GLOSSARY


A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

--A--

Accrued Interest: Interest accumulating on the unpaid principal balance of a loan.

ACH: Automated Clearing House.

AGI: Adjusted Gross Income.

Applicant: A person who applies for a student loan.

Asset Transfer: The sale of loans from one entity to another.

Authentication: (1) The process of confirming the borrower's identity; or (2) the process used to confirm that an electronically signed document has not been altered and is the actual document signed by a borrower. Authentication of the borrower's identity can be accomplished by comparing certain data provided by the borrower with data maintained by an independent source. Authentication of a document can be accomplished by having proven processes in place to prevent the alteration of a document.

Auto Pay: During repayment, a borrower can make loan payments through automatic deduction from an account with his or her financial institution.

--B--

Borrower: A person who is legally responsible for a loan obtained from a lender.

Borrower Consent: In the case of electronic signatures, before a lender or holder may conduct an electronic transaction, the borrower must agree to use an electronic record. The consent must be voluntary and based on accurate information about the transaction to be completed. The lender's procedures for obtaining consent must include a reasonable demonstration of the borrower's ability to access information in the electronic records.

Borrower Rights and Responsibilities: All terms and conditions of a promissory note that the borrower must read and agree to when signing a promissory note, whether signing with an electronic signature or a "wet" signature.

--C--

Capitalization of Interest: The addition of unpaid interest to the principal balance of a loan. This can increase the total outstanding principal amount. Interest accrues during forbearance, in-school deferment, or grace periods for unsubsidized Stafford Loans.

CLFE: California Lenders for Education.

Combination: Combining several loans into one account so that the borrower only pays one monthly bill. The original terms of the loan still apply, such as payment and interest.

Cost of Attendance (COA): The total cost of attending a postsecondary institution for one year as determined by the financial aid office. The student's budget usually includes tuition, fees, housing, food, books, supplies, transportation, and personal expenses.

Credit-ready: A borrower who has no credit history or has a credit history that does not reveal excessive delinquencies on consumer loans and charge accounts, prior education loan defaults, foreclosures, or bankruptcy, etc.

Credit-worthy: An individual without a negative credit history, according to the lender's criteria.

CSAC: California Student Aid Commission.

CSS: College Scholarship Service.

--D--

DCL: Dear Colleague Letter.

Default: Failure to meet a financial obligation, such as a loan. Stafford Loans are considered to have defaulted when a borrower's loan is more than 270 days delinquent. Staying out of default will help protect a borrower's credit record.

Deferment: A borrower is allowed to postpone payments on the loan principal. During deferment, the federal government will pay the interest on a subsidized Stafford Loan. On others, the interest will accrue and be capitalized, and the borrower is responsible for paying it.

Delinquency: Failure to make loan payments when due. Delinquency can lead to default.

Department of Education Standards: The standards described in the April 30, 2001, Department of Education document Standards for Electronic Signatures in Electronic Student Loan Transactions. This document establishes recommended standards regarding electronic signatures and implementation of the ESIGN Act as it applies to electronic transactions conducted by lenders, guaranty agencies, schools, and borrowers under the student loan programs authorized by Title IV of the Higher Education Act of 1965, as amended. These standards also identify a Safe Harbor for lenders whose processes for electronic signatures satisfy the standards.

Dependent Student: A student who does not meet any of the federal definitions for independent student. For a dependent student, the financial aid package is based on student and parent income and assets. Dependent status is determined annually when the FAFSA is filed.

Digital Signature: Refers to the specific type of electronic signature technology that uses public key cryptography. A digital signature is an alphanumeric number, attached to a document, that's both unique to the document and to the person signing the document.

Disbursement: A release of funds to the school for delivery to the borrower. This is done either electronically or with a check.

Domestic School: An accredited institution of higher education in the United States.

--E--

Electronic Document or Record: A document or record created, generated, sent, communicated, received, and/or stored by electronic means.

Electronic Funds Transfer (EFT): Any transfer of funds that is an electronic-based transaction, such as automatic deduction.

Electronic Signature: An electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.

Electronic Signatures in Global and National Commerce Act (ESIGN): A federal law allowing electronically signed documents to have the same legal integrity as documents bearing an ink (or "wet") signature.

ELM: Education Loan Management Resources.

Entrance Interview and Exit Interview: Required counseling sessions that the federal student loan borrower must attend before receiving the first loan disbursement and before leaving school.

Expected Family Contribution (EFC): Determined through the FAFSA process, this amount is calculated based on a congressionally mandated formula. It indicates how much of a family's resources are available to contribute to the student's cost of education.

--F--

FAA: Financial Aid Administrator.

FAFSA: Free Application for Federal Student Aid.

FDLP: Federal Direct Loan Program.

Federal Direct Loan Program (FDLP): A loan program authorized by Title IV, part D of the Higher Education Act of 1965, as amended, including the Federal Direct Stafford, Federal Direct PLUS and Federal Direct Consolidation Loan Programs. This program is run through a partnership between schools and the federal government and the funds come from the federal government.

Federal Family Education Loan Program (FFELP): A loan program authorized by Title IV, part B of the Higher Education Act of 1965, as amended, including the Federal Stafford, Federal PLUS, and Federal Consolidation Loan Programs. This loan program is run through a partnership of lenders, guarantors, schools and the federal government. The funds come from private lenders, the loans are then guaranteed by the guarantor and reinsured by the federal government.

Financial Aid Package: The financial aid office of a college or university determines financial aid packages. The packages can include a combination of grants, scholarships, loans and work-study.

Financial Need: The difference between the cost of education and the expected family contribution.

First-time Student: A first-year student borrowing for the first time.

Forbearance: A special agreement between lender and borrower to delay or reduce monthly loan payments because of financial hardship.

Free Application for Federal Student Aid (FAFSA): The official form students must use to apply for federal aid. The Student Aid Report (SAR) and Institutional Student Information Report (ISIR) are generated from the information the student/parents supply on the FAFSA form. The financial aid office then awards a financial aid package based on the ISIR.

Full-time Student: An enrolled student who is carrying a full-time academic workload (other than by correspondence) as determined by the school under a standard applicable to all students enrolled in a particular education program.

--G--

Grace Period: A specified time between graduation and the time loan repayment begins for the borrower.

Graduated Repayment: This repayment option initially lowers loan payments, but gradually increases the payments over the length of the repayment period.

Graduate Student: A student who:

GSL: Guaranteed Student Loan Program (now called Stafford Loan Program).

Guaranty Agency: An organization that insures student loans for lenders and administers the student loan insurance program for the federal government.

Guarantee Fee: Insurance fee that the guaranty agency charges a borrower. This fee, usually 1%, is deducted from the loan principal amount before the borrower receives the loan funds.

--H--

HEA: Higher Education Act (of 1965, as amended).

HEAL: Health Education Assistance Loan.

Holder: Owner of a student loan. The holder may be the original lender or a transferee of the student loan.

--I--

Income-sensitive Repayment: A borrower's monthly payments are adjusted annually, based on income level. Under this plan, the borrower selects payments between 4% and 25% of his/her gross monthly income.

Indebtedness: The state of owing a student loan.

Independent Student: A student who is either married, 24 years old or older, enrolled in a graduate or professional program, supporting a legal dependent(s) other than a spouse, an orphan or ward of the court, or a veteran of the U.S. Armed Forces. Dependent status is determined annually when the FAFSA is filed.

Institutional Grant: Grant programs funded and awarded by the school to students based on financial need.

Interest: An amount charged for borrowing money that is calculated as a percentage of the principal loan amount.

International Student: A student who is enrolled in a program or course of study at a school in a foreign country.

ISIR: Institutional Student Information Report.

--J--

--K--

--L--

Lender: An organization, financial institution, agency or school that provides money to a student on the condition that it will be returned.

LIBOR: The London Interbank Offered Rate is an international index based on the interest rate that banks charge each other for loans in the London wholesale money market. Some consumer loans, including private education loans, have variable interest rates that are formulated using LIBOR plus a margin.

--M--

Master Promissory Note (MPN): The promissory note a student signs when taking out a Stafford Loan. It can serve as a multi-year or serial promissory note, under which it is possible for multiple loans to be made without the necessity of having the borrower execute new promissory notes for future enrollment periods.

Merit-based Aid: Any form of financial aid awarded on the basis of merit, such as specific accomplishments or personal achievement, rather than financial need.

--N--

NASFAA: National Administration of Student Financial Aid Administrators.

NCELP: National Council of Higher Education Loan Programs.

NDN: National Disbursement Network.

NDSL: National Direct Student Loan (now called Perkins Loan Program).

NSLDS: National Student Loan Data System.

Need-based Aid: Any form of financial aid awarded with financial need as a determining factor.

Nonresident Alien: An individual who attends an institution in the United States but is not a resident of the U.S.

--O--

OASFAA: Oregon Association of Student Financial Aid Administrators.

Origination Fee: A fee charged to the borrower (usually 3%) by the federal government that is deducted from the principal of a loan before disbursement.

Originator: The organization responsible for originating the loan(s).

--P--

Parent Loan for Undergraduate Students (PLUS): A PLUS Loan is not need-based. On the student's behalf, parents or legal guardians can borrow through the PLUS program.

Pell Grant: Grant program funded by the federal government and awarded by schools to undergraduate students based on financial need.

Perkins Loan: Loan funded by the federal government and awarded by the school. These types of loans tend to have a very favorable interest rate.

PIN: Personal Identification Number.

P-NOTE: Promissory Note.

Portable Document Format (PDF): A file that can only be altered in the Adobe Acrobat software program. These files can be read by virtually anyone with a computer that has the ability to download the free reading software from the Adobe Web site.

Prepayment: An amount of money that is paid by the borrower before it is due. There is not a penalty for prepayment of federal student loans.

Principal: An amount borrowed from a lender for a specified period of time.

Private Institution: A postsecondary school which is run and supported by private individuals or a corporation rather than a government or public agency.

Private (Alternative) Loan: A loan made available to student borrowers through lending institutions. These loans are not part of the federal student loan program.

Proprietary School: An exclusively owned, private institution that is not a nonprofit educational institution.

--Q--

--R--

Repayment: This is when the borrower takes on the responsibility of repaying the loans that helped pay for the cost of education.

Repayment Schedule: A repayment plan that alerts the borrower of the length of the repayment period, monthly repayment amount, number of payments required and the due date of each payment.

Resident Alien or Other Eligible Noncitizen: Persons who are not U.S. citizens but are permanent residents of the United States.

--S--

SAR: Student Aid Report.

School: An accredited institution that awards financial aid to the student.

Secondary Market: Organizations, like Student Loan Finance Association, that buy loans from lenders. This purchase of loans frees lender funds and allows them to make additional loans to students.

Self-contained Records: Electronically signed records that contain all the information necessary to reproduce the entire electronic record and all associated signatures in a form that permits the person viewing or printing the entire electronic record to verify the contents of the record, the method used to sign it, and the person or persons signing it.

SEOG: Supplemental Educational Opportunity Grant.

Servicer: The organization that maintains the borrower's loan account records.

SLFA: Student Loan Finance Association.

Special Allowance Benefits: A percentage of the daily average unpaid principal balance, paid to a lender by the Department of Education on an eligible Stafford, PLUS, SLS or Federal Consolidation loan. It serves as an incentive for lenders to make education loans by, in effect, making up the difference between the interest rate charged to a FFELP borrower and market interest rates. The special allowance rate is set by a statutory formula.

SSCR: Student Status Confirmation Report.

SSIG: State Student Incentive Grant.

Stafford Loan: A loan that is either subsidized (need-based) or unsubsidized (non-need based) and guaranteed by the federal government for students.

Standard Repayment: A repayment plan that gives a borrower the consistency of the same monthly payments for the entire repayment period.

State Grants: Grant programs funded by each individual state and awarded by the school to students based on financial need.

Subrogation: A transfer in the ownership of a defaulted FFELP loan from a guarantor to the Department of Education.

Subsidized Stafford Loan: A need-based federal loan. Interest is paid by the federal government while the borrower is enrolled in school at least half-time, or during grace and deferment periods.

Supplemental Educational Opportunity Grant (SEOG): A grant program funded by the federal government and awarded by the school to eligible Pell Grant undergraduate students based on financial need.

--T--

Title IV: A section of the Higher Education Act of 1965, as amended, that authorizes federal loan, work and grant education financial assistance programs.

Trusted Third Party: A business other than the holder or its agent who provides services to authenticate a borrower's identity and thereby enhances the trustworthiness of the process for signing electronic records using electronic signatures and the integrity and reliability of the signed electronic records.

Tuition: The fees charged for instruction at a postsecondary institution.

--U--

Undergraduate Student: A student who is enrolled at a school in a course of study at or below the bachelor’s degree level, which is up to five academic years in length and is designed to lead to a degree or certificate at or below the bachelor's degree level.

Unsubsidized Stafford Loan: A non-need-based loan. Interest is paid by the borrower with the option of letting it accrue during periods of in-school deferment or during a grace period (see capitalization), and paying it upon completion of school.

--V--

VFA: Voluntary Flexible Allowance.

--W--

WASFAA: Western Association of Student Financial Aid Administrators.

WFAA: Washington Financial Aid Administrators.

WSNG: Washington State Need Grant.

--X--

--Y--

--Z--