An award year runs from July 1 to June 30 of the following year—it’s different from a calendar year that runs from January to December. When you submit a Free Application for Federal Student Aid (FAFSA^®) form, you’ll select the award year that you’re planning on attending school.

What is student loan consolidation?

Loan consolidation occurs when a borrower combines one or more federal student loans into a single Direct Consolidation Loan with a fixed interest rate and one monthly payment. Consolidating your student loans may lower your monthly payment and give you access to federal forgiveness programs. However, your repayment period may become longer, and you may pay more interest than if you hadn’t consolidated.

What is cost of attendance (COA)?

COA refers to the total cost for a student to attend a specific school during a school year. It includes expenses such as tuition, fees, books, school supplies, food, and housing. Keep in mind that your COA isn’t the price you’ll pay to attend a school—that’s known as the net price. A school’s net price is your COA minus any grants or scholarships that you receive as part of your financial aid offer from the school.

What is default?

If a borrower fails to repay their student loan, the loan may go into default. This typically occurs when a required payment isn’t made for more than 270 days. Defaulting on a student loan can have legal consequences and limit the borrower’s ability to receive student aid in the future. If you’re having trouble making payments on your student loan, contact your loan servicer.

What is deferment?

A deferment temporarily postpones monthly payments on a federal student loan for borrowers who meet certain eligibility requirements. Interest will continue to accrue (grow) on unsubsidized loans during most deferment periods, but not on subsidized loans. If you need to request a deferment, contact your loan servicer.

What is dependency status?

Dependency status refers to whether you’re considered a dependent or independent student when you fill out the Free Application for Federal Student Aid (FAFSA^®) form. An independent student reports only their own information (and their spouse’s information if they’re married). Dependent students also report their parents’ information.

What is a Direct Loan?

Direct Loans are federal student loans offered from the U.S. Department of Education to eligible students and parents. The loan types include Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

What is entrance counseling?

Before you can receive funds from a Direct Loan, you’ll need to complete entrance counseling if you are a first-time student borrower. During entrance counseling, you’ll learn about your rights and responsibilities, and you’ll review the terms and conditions of your loan. You can complete entrance counseling at StudentAid.gov, but first ask your school’s financial aid office about their specific requirements.

What is exit counseling?

If you have federal student loans and leave school or drop below half-time enrollment, you’ll need to complete exit counseling. During exit counseling, you’ll learn important information that will help you prepare to start making payments on your loans, including the terms and conditions of your loans and repayment plan options. You can complete exit counseling at StudentAid.gov, but first ask your school’s financial aid office about their specific requirements.

What is Expected Family Contribution (EFC)?

EFC is a number that’s used by schools to determine how much financial aid you’d be eligible for if you decided to attend their school. The information you provide in the Free Application for Federal Student Aid (FAFSA^®) form—such as your family’s income, assets, and benefits—affects your EFC. Learn how your EFC is calculated.

What is the Extended Repayment Plan?

The Extended Repayment Plan is a type of repayment plan that gives you more time to pay off your student loans. If you meet the eligibility requirements for the Extended Repayment Plan, you can make payments for up to 25 years. To compare all federal student loan repayment plans, use Loan Simulator.

What is forbearance?

During a forbearance, you temporarily stop making monthly payments or make smaller monthly payments on your student loans. Your loan interest will continue to grow during this time. If you need to request a forbearance, contact your loan servicer.

What is a grace period?

A grace period is the amount of time after a borrower graduates, leaves school, or drops below half-time enrollment before they are required to begin paying their student loans. For Direct Subsidized Loans and Direct Unsubsidized Loans, this is a six-month period. Direct PLUS loans don’t have a grace period, but graduate or professional students with PLUS loans automatically receive a six-month deferment if they graduate, leave school, or drop below half-time enrollment. Parent borrowers with PLUS loans can request a six-month deferment if their child graduates, leaves school, or drops below half-time enrollment.

What is the Graduated Repayment Plan?

The Graduated Repayment Plan is a type of repayment plan where your monthly student loan payments start low and increase every two years. This repayment plan is available for all Direct Loans and Federal Family Education Loan (FFEL) Program loans. To compare all federal student loan repayment plans, use Loan Simulator.

What is a grant?

A grant is a form of financial aid that provides funds to help pay for college or career school. Grants are usually awarded to students based on their financial need. Unlike student loans, grants generally don’t need to be repaid. Grants can be offered by the federal government, your state government, your college or career school, or private or nonprofit organizations. To be considered for grants, do your research to find out their eligibility and application requirements, and make sure you submit a Free Application for Federal Student Aid (FAFSA^®) form every year that you’re in school.

What is an income-driven repayment (IDR) plan?

An IDR plan is a type of student loan repayment plan that uses your income and family size to determine your monthly payment amount. There are four IDR plans available with different eligibility requirements and terms: Revised Pay As You Earn (REPAYE) Repayment Plan, Pay As You Earn (PAYE) Repayment Plan, Income-Based Repayment (IBR) Plan, and Income-Contingent Repayment (ICR) Plan. To compare all federal student loan repayment plans, use Loan Simulator.

What is interest capitalization?

Interest capitalization occurs when unpaid interest is added to a loan’s principal balance. This can increase the loan’s overall cost and your monthly payments because interest will grow on the principal balance.

What are interest rates for student loans?

Interest refers to the additional money that you must pay to borrow loan funds. The interest rate is set as a percentage of the unpaid principal amount that you borrowed. Federal student loans have a fixed interest rate, meaning the rate will not change for the life of the loan. Interest rates vary depending on the loan type and the date the loan was paid out. View the current interest rates.

What is a loan servicer?

A federal student loan servicer is a company that works on behalf of the U.S. Department of Education to handle the service on your federal student loans. This includes billing, responding to your inquiries, and helping you understand or change your repayment plan.

What is a Master Promissory Note (MPN)?

The MPN is a legal document that you must sign before you can receive funds from a Direct Loan. An MPN can cover multiple loans for up to 10 years—it serves as a promise from the borrower to repay all loans, interest, and fees. The MPN also explains the timeframe you have to take certain actions, such as cancelling all or part of a loan.

What is an origination fee for student loans?

An origination fee is a percentage of your total loan amount that’s charged for processing your loan. This fee is subtracted directly from your Direct Loan before the loan is distributed to you. For example, if you borrow a Direct Subsidized Loan of $5,000, the current loan fee is 1.057%. That means a loan fee of $52.85 would be deducted from your loan before it’s distributed to you. Although you would receive $4,947.15, you are still responsible for paying the entire $5,000 that you borrowed. Learn about fees for federal student loans.

What is a Federal Pell Grant?

A Federal Pell Grant provides grant funds to undergraduate students who have exceptional financial need. Unlike student loans, Pell Grants usually don’t need to be repaid. To see if you may be eligible for a Pell Grant, check your Student Aid Report if you’ve already submitted your Free Application for Federal Student Aid (FAFSA^®) form. If you haven’t submitted a FAFSA^® form, you can get an estimate of how much Pell Grant funds you may be eligible for by using the Federal Student Aid Estimator. You can receive Pell Grant funding for the equivalent of 12 semesters, or roughly six years. To keep track of the Pell Grant funds you’ve received, log in to your Dashboard.

What is a PLUS loan?

A PLUS loan, also known as a Direct PLUS Loan, is a type of federal student loan that’s available for eligible graduate or professional students and parents of dependent undergraduate students. PLUS loans can help pay for education-related expenses that aren’t covered by other financial aid.

What is a private student loan?

A private student loan is a loan offered by a private lender, such as a bank, credit union, state agency, or school. These loans aren’t funded by the federal government, and the loan terms and conditions are set by the lender. Learn about federal vs. private student loans.

What is refinancing for student loans?

Refinancing is the process of changing the terms of an existing student loan, typically to better terms for the borrower. Federal student and parent loans are not eligible for refinancing with the federal government. However, your loans may be eligible for loan consolidation, which combines one or more loans into a Direct Consolidation Loan with a fixed interest rate and single monthly payment. Learn why refinancing federal student loans into a private loan could result in a loss of benefits.

What is satisfactory academic progress (SAP)?

SAP is a process that schools use to determine if a student is meeting their requirements while working toward a degree or certificate. Every school has its own SAP policy, which students must follow to stay eligible to receive federal student aid. For example, a school might expect you to maintain a certain grade-point average or complete a certain number of credits each year. Check your school’s website or contact your school’s financial aid office to learn about its SAP policy.

What is a scholarship?

A scholarship is a monetary gift that can help you pay for college or career school. Unlike student loans, you don’t need to pay back a scholarship. Scholarships can be merit-based, specific to particular groups of people, or based on financial need. They can be offered by schools, individuals, employers, private companies, nonprofits, professional and social organizations, and community and religious groups. When you’re looking for scholarships, pay close attention to deadlines and keep in mind that you may be eligible for some scholarships just by filling out the Free Application for Federal Student Aid (FAFSA^®) form. To look for scholarships online, try the U.S. Department of Labor’s free scholarship search tool.

What is the Standard Repayment Plan?

The Standard Repayment Plan is a student loan repayment plan with fixed payment amounts that will pay off your loans within 10 years (or up to 30 years for consolidation loans). All borrowers are eligible for the Standard Repayment Plan. To compare all federal student loan repayment plans, use Loan Simulator.

What is a Student Aid Report (SAR)?

The SAR is a document that summarizes the information you provided on the Free Application for Federal Student Aid (FAFSA^®) form. If you submitted your FAFSA^® form online and included your email address, you’ll receive an email link to your SAR in about three to five days. Your SAR will include your Expected Family Contribution (EFC), which is a number that schools use to determine how much financial aid you’re eligible for.

Remember: Your SAR is not your financial aid offer. Each school that you’ve been accepted to will send you a financial aid offer—as long as you listed the school on your FAFSA^® form. Your financial aid offer will include the exact amounts and types of aid that the school is offering you.

Learn what to expect when you receive your SAR.

What is a subsidized loan?

A Direct Subsidized Loan is a type of federal student loan that’s available to undergraduate students with financial need. If you accept a Direct Subsidized Loan, the U.S. Department of Education will pay the interest on your loan while you’re in school at least half time, during your six-month grace period after you leave school, and during a period of deferment.

What is an unsubsidized loan?

A Direct Unsubsidized Loan is a type of federal student loan that’s available to undergraduate and graduate students. Unlike a Direct Subsidized Loan, it’s not based on financial need. Interest accrues (adds up) on Direct Unsubsidized Loans during all periods—even when you’re in school. For example, let’s say you accepted $15,000 in Direct Unsubsidized Loans with a fixed interest rate of 6.54% to help you pay for a two-year graduate program. By the time you finish your two-year program, you’ll owe an additional $1,962 in interest unless you start making payments while you’re in school.

What is work-study?

Federal Work-Study provides part-time jobs to students with financial need. Students can gain valuable work experience while earning money to help pay for college or career school expenses. To find out if your college or career school participates in the Federal Work-Study Program, check with the financial aid office. If they do, submit your Free Application for Federal Student Aid (FAFSA^®) form as early as possible to see if you’re eligible. If you accept a work-study job, you’ll be paid at least once a month.

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Financial Aid Dictionary: Top Terms Related to Grants, Work-study, and Student Loans