Terminology for Financial Aid
NOTE: The Federal Government has an excellent online glossary and help section for a wide variety of terms and questions. The items listed below are the main terms that you will read/hear about while completing your financial aid.
Academic year- A period of no less than 30 weeks of instructional time, normally two semesters.
Accrual date- The day interest charges begin to be added to the loan balance.
Accruing interest- The adding of interest to a loan amount. For some loans, interest charges begin to add up as soon as the loan is made, increasing the total amount due.
Adjusted Gross Income- (AGI) is a United States tax term for an amount used in the calculation of an individual's income tax liability.
Assets- For financial aid purposes, assets are generally considered to include cash on hand in checking and savings accounts, trusts, stocks, bonds, home equity, other securities (real estate, income-producing property, business equipment and business inventory). These assets are considered in determining expected family contribution (EFC).
Award Letter- A letter notifying financial aid applicants of the assistance being offered. The award letter provides information on the types of and amounts of aid offered, as well as specific program information, student responsibilities, and the conditions which govern the award.
Borrower- The person who assumes legal obligations of the repayment of the loan principal plus interest. In the case of a Federal Direct Loan the borrower is the student. In the case of a PLUS Loan the borrower is the parent.
Capitalization- When a lender accrues interest before the borrower starts repayment, then adds that amount to the principal. This is sometimes called "compounding." Capitalizing increases the total to be repaid and the size of the minimum monthly payment. Students can avoid capitalizing by paying interest as it accrues.
Default- A borrower's failure to repay according to the terms agreed upon when the promissory note was signed. Default can also occur when a borrower fails to submit requests for deferment or cancellation. When a borrower defaults on a federal student loan, the school, the organization holding the loan, the guaranty agency, and the federal government can all take action to recover the money. A borrower is considered to be "in default" when payments are 180 or more days overdue and no satisfactory arrangements for payment, deferment or forbearance have been made. Assets, including Internal Revenue Service (IRS) refunds, may be seized and the borrower's credit record or history can be affected. Student loan borrowers in default will remain so until they pay back their loan in full, sign new loan agreements or reschedule their debt. While in default, they are ineligible for additional federal student aid, including grants and loans.
Deferment- An authorized period of time during which a student loan borrower may postpone making payments on the principal or the principal plus interest. Borrowers must file deferment forms with their lenders and be approved for deferments.
Demonstrated Need- The difference between cost of college attendance and a student's (and the student's parents') ability to pay that cost: Student's Cost of Attendance Budget minus Family Contributions equals Demonstrated need
Direct Loans- William D. Ford Federal Direct Loan Program provides low-interest loans for students and parents to help pay for the cost of a student's post-secondary education. The lender is the United States Department of Education, rather than a bank or other financial institution.
EFC- Expected Family Contribution. The amount that the federal government has determined to be the student's/parent's contribution toward education expenses.
Eligible Non-citizen- Student who is not a citizen of the United States, but has a valid Alien Registration Card I-551 (Green Card) or a valid I-94 (Arrival Departure Record with valid designation).
Federal Family Education Loan Program- (FFELP) Education loans provided by private lenders and guaranteed by the federal government. Subsidized and unsubsidized Stafford loans and PLUS are included.
Federal Methodology- (FM) The formulas used to determine a student's eligibility for federal Title IV funds. The formulas take into account income, assets, expenses, family size and other factors.
Federal Pell Grant- Pell grants are available to students who have demonstrated significant financial need, as determined by the Free Application for Student Aid. This grant does not have to be repaid.
Financial Need- The difference between what it costs to attend a particular college and the amount it has been determined that a student and his/her family can afford to pay toward those expenses.
Free Application for Federal Student Aid- (FAFSA) A form used to apply for all Federal Title IV student aid programs, including Pell Grants, Stafford Loans and campus-based programs (SEOG and work-study). The FAFSA, which is collected, distributed and processed by the United States Department of Education, gathers the information required to determine need and eligibility according to the federal methodology. The application is available at www.fafsa.ed.gov.
Grace Period- A specified time period after a student leaves school or drops below half-time status during which he or she is not required to make payments on student-loan principal or interest. The grace period is typically six months, depending on the type of loan.
Graduated Payments- A flexible rescheduling of loan payments that allows the borrower to make payments of different amounts (available through consolidation).
Grant- A form of financial aid which does not have to be repaid. Also known as gift aid and/or merit scholarships.
Guarantee Fee- A premium deducted from the proceeds of a Stafford Loan prior to disbursement and paid to the guarantor.
Guaranty Agency- A national or state agency that insures student loans.
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Independent Student- In order to file your financial aid application as an independent student you must meet one or more of the following criteria:
- Age 24 by January 1 of the aid year
- Veteran of the U.S. Armed Forces
- Currently serving on active duty in the U.S. Armed Forces for purposes other than training
- Graduate or graduate/professional student
- Married prior to filing and signing the Free Application for Federal Student Aid (FAFSA)
- Orphan or ward of the court
- Have legal dependents other than a spouse
However, there may be family situations that warrant a dependency override for extreme circumstances, such as drug or physical abuse, neglect, abandonment, or refugee students. A Dependency Override Request may be made to the University in such cases.
Institutional Student Information Report- (ISIR) An electronic record sent by the Department of Education to the school of choice as a result of completing the Free Application for Student Financial Aid (FAFSA). Also referred to as SAR.
Institutional Verification Form (IVF)- Form sent by the University to students selected for verification for update on taxable/non-taxable income and household size.
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Lender- A financial institution, such as a bank, a state agency, a savings and loan association, a credit union, or a qualified program that makes FFELP and/or private loans.
Loan Consolidation- An entirely new loan combining the repayment of two or more student loans, reducing the amount of monthly payments and extending the loan term.
MCS- Michigan Competitive Scholarship. Need-based scholarship administered by the Michigan Higher Education Assistance Authority. Eligibility is based, in part on ACT test scores.
Merit-Based Aid- Financial aid that is awarded based on a student's academic, athletic, or artistic merit, or some other criteria. It does not depend on financial need.
MPN- Master Promissory Note -The MPN essentially opens a line of credit for education expenses during your academic career. When you sign a promissory note, you promise to repay your student loans. This note also includes important information about your rights and responsibilities as a borrower. The Stafford MPN is good for ten years provided at least one Stafford Loan disbursed to you within the first 12 months after signing.
MTG- Michigan Tuition Grant. Need-based grant program for students attending private universities (such as Davenport) in Michigan.
Need Analysis- The process that determines a student's demonstrated financial need by analyzing the information provided by the student and his or her parents (or spouse, if applicable) on financial aid forms(s). All students are required to file a FAFSA (Free Application for Federal Aid) to apply for need-based federal financial aid programs.
Need-Based Aid- Financial aid that is awarded based on a student's financial circumstances. Need-based aid can be awarded in the form of grants, loans, or work-study pay.
Origination Fee- A fee charged by the federal government and deducted from the proceeds of a loan before disbursement. This fee partially offsets the administrative costs of the Federal Family Educational Loan Program (FFELP).
Principal- The original amount borrowed. Origination and guaranty fees are deducted from this amount before disbursement, and interest is computed as a percentage of principal.
Promissory Note- The legal document a borrower signs. The promissory note includes the conditions under which the money is borrowed, interest rates and other terms. Borrowers should retain copies of all promissory notes until loans are fully paid.
PLUS Loans- Federal loans made by commercial institutions that are designed to help parents meet the cost of a university education for their children.
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Repayment Schedule- Description of the borrower's monthly payment, interest rate, total payment obligation, due dates and length of time for repaying the loan.
SAR- Student Aid Report - Document received by student as a result of filing the Free Application for
Federal Student Aid (FAFSA).
Selective Service Registration- All male students 18 years old and born after December 31, 1959, must be registered with Selective Service in order to receive federal student aid.
SOP/SAP- Standards of Progress/Satisfactory Academic Progress. Minimum academic standards that a student must maintain in order to continue to receive financial aid.
Subsidized Loan- The government pays the interest on the loan while the student is in school, during the six-month grace period, and during any deferment periods. Subsidized loans are awarded based on financial need and may not be used to finance the family contribution.
TIP- Tuition Incentive Program. TIP is an incentive program that encourages eligible Michigan students to complete high school by providing tuition assistance for the first two years of college and beyond. Click here for more information.
Unsubsidized Loan- With this loan, the government does not pay the interest while the student is enrolled. So the student has the option to either pay the accruing interest monthly or allow the interest to capitalize. Required payments do not begin until 6 months after the student drops below half-time enrollment. Unsubsidized Stafford Loans are not based on financial need and therefore may be used to finance the family contribution.
Verification- The process of the University checking the information that the student reported on the financial aid application. This is done by requiring the student to complete the Institutional Verification Form (IVF) and requiring the student to submit various documents such as student and parent tax forms.
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