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

Capitalization of Interest: The addition of unpaid interest to the principal balance of a loan. This can increase the total outstanding principal amount.

Cohort Default Rate: The percentage of loan borrowers who default before the end of the academic fiscal year following the fiscal year in which they entered repayment on their loans.

Consolidation: The process of a bank paying off a borrower's current student loans and issuing a new, single loan. The monthly payment is usually lower because the repayment term is longer.

Default: Failure to meet a financial obligation, such as a loan.

Deferment: A period in which a borrower is allowed to postpone payments on the loan principal. During deferment, the federal government pays the interest on a subsidized Stafford Loan. On other loans, the interest accrues and is capitalized, and the borrower is responsible for paying it.

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

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

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

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.

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

Free Application for Federal Student Aid (FAFSA): The official application students must use to apply for federal aid.

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

Guaranty Agency: An organization, like NELA, that insures student loans for banks and administers the student loan insurance program for the federal government.

Guarantee Fee: Insurance fee that the guaranty agency may charge a borrower. This fee, no more than 1 percent, is deducted from the loan principal amount before the borrower receives the loan funds.

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

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

Repayment: The period in which a borrower takes on the responsibility of repaying the loans that helped finance the cost of education.

Secondary Market: An organization that buys loans from banks or other lenders. This purchase of loans frees funds and allows lenders to make additional loans to students.

Servicer: An organization that maintains a borrower's loan account records.