Glossary of Financial Aid Terms
The following terms are loosely defined for the reader's comprehension on this site and should not be taken as legal definitions.
Accrued Interest - The interest on a student loan that begins to accrue (accumulate) after a student completes school. This interest is charged on the principal (dollar) amount of the loan.
Award letter - A document provided by the school, informing the applicant of the estimated amount of assistance for which the student is eligible; this offer could include scholarships, grants, work-study, and/or loans. The student must indicate to the school which, if any, of the items available he/she wishes to accept. Any changes in financial situation, address changes, etc. after the student has filled out the FAFSA must be reported to the school. The award letter is valid only for the upcoming year unless otherwise noted.
Borrower - Person responsible for repaying a loan who has signed and agreed to the terms in the promissory note.
Capitalizing Interest - Adding accumulated interest to the loan principal rather than having the borrower make monthly interest payments. Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan.
Cohort - Borrowers who enter repayment in a given fiscal year.
Consolidation Loans - Consolidation occurs when a borrower with multiple loans requests that all of his or her loans be consolidated into one loan. Repayment begins 60 days after discharge of prior loans; certain deferments are authorized.
Cost of attendance - Allowances in the student budget for the following expenses that the student may incur: tuition, room and board, fees, books, travel, miscellaneous, and loan fees. The total amount of a student's financial aid cannot exceed the cost of attendance.
Default - Failure to repay a loan in accordance with the terms of the promissory note.
Deferment - The temporary postponement of loan payments.
Delinquency - Incidents of late or missed loan payments, as specified in the terms of the promissory note and the selected repayment plan.
Dependent Student - A student that is financially dependent upon a parent or legal guardian or a student who does not meet certain criteria from the U.S. Department of Education for being classified as independent (see Independent Student).
Disbursement - The process in which the school pays funds directly to the student's school account from either internal or external aid sources, which is different from a refund. Aid sources include scholarships, grants, loans and other aid.
Discharge - The release of a borrower from their obligations to repay their loans. Borrowers must meet certain requirements to be eligible for discharges.
Entrance counseling - An informative online session for first-time loan borrowers. It ensures that students know they are borrowing funds for their education and that they are expected to repay the loans.
Exit counseling - An informative online session for students who cease to maintain at least half-time enrollment whether by graduation or withdrawal. The session outlines the amount of money in loans the student owes and the available repayment options.
Expected Family Contribution (EFC) -The amount that a family is expected to contribute toward college costs according to federal financial aid formulas.
Extended Repayment Plan - A plan that requires the borrower to pay at least $50 a month and allows up to 30 years to repay, depending on the amount borrowed.
Federal Direct Loan Program (FDLP) - The William D. Ford Direct Loan Program, also referred to as the Direct Loan Program, is a federal program that was authorized under the Student Loan Reform Act of 1993. FDLP provides low-interest loans to students. These loans are originated by participating institutions with capital provided directly through the U.S. Department of Education, which is the sole lender. Several loan programs exist under the umbrella of FDLP. These loans are the Stafford Subsidized loan program, the Stafford Unsubsidized loan program, the Parent Loan for Undergraduate Students (PLUS), and Consolidation loans.
Federal Family Education Loan (FFEL) Program - The Federal Family Education Loan (FFEL) Program is formerly know as Guaranteed Student Loans (GSL). Loan funds are provided primarily by commercial lenders, but principal and interest are guaranteed by the federal government through federally-funded guarantee agencies. The same loan programs that exist under FDLP also existed under FFEL: the Stafford Subsidized program, the Stafford Unsubsidized program, the Parent Loans for Undergraduate Students (PLUS), and Consolidation loans.
Federal Pell Grant - Federal money that does not have to be repaid; based on the EFC and cost of attendance. Pell Grant is only awarded to qualifying undergraduate students.
Federal Student Aid ID (FSA ID) - Students, parents, and borrowers are required to use an FSA ID, made up of a username and password, to access certain U.S. Department of Education websites. Your FSA ID is used to confirm your identity when accessing your financial aid information and electronically signing your federal student aid documents.
Federal Supplemental Educational Opportunity Grant (FSEOG) -A federal grant available to undergraduate students with exceptional financial need. Priority is given to students receiving the Federal Pell Grant with a zero EFC at Liberty University.
Federal Work Study Program -Provides part-time jobs for undergraduate and graduate students who have financial need as established by the FAFSA.
FDLP - See Federal Direct Loan Program.
FFEL - See Federal Education Loan Program.
Financial Aid Satisfactory Academic Progress (SAP) - Students must meet Financial Aid Satisfactory Academic Progress (SAP) requirements to receive federal Title IV aid that includes the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work Study, Federal TEACH Grant, and Federal Direct Education Loans (Stafford, Parent PLUS, and Grad PLUS). Liberty University also applies the SAP requirements to monitor eligibility for all institutional aid. The Virginia Commonwealth programs are administered under the guidelines from the State Council of Higher Education for Virginia (SCHEV).
Financial Check-In -The process in which students make arrangements to meet their financial obligations to Liberty University for a specific term of enrollment. More information regarding Financial Check-In can be found on this page and these videos: Online and Resident.
Free Application for Federal Student Aid (FAFSA) -A financial application that the U.S. Department of Education uses to determine student's federal financial aid eligibility. Liberty requires that this application be filed if you are to receive any institutional aid. Check out this video for more information about the FAFSA.
Grace Period - A six-month period before the first payment must be made on a Federal Direct student loan. The grace period starts the day after a borrower ceases to be enrolled at least half-time. During the grace period on an unsubsidized loan, accumulating interest must be paid or it will be capitalized.
Graduate student -A Liberty University student pursuing a degree beyond a bachelor's (four-year) degree.
Graduated Repayment Plan - A plan that allows monthly payment amounts to start out at one level and then increase every two years during the repayment period. Borrowers have up to 30 years to repay, depending on the amount they borrowed. The minimum payment must cover interest that accumulates monthly and must be at least half of the payment that would be required under the Standard Repayment Plan. The maximum amount may not be more than 1-1/2 times the payment that would be required under the Standard Repayment Plan.
Grants -Financial aid from the federal or state government, which does not have to be paid back. Grants from the federal government are generally need based. Grants from the state government are generally given to students attending an in-state school that is not state funded. Check out this video for more information about grants.
Guarantee Agency - A state or private non-profit agency that has an agreement with the U.S. Secretary of Education to administer the FFEL Program. The agency insures lenders against losses due to a borrower's default. Also called "guarantor" or "guaranty agency".
Half-time Student - A student who is carrying an academic workload that is considered at least one-half the workload of a full-time student (as determined by the school).
HEA - The Higher Education Act is the law that authorizes most of the federal programs that relate to financial aid for college.
Income-Based Repayment Plan - A federal student loan repayment option beginning July 1, 2009 that caps monthly payments based on the borrower's income, with any amounts remaining after 25 years forgiven.
Income Contingent Repayment Plan - Available only in the FDLP, this plan allows the monthly payment amounts to vary with the borrower's income, with any amount remaining after 25 years forgiven.
Income Sensitive Repayment Plan - A plan that allows the monthly payment amount to vary with the borrower's income, except that all principal and interest must be fully repaid within 25 years.
Independent Student - A student who meets one of the following criteria: the student is 24 years or older, a graduate or professional student, married, orphaned or a ward of the court, veteran of the armed services, or has documents describing circumstances of independence. (See Dependent Student).
In-School Period - Under the Stafford Subsidized loan program, the period during which the borrower pursues his or her studies as an at least half-time student at a participating school. This period begins with the date of disbursement and ends with the beginning of the grace period. During the in-school period, borrowers are not charged interest (in FFEL, the federal government pays lenders interest benefits and special allowances).
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.
Interest Benefits - Under the Stafford Subsidized loan program, the government pays a borrower's interest payments during the in-school and grace periods, and during any authorized deferment periods.
IRS Data Retrieval Tool - A tool within the FAFSA that allows you to electronically transfer your tax information directly from the IRS, which fills in many financial questions on the FAFSA.
IRS Offset - When other collection efforts fail, the U.S. Department of Education turns over a defaulted borrower's account to the Internal Revenue Service (IRS). The IRS offsets the debt against the defaulter's income tax refund.
Loan Limits - Limits placed on student borrowers in terms of the maximum number of dollars they may obtain through federally funded student financial assistance programs. Loan limits vary by loan type, academic level, program length, and whether a student is dependent or independent.
Loan Principal - The total sum of money borrowed.
Loans in Repayment - Loans that have entered the repayment period after expiration of the grace period.
Master Promissory Note (MPN) - A legally binding contract between a lender and a borrower, that contains the terms and conditions of the loan, including how the loan is to be repaid.
Origination Fee - A fee charged and deducted from the proceeds of a loan before the loan is disbursed. In the federal loan programs, the origination fee is paid to the government to offset its costs.
Parent PLUS Loan - Federal Parent Loans for Undergraduate Students (PLUS). Loans taken out by parents for the purpose of helping to pay for their children's undergraduate education. Parents are responsible for all interest charges. The loan value may not exceed the full cost of the student's education, minus any other financial aid that the student receives.
Pre-payment - 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 federal student loans.
Public Service Loan Forgiveness - A program for federal student loan borrowers that forgives remaining debt for people who work in non-profit, government, and public service jobs after ten years of qualifying payments.
Refund - The process of paying a student from a credit balance present on the student's account according to the preference the student provided during Financial Check-In in ASIST. In all cases, credit balances generated from a Federal Parent PLUS loan will refund to the parent, unless otherwise authorized by the borrower (a refund is not the same as a disbursement).
Rehabilitation Loans - When twelve consecutive payments have been made on a formerly defaulted loan, it can become a rehabilitation loan. Once a loan becomes rehabilitated, it becomes a new loan. A borrower again becomes eligible for participation in federal financial aid programs.
Reinsurance Payments (Reinsurance Default Claims) - Monies the federal government gives a guarantee agency as reimbursement for payments made to lenders for losses due to borrower default.
Repayment Period - The period for which the borrower is responsible for repaying his or her loan. In the case of Stafford loans, this period begins on the day after the last day of the grace period. In the case of PLUS loans, this period begins on the day the loan is disbursed. The maximum repayment period is ten years, not including any authorized deferment or forbearance periods.
Repayment Schedule - A statement provided to the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.
Scholarships -Financial aid that does not have to be repaid. Scholarships may be received from Liberty University or an external organization. In order to be eligible for Liberty scholarships, the student must have a complete FAFSA on file annually.
Special Allowance - A quarterly supplemental interest payment to lenders based on the outstanding principal balance of Stafford, PLUS and Consolidation loans. This payment assures that, as a complement to the borrower's interest rate, the lenders receive a guaranteed yield on their loans even when interest rates change.
Subsidized Loan (FDLP and FFEL) - A federally subsidized student loan made on the basis of the student's financial need and other specific eligibility requirements. Subsidized loans have subsidized interest, which means that the federal government covers the interest on these loans while borrowers are enrolled at least half-time, during the six-month grace period following graduation, or during authorized periods of deferment. Subsidized loans are available to undergraduate students while the student is in school. The borrower begins to repay the principal and interest after leaving school.
Unsubsidized Loan (FDLP and FFEL) - These loans are made to borrowers meeting specific eligibility requirements. Interest is charged throughout the life of the loan. The borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized (added to the loan principal).
Standard Repayment Plan - A repayment schedule that allows up to ten years to repay student loans, with a minimum monthly payment of $50 a month. This is the default repayment plan for unconsolidated federal student loans, although borrowers can choose other plans.
Student Aid Report (SAR) -A report sent to the student from the U.S. Department of Education that contains the following: an EFC calculation, a summary of the information the student submitted on the FAFSA, results of matches with other federal agency databases, and the student's financial aid history. It also defines any issues that the U.S. Department of Education requires the student to resolve before financial aid can be processed.
Title IV - The portion of the Higher Education Act (see HEA) that includes most of the federal financial aid programs.
Undergraduate student -A Liberty University student who has not yet completed a bachelor's (four-year) degree.
Variable Interest - Rate of interest on a loan that is tied to a stated index and changes annually every July 1 as the index changes.
Verification -The process of confirming the accuracy of information reported on the FAFSA with the U.S. Department of Education. Check out this video to learn more about the verification process at Liberty University.
Virginia Tuition Assistance Grant (VTAG) -A non-need based grant for full-time Virginia residents who have permanently resided in Virginia for at least one year. Students must also be enrolled in an eligible degree program.