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32 Financial Aid Terms You Need To Know About Loans

by Tim Brunicardi on April 29, 2018

Student loans can be confusing, even to some of the most seasoned experts. This list compiles 32 financial aid terms that will help you navigate getting loans so that you can pay for college.

What Is Financial Aid and How Do You Get It?

Financial Aid Terms | Hocking College

Financial aid helps students pay for college and the necessary expenses that come with it. This can include tuition and fees, room and board, books and supplies, and transportation.

In order to be eligible for financial aid, students are required to to complete the Free Application for Federal Student Aid, also known as the FAFSA. The FAFSA form is the application you will use to apply for federal student aid programs offered by the U.S. Department of Education (ED). Completing and submitting the FAFSA form is free, and it gives you access to the largest source of financial aid to help pay for college.

Financial Aid Terms - Loans

Adverse Credit History

According to the Federal Student Aid website, Adverse Credit History is when an applicant's credit report shows any of the following:

  • Accounts with a total outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or charged off during the two years preceding the date of the credit report.
  • Default determination during the five years preceding the date of the credit report.
  • Bankruptcy discharge during the five years preceding the date of the credit report.
  • Repossession during the five years preceding the date of the credit report.
  • Foreclosure during the five years preceding the date of the credit report.
  • Charge-off/write-off of a federal student aid debt during the five years preceding the date of the credit report.
  • Wage garnishment during the five years preceding the date of the credit report.
  • Tax lien during the five years preceding the date of the credit report.

If you qualify as having Adverse Credit History, you will not be able to qualify for certain loans.

Luckily, if you are just coming out of high school, most of these issues will probably not have damaged your credit report.


Interest starts to generate on your loan from the day it is disbursed (sent to you or your school). At certain points in time that Unpaid Interest may capitalize.

According to Sallie Mae, "This means it is added to your loan’s Current Principal. From that point, your interest will now be calculated on this new amount."

Direct Loan

According to the Consumer Financial Protection Bureau, "The federal Direct Loan is a federal student loan made directly by the U.S. Department of Education. 

Generally, if you took out a federal student loan or consolidated your loans on or after July 1, 2010, you have a federal Direct Loan. There are four types of Direct Loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans
  • Direct Consolidation Loans
Financial Aid Terms | Hocking College

 Direct PLUS Loan

Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school.

Disbursement/Disbursement Date

Disbursement is when federal financial aid is distributed to you through your college. This will typically happen 2 (or more) times a year.

The Disbursement Date refers to when the school reports to the government that the disbursement funds were received by the borrower.


An Endorser is someone who agrees to repay a Direct PLUS Loan if the borrower does not repay it. An endorser should have a clean credit history.

Federal Family Education Loan (FFEL) Program

Under the Federal Family Education Loan (FFEL) Program, private lenders funded student loans that were guaranteed by the federal government. These loans included Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans.

As a result of the Health Care and Education Reconciliation Act of 2010, no new FFEL Program loans will be made, beginning July 1, 2010.

Federal Pell Grant

A Federal Pell Grant is money the government provides to students in need in order to help pay for college. Unlike a loan, a Federal Pell Grant does not need to be repaid.

Federal Perkins Loan

The Federal Perkins Loan is a low-interest loan for undergraduate and graduate students that is provided by your school or your school's loan servicer.

In order to qualify for this loan, the applicant must:

  • Be an undergraduate, graduate, and professional students with exceptional financial need.
  • Attend a school that participates in the Federal Perkins Loan Program.

Federal Student Loan

A Federal Student Loan encompasses any type of loan that is given to student in order to help them pay for their education.


Forbearance is an option for borrowers who are facing financial hardship. During forbearance, principal payments are postponed but interest continues to generate on the loan. Unpaid interest that is generated during the forbearance will be added to the principal balance (capitalized) of your loan(s), increasing the total amount you owe.


Forgiveness (also known as discharge or cancellation) refers to a student no longer needing to pay all or some of a loan.


A Grant is a form of financial aid that student's do not need to repay. This type of financial aid is usually assigned based on financial need.

Interest/Interest Rate

Interest is a loan expense that is a calculated percentage of the unpaid balance of the loan that is paid by the borrower. The Interest Rate is the percentage at which interest is calculated and added to your loan(s).

Lifetime Eligibility Used (LEU)

According to the Federal Student Aid website, the Lifetime Eligibilty Used is, "the amount of Federal Pell Grant funds you may receive over your lifetime as limited by federal law."

Loan Servicer

A Loan Servicer is a company that collects payments, handles repayment plans, loan consolidation and other customer inquiries around federal student loans on behalf of the lender.

If you are unsure of who your Loan Servicer is you can look it up by logging into your "My Federal Student Aid" account.

Financial Aid Terms | Hocking College

Master Promissory Note

The Master Promissory Note is a legally binding document that is signed when you accept a student loan. This document outlines all of the terms associated with the loan and repayment.

New Borrower

A New Borrower is someone who has no outstanding loan balances.

Outstanding Interest

Outstanding Interest is the dollar value of the generated interest balance on a loan.

Outstanding Principal

Outstanding Principal is "the remaining portion of the original loan amount, plus any interest that has been capitalized, that is still owed."


The PLUS Loan is a loan available to graduate students and parents of dependent undergraduate students for which the borrower is solely responsible for paying the interest regardless of the loan status.


The Principal is the total sum of money borrowed, plus any capitalization.

Private Loan

A Private Loan is a non-federal loan made by a lender such as a bank, credit union, state agency, or school.

Promissory Note

A Promissory Note is a legally binding document where the borrower promises to repay the loan. According to Cornell University, "The promissory note also includes important language about your rights and responsibilities as a borrower."

Qualifying Public Services

Qualifying Public Services is a term used to explain what career tracks are eligible to become a part of the Public Service Loan Forgiveness Program (PSLF).

Qualifying Public Services for the PSLF program include employers who provide at least one of the following public services:

  • Emergency management
  • Military service
  • Public safety
  • Law enforcement
  • Public interest law services
  • Early childhood education
  • Public service for individuals with disabilities
  • Public service for the elderly
  • Public health
  • Public education
  • Public library services
  • Other school-based services

Satisfactory Academic Progress (SAP)

Satisfactory Academic Progress is a school's academic requirements to ensure that that you're successfully completing your coursework, therefore still eligible to receive financial aid.

If a student does not meet SAP, they can be subject to losing their financial aid funding.

Service Obligation

The Service Obligation refers to the teaching service requirement that accompanies the TEACH grant (Ref. TEACH Grant and ATS).

Subsidized Loan

Direct Subsidized Loans are federal student loans available to undergraduates that do not generate interest while the student is in school or when loans are deferred after graduation.

The benefits of subsidized loans are that the government sets the interest rate on Direct Subsidized Loans and the rates are fixed. That being said, the amount students may borrow is limited.

In order to be eligible, students must complete the FAFSA. Eligibility is also based on demonstrated financial need.

Teacher Education Assistance for College and Higher Education (TEACH) Grant

Financial Aid Terms | Hocking College

The Teacher Education Assistance for College and Higher Education (TEACH) Grant provides grants of up to $4,000 a year to students who are completing or plan to complete course work needed to begin a career in teaching.

The TEACH Grant is a federal grant that is slighly different from other grants because it requires recipients to take certain kinds of classes in order to get the grant, and then do a certain kind of job to keep the grant from turning into a Direct Unsubsidized Loan that you have to repay with interest.

Total Borrowed

The total amont of money that was paid out to the borrower.


According to the Ohio TRIO website, "TRIO programs are a set of federally funded programs geared to assert our nation's commitment to providing college access for all Americans regardless of race, ethnic background or economic circumstance."

Congress established a series of programs to help low-income Americans enter college, graduate and move on to successfully participate in America's economic and social life. These programs are funded under Title IV of the Higher Education Act of 1965 as a direct result of President Lyndon B. Johnson’s War on Poverty.

Learn About Hocking College's TRIO Program Here

Unsubsidized Loan

Direct Unsubsidized Loans are federal loans that are not based on financial need. Students who receive these types of loans are responsible for interest, even while in school or while loans are in deferment after graduation.

Not What You're Looking For? Read the Other Blogs in This Series:

19 Financial Aid Terms to Help You Understand Loan Repayment

20 Financial Aid Terms for the First Generation College Student

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