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Accrued Interest: Daily interest that is calculated on the unpaid principal balance of a loan at the rate specified in the promissory note. |
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Capitalized Interest: Daily interest that is calculated on the unpaid principal balance of a loan at the rate specified in the promissory note, and then added to the principal loan amount, to be paid at a later time rather than being paid by the borrower as it is incurred. |
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Default: When a borrower fails to meet the loan terms as outlined in the promissory note. |
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Deferment: A temporary postponement of loan payments based on eligibility criteria outlined in the promissory note. If the loan is subsidized, the federal government pays the interest during a deferment. If unsubsidized, the borrower is responsible for paying accrued interest. |
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DLP: William D. Ford Federal Direct Loan Program. |
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EFC: Expected Family Contribution. It represents the amount of money students and their families are expected to contribute towards their education, as determined through a “need analysis” of information provided on a FAFSA. |
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FAFSA: Free Application for Federal Student Aid. It is the application used by the Department of Education to determine your EFC, and is used by most colleges and universities to determine eligibility for federal, state, and college-sponsored financial aid, including grants, educational loans and work-study programs. |
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FFELP: Federal Family Education Loan Program. |
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Fixed Interest: An interest rate specified in the promissory note that does not change during the loan term. |
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Grace Period: Depending on loan type, it is typically the 6 to 9 months after a student graduates (or leaves school) before loan repayment begins. |
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Grant: Typically a need-based financial aid award that does not have to be repaid. |
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Interest Rate: The fee charged by the lender and paid by the borrower for use of the money loaned. It is calculated as a percentage of the principal amount borrowed. |
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Principal: The original amount of money borrowed, or the loan amount. |
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Promissory Note: Also called the Master Promissory Note, it is a binding contract between a borrower and lender that outlines the terms and conditions of a loan. |
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PLUS Loan: Parent Loan for Undergraduate Students. A non-need-based, federally guaranteed loan that allows parents to finance up to the full cost of their child’s education, less any other federal aid the student receives. |
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Scholarships: Financial aid that is awarded by schools, businesses, institutions, associations and private industry that does not have to be repaid. Can be awarded based on need, academic merit, academic concentration, interests, or a host of other criteria. |
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Stafford Loan: A federal education loan that is funded and/or guaranteed and insured by the federal government. There are two types: subsidized and unsubsidized. |
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Subsidized Loan: A need-based loan on which the federal government pays accrued interest while the student borrower is in school, during the grace period, and during periods of deferment. |
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Unsubsidized Loan: A non-need-based loan for which the student is responsible for paying accrued interest. |
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Variable Interest: Loan interest that fluctuates based on market conditions. |