of the campus-based programs; grants to undergraduate students of exceptional financial need who have not completed their first baccalaureate degree and who are financially in need of this grant to enable them to pursue their education.  Priority for FSEOG awards must be given to Federal Pell Grant recipients with the lowest EFCs.

Federal Work-Study Program (FWS): One of the campus-based programs; a part-time employment program which provides jobs for undergraduate and graduate students who are in need of such earnings to meet a portion of their educational expenses.

Financial Aid: General term that describes any source of student assistance outside the student or the student's family. Funds awarded to a student to help meet postsecondary educational expenses.  These funds are generally awarded on the basis of financial need and include scholarships, grants, loans, and employment.

Financial Aid Administrator: An individual who is responsible for preparing and communicating information pertaining to student loans, grants or scholarships, and employment programs, and for advising, awarding, reporting,  counseling, and supervising office functions related to student financial aid.  Accountable to the various publics which are involved and is a manager or administrator who interprets and implements federal, state, and institutional policies and regulations, and is capable of analyzing student and employee needs and making changes where necessary.

Financial Aid Award: An offer of financial or in-kind assistance to a student attending a postsecondary educational institution.  This award may be in the form of one or more of the following types of financial aid: repayable loan, a non-repayable grant and/or scholarship, and/or student employment.

Financial Aid Notification: The letter from the postsecondary institution that lets the student know whether or not aid has been awarded. If the student will be receiving assistance, the notification also describes the financial aid package. State agencies and private organizations may send students financial aid notifications separately from the postsecondary institution. Also see Award Letter.

Financial Aid Package: A financial aid award to a student comprised of a combination of forms of financial aid (loans, grants and/or scholarships, employment).

Financial Need Equation: Cost of attendance minus Expected Family Contribution equals financial need (COA - EFC = Need).

Forbearance: Permitting the temporary cessation of repayments of loans, allowing an extension of time for making loan payments, or accepting smaller loan payments than were previously scheduled.

Free Application for Federal Student Aid (FAFSA): The financial aid application document completed by the student, and the student's parents if applicable, that collects household and financial information. The FAFSA is the foundation document for all federal need analysis computations and database matches performed for a student.

Gift Aid: Educational funds such as grants or scholarships that do not require repayment from present or future earnings. See Grant

Grace Period: The period of time that begins when a loan recipient ceases to be enrolled at least half-time and ends when the repayment period starts.  Loan principal need not be paid and, generally, interest does not accrue during this period.

Grant: A type of financial aid that does not have to be repaid; usually awarded on the basis of need, possibly combined with some skills or characteristics the student possesses.

Income: Amount of money received from any or all of the following: wages, interest, dividends, sales or rental of property or services, business or farm profits, certain welfare programs, and subsistence allowances such as taxable and non-taxable social security benefits and child support. 

Independent Student: A student who:(a) will be 24 years of age by December 31, 2010, or who:

(b) is an orphan or a ward of the court;

(c) is a veteran;

(d) is married or is a graduate or professional student;

(e) has legal dependents other than a spouse; or

(f) presents documentation of other unusual circumstances demonstrating independence to the student financial aid administrator.

Legal Dependent (of Applicant): A biological or adopted child, or a person for whom the applicant has been appointed legal guardian, and for whom the applicant provides more than half support.  In addition, a person who lives with and receives at least half support from the applicant and will continue to receive that support during the award year.  For purposes of determining dependency status, a spouse is not considered a legal dependent.

Loan: An advance of funds evidenced by a promissory note and requiring the recipient to repay the specified amount(s) under prescribed conditions.

Merit-based Aid: Student assistance awarded because of a student's achievement or talent in a particular area, such as academics, athletics, community service and leadership experience, etc.

Methodology: Refers to the system used to calculate the expected family contribution (i.e., the Federal Need Analysis Methodology).

Need Analysis: A system by which  a student applicant's ability to pay for educational expenses is evaluated and calculated.  Need analysis consists of two primary components: (a) determination of an estimate of the applicant's and/or family's ability to contribute to educational expenses; and (b) determination of an accurate estimate of the educational expenses themselves.

Need Analysis Formula: Defines the data elements used to calculate the expected family contribution (EFC); there are two distinct formulas: regular and simplified. The formula determines the EFC under the Federal Need Analysis Methodology.

Need-based Aid: Student assistance awarded because a student's financial circumstances would not permit him or her to afford the cost of a postsecondary education.

Non Need-based Aid: Aid based on criteria other than need, such as academic, musical, or athletic ability. Also, refers to federal student aid programs where the expected family contribution (EFC) is not part of the need equation.

Packaging: The process of combining various types of student aid (grants, loans, scholarships, and employment) to attempt to meet full amount of student's need.

Parent Contribution: A quantitative estimate of the parents' ability to contribute to postsecondary educational expenses.

Parent PLUS Loan: Long-term loans made available to parents of dependent students.  Interest rates are linked to 52-week Treasury bill rates, but may not exceed 9%.  May be used to replace EFC; amount borrowed is limited to the cost of attendance minus estimated financial assistance.

Principal (of a loan): The amount of money borrowed through a loan; does not include interest or other charges, unless they are capitalized.

Professional Judgment (PJ): Aid administrator discretion, based on special circumstances of the student, to change data elements used in determining eligibility for federal student aid.

Promissory Note: The legal document which binds a borrower to the repayment obligations and other terms and conditions which govern a loan program.

SAR Information Acknowledgment: A non-correctable one-page Student Aid Report.  Students who file electronic applications or who make electronic corrections to applicant information through a school receive this acknowledgment.

Scholarship: A form of financial assistance that does not require repayment or employment and is usually made to students who demonstrate or show potential for distinction, usually in academic performance.

Scholarship Search Services: Organizations that claim to help students find little-known and unused financial aid funds. Families who are interested is using such a service should carefully investigate the company first.

Simplified Needs Test: An alternate method of calculating the expected family contribution for families with adjusted gross incomes of less than $50,000, who have filed, or are eligible to file, an IRS Form 1040A or 1040EZ, or are not required to file an income tax return.  Excludes all assets from consideration.

Student Aid Report (SAR): The official notification sent to a student as a result of the Central Processing System (CPS) receiving an applicant record (via FAFSA) for the student.  The SAR summarizes applicant information, an Expected Family Contribution for the student, and displays other special messages related to the student's application.  In some instances the SAR may need to be submitted to the financial aid office at the school the student plans to attend, but only if the school requests it.  

Student Contribution:  A quantitative estimate of the student's ability to contribute to postsecondary expenses for a given year.

Taxable Income:  Income earned from wages, salaries, and tips, as well as interest income, dividend income, business or farm profits, and rental or property income.

Title IV Programs: Those federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended.  Includes: the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work-Study, Federal Perkins Loan, Federal Stafford Loan, Federal PLUS Loan, Direct Loan, Direct PLUS Loan, and SSIG.

Tuition Payment Plans: A strategy by which payment for present costs of postsecondary education is extended into a future period of time.

Unmet Need: The difference between a student's total cost of attendance at a specific institution and the student's total available resources.

Untaxed Income:  All income received that is not reported to the Internal Revenue Service or is reported but excluded from taxation.  Such income would include but not be limited to any untaxed portion of Social Security benefits, Earned Income Credit, welfare payments, untaxed capital gains, interest on tax-free bonds, dividend exclusion, and military and other subsistence and quarters allowances.

Veterans Educational Benefits:  Assistance programs for eligible veterans and/or their dependents for education or training.

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

Abbreviations Commonly Used in Financial Aid Administration

ACT: American College Testing Program

AGI: Adjusted Gross Income

COA: Cost of Attendance

CPS: Central Processing System

EFC: Expected Family Contribution (also FC, Family Contribution)

FAFSA: Free Application for Federal Student Aid

FFELP: Federal Family Education Loan Program

FM: Federal Methodology

FPLUS: Federal PLUS (Parent) Loan

FSEOG: Federal Supplemental Educational Opportunity Grant

FWS: Federal Work-Study

GPA: Grade Point Average

PC: Parental Contribution

ROTC: Reserve Officer Training Corps

SAR: Student Aid Report