Education Loan Glossary | PNC

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Terms A - B

Academic Year	The period of time each year when the school is open and people are studying - either semesters or quarters. These vary school by school, and even by educational program at the same school.
Accrued Interest	The amount of money to be repaid on a loan in addition to the original principal amount borrowed.
Aggregate Limit	The maximum amount a student can borrow under a certain loan program during all their years in school.
Amortization	A gradual reduction of a loan debt through periodic installment payments of principal and interest.
Annual Limit	The maximum amount a student can borrow from a certain loan program in a given academic year. (Once the maximum annual limit is met, the student cannot borrow any more funds for that academic year).
Annual Percentage Rate (APR)	The yearly cost of the loan to the borrower. It reflects all finance charges, and may include interest, a guarantee fee and an origination fee.
Application and Solicitation Disclosure (ASD)	Disclosure provided with an application or solicitation which contains information about the interest rate, fees, repayment terms, cost estimates, Federal loan alternatives, eligibility criteria and other key information about the private student loan.
Approval Disclosure (AD)	Disclosure, provided at the time of approval, which contains the specific terms such as the interest rate, fees, repayment terms, cost estimates, Federal loan alternatives and other key information about the private student loan. The disclosure explains the steps the borrower must take to accept the terms of the loan. The consumer has 30 calendar days after receipt of the disclosure to accept the terms of the loan.
Assets	Things that make up your (or your family's) financial worth - valuable possessions that can be used to pay back your loan. This can include real estate, stocks, bonds, cash savings and college savings plans.
Award Letter	A letter notifying you of the types and amounts of aid being offered by the college you applied to, as well as your responsibilities for the money and the “fine print” (terms and conditions) of each award. It may also be called a financial aid package or a school aid package.
Award Year	The period between July 1st of a given calendar year and June 30th of the following calendar year, for the purposes of determining federal Pell grant and campus-based program awards.
Borrower	A person who agrees to repay money received, plus interest, according to the terms of a promissory note they signed. Another way to look at it - are you borrowing money? Then you're a borrower.
Borrower Authorization Statement	The borrower's written authorization for the release of disbursements of FFEL program loan proceeds disbursed on behalf of the borrower by electronic funds transfer (EFT) or master check to an account of the school.

Terms C - D

Campus-Based Aid	The school administers federal money to qualifying students. There are three programs for this: Perkins Loan, Federal Supplemental Educational Opportunity Grant (SEOG), and Federal Work-Study.
Cancelled Loan	A status assigned to a loan that is no longer being processed because the loan proceeds have been returned to the lender. Partial cancellations can occur when a portion of the loan proceeds are returned.
Capitalization	When interest is added to the base loan amount, rather than being paid immediately. Any future interest increases because it's based on the higher loan amount (the combined total of principal and accrued interest), a.k.a. the snowball effect. Tip: Avoid capitalization if you can by making interest payments while in school. You'll save money.
Certification	A financial aid officer confirms for the lender that a loan applicant meets certain eligibility criteria such as student enrollment and eligible financial aid amounts.
Citizen/Eligible Non-Citizen	An eligibility requirement that must be met by most loan borrowers and recipients. Schools apply official government definitions to determine citizen/non-citizen eligibility for student loans. Some individuals who are not U.S. citizens can still apply for Stafford and PLUS federal loans - including (but not limited to) U.S. permanent residents with an Alien Registration Receipt Card.
Co-signer	A person who assumes joint responsibility with the primary borrower for repaying a loan. Federal student loans do not require a co-signer, but many private/alternative loans do. Getting a co-signer with good credit might help a borrower improve the terms of a private loan.
Consolidation Loan	A federal loan that is used to combine (consolidate) loans for borrowers with multiple lenders. Visit ed.gov for more information.
Cost of Attendance (COA)	It's the estimated cost to attend a year of school - including not just tuition and fees, but also books, supplies, transportation, room and board, spending money, health insurance and loan fees. It's an average and a great place to start comparing costs between schools - but always take the time to confirm what YOUR costs will be.
Cost Minus Aid	A figure calculated by deducting all financial assistance the student has been or will be awarded from the cost of attendance.
Credit History	A record of an individual's past performance of borrowing and repaying debts.
Default	Failure to pay a loan back according to the terms on the promissory note. After 270 days of non-payment on federal student loans, it's reasonable to assume that the borrower no longer plans to honor the obligation to repay. Do not mess with this. Defaults are reported to credit bureaus marking you as a bad credit risk, making it very hard to get loans in the future. Tip: Repayment terms might sound complicated and boring, but it's worth a little homework up front to make sure you can afford to pay your loans back.
Debt-to-income ratio	The percentage of income that goes toward paying debt.
Deferment	A temporary postponement of payments of principal and/or interest on a loan. A deferment is an entitlement, meaning it must be granted by the lender or servicer if you qualify. Stafford loans and most private student loans offer deferment options while you are in school - but interest may be adding up. Make sure you ask if it is.
Deferred Interest	Interest payments that are delayed for the borrower during a specified period and paid at a later time.
Dependent Student	A student under 24 years old whose parental income and asset information is used in calculating the Expected Family Contribution. Dependent students must include parental information on the FAFSA to be considered for financial aid.
Direct Loans	Loans (subsidized and unsubsidized Stafford loans, PLUS loans and consolidation loans) offered under the William D. Ford Federal Direct Loan Program, where the federal government acts as the lender and guarantor.
Disbursement	This typically refers to the transfer of funds from a lender to the school, or from the school to the student.
Multiple Disbursement	The disbursement of a loan in more than one pre-designated installment.
DOE	U.S. Department of Education

Terms E - F

Enrollment Status	According to a school or lender, the designation of the student as being full-time, less than full-time but at least half-time, or being less than half-time.
Expected Family Contribution (EFC)	An estimate of a student's personal and/or family money that should be available to help pay educational costs, based on the federal methodology. The EFC is calculated using the information provided on the FAFSA.
FAFSA (Free Application for Federal Student Aid)	The Free Application for Federal Student Aid (FAFSA) is a form that can be filled out annually by current and prospective university students (both undergraduate and graduate) - and sometimes their parents - to determine their eligibility for federal student financial aid (including grants, loans, and Federal Work-Study programs). In addition, most states and schools use information from the FAFSA to award non-federal aid.
FAFSA on the Web	The electronic version of the FAFSA that allows applicants to complete and file their annual federal financial aid applications online.
Federal Family Education Loan Program (FFELP)	The government program that made Stafford, Parent PLUS and Graduate PLUS loans possible. These loan programs were funded by private lenders such as banks, guaranteed by guarantors and reinsured by the federal government. This program ended in July 2010.
Federal Methodology	The formula that Congress sets to determine the Expected Family Contribution (EFC) for student financial aid applicants.
Federal Processor	Also called Central Processing Service (CPS), it's the “machine” (or more technically, a computer system) that takes your FAFSA, figures out the Expected Family Contribution (EFC), and then sends out the Student Aid Report (SAR).
Final Disclosure(FD)	Disclosure, provided after the borrower accepts the terms of the loan, which contains the specific terms such as the interest rate, fees, repayment terms, cost estimates and other key information about the private student loan. The disclosure provides the borrower a “right to cancel” period which allows the borrower to cancel the loan without penalty at any time by midnight of the third business day after receipt of the final disclosure.
Financial Aid	Money provided by federal and state governments and by the college to help pay for school. Private and corporate funding options may also be available. Financial aid can include grants, scholarships and loans.
Financial Aid Eligibility	The difference between a student's Expected Family Contribution (EFC) and the cost of attendance; also known as financial need.
Fixed Interest Rate	An interest rate that stays the same for the life of the loan, as opposed to a variable interest rate which changes.
Forbearance	When a lender allows the borrower to temporarily postpone repaying the loan principal, usually because of economic hardship. Interest continues to accrue. Note: If your loan is in default, you can't apply for forbearance.
Free Application for Federal Student Aid (FAFSA)	Completing the FAFSA is the first step in the financial aid process. It's the form used to apply for federal student financial aid, including grants, loans and Federal Work-Study. In addition, most states and schools use this application form to award non-federal student financial aid. It's like your key to just about every kind of financial aid, so we like to think of it as Financial Aid's First Step Always. The FASFA can be submitted online - and it's much easier that way.
FSA ID	An FSA ID is a username and password you must use to log in to certain U.S. Department of Education (ED) websites. It serves as your e-signature on the electronic FAFSA. Both students and parents can obtain a FSA ID. Create one at fsaid.ed.gov.
Full Deferment Repayment	Borrower makes no loan payments while enrolled in school full time or during any grace period after leaving school. Interest will accrue and be added to the principal loan amount upon entering repayment.
Full-time Enrollment	A period of time generally defined as a minimum of 12 semester hours per academic term or 24-clock-hours attendance.

Terms G- I

Gift Aid	Grants and scholarships that do not require repayment. You know, like a gift.
Grace Period	This is the time after a student graduates or withdraws from school and before loan repayment begins. Grace periods are six months for Stafford and nine months for Perkins. There is no grace period for PLUS loans.
Graduate PLUS Loan	A loan program which allows graduate or professional students to borrow under the Federal PLUS Loan Program. A graduate/professional student enrolled at least half time may borrow up to the total cost of education, minus any other financial aid received through this federally-guaranteed program.
Graduated Repayment	A repayment plan where the payment amount changes periodically, usually increasing at scheduled intervals during the course of the repayment period.
Grant	Grants are “cash” financial aid that does not require repayment (gift aid). There are federal, state and university grants.
Guarantee	A promise to pay a debt if the borrower fails; the government or guaranty agency guarantees/insures federal loans. Note: This doesn't mean you're off the hook if you default on your loan.
Guarantor	A non-profit organization that guarantees that if a borrower defaults, it will pay on federal loans borrowed through the FFEL program. Note: Again, this doesn't mean you're off the hook if you default on your loan.
Half-time Enrollment	When a student is enrolled in school a minimum of six semester hours per academic term, or 12 clock hour of attendance.
Immediate Repayment	Borrower makes loan payments (principal and interest) while in school. This option provides for the maximum savings over the life of the loan.
Income-Based Repayment	A payment option for federal student loans that helps borrowers keep their loan payments affordable with payment caps based on their income and family size. For most eligible borrowers, income-based repayment (IBR) loan payments will be less than 10 percent of their income – and even smaller for borrowers with low earnings. IBR will also forgive any remaining debt after 25 years of qualifying payments.
Income-Sensitive Repayment Schedule	A repayment schedule for some federal loans under which the borrower's monthly payment amount is adjusted annually, based solely on the borrower's expected total monthly gross income received from employment and other sources during the course of the repayment period.
Independent Student	A student who is 24 years old or older, or who is not 24 but otherwise on their own: both parents are deceased, they're a ward/dependent of the court, a veteran, married, a graduate or professional student, someone who has legal dependents other than a spouse, or has special circumstances. See the FAFSA for exact requirements.
Interest Only Repayment	Borrower makes interest payments while in school and during any grace period after leaving school. Making interest payments while enrolled in school reduces the overall total cost of the loan.
Index	An index is a money market rate such as the Prime Rate, LIBOR or a Treasury Bill that lenders use to determine interest rates for the loans they offer to customers. An index is used almost exclusively for variable rate loans.
Interest	The fee charged to borrow money, calculated as a percentage of the principal amount owed.
Interest Rate	The actual rate of simple interest paid by the borrower. Different types include variable rate and fixed rate. Variable rate loans adjust according to economic and market conditions, either monthly, quarterly or annually. Fixed rate loans have the same interest rate for the entire term of the loan.

Terms L - R

Legal Guardian	An individual appointed by a court to be the guardian of a person and specifically required by the court to use his or her financial resources for the support of that person.
Lender	An entity that lends money to a borrower based upon mutually agreeable eligibility and repayment provisions, like a bank or the government. Not like a parent or a friend, unless they make you sign something.
LIBOR (London Interbank Offered Rate)	LIBOR is the interest rate that banks charge each other for loans. It's the most widely used benchmark or reference rate for short-term interest rates annually.
Loans	Financial aid that must be repaid based on the terms of the loan. Various loans are available for students and parents with different terms and conditions for each loan. There are two categories of student loans: government loans include Stafford, Parent PLUS and Graduate PLUS, and private loans from lenders.
Master Promissory Note (MPN)	A legally binding contract that covers all loans made by the same lender to the same borrower for the same loan program.
Need-Based	Financial aid that depends on your personal and/or family's ability to help pay for school; most government sources of financial aid are need-based.
Origination Fee	The fee charged to consumers for borrowing loans. The PNC Solution Loan^® has no origination fee.
Parent Loan for Undergraduate Students (PLUS Loan)	A federal education loan programs that allows parents of dependent undergraduate students to borrow loans for their child's education.
Prime Rate	An index rate, like LIBOR, at which banks often borrow money from each other. The Prime Rate is used by some variable rate loan programs.
Principal	The amount of a loan that must be repaid upon maturity and the amount upon which interest will be charged.
Promissory Note	The legally binding contract or “promise to pay” between a borrower and lender, listing all terms and conditions of a loan.
Repayment Period	The period during which interest accrues on the loan and principal payments are required. For federal student loans, the repayment period excludes any period of authorized deferment or forbearance; however interest will continue to accrue during these periods for unsubsidized Stafford and PLUS loans.
Right to Cancel	Time period after receipt of the Final Disclosure that provides the borrower the right to cancel the loan without penalty at any time by midnight of the third business day after receipt of the final disclosure.

Terms S - W

Scholarship	Also known as gift-aid or “free money,” a scholarship does not require repayment and can be awarded from a number of sources and for a number of reasons. Some scholarships are awarded on the basis of merit, academic excellence, study in a particular major, leadership, plans to study abroad or financial need. Others are awarded as part of a contest, random drawing or other selection process.
Self-Certification Form	Form that must be obtained by the lender, either from the student or from the student’s school, before consummating a private education loan. The form includes information about the availability of Federal private education loans, the student’s cost of attendance, the amount of any financial aid and the amount the student can borrow to cover any gap.
Self-Help Aid	Sometimes used as the counterpoint to “gift aid,” this financial aid is either loans that must be repaid or work-study funds that must be earned.
Servicer	An entity that enters into a contract with a student loan lender, such as a bank, to administer any aspect of its participation in lending federal student loans. If you have questions about your loans after applying, you should contact your loan servicer.
Standard Repayment	A repayment schedule under which the borrower pays the same amount for each installment payment throughout the entire repayment period, or pays an amount that adjusts to reflect annual changes in the loan's variable interest rate.
Student Aid Report (SAR)	The Student Aid Report is produced by the U.S. Department of Education and sent to students who have applied for federal student financial aid by filing the FAFSA. It is also sent to any schools a student lists on the FAFSA. The SAR summarizes the information from the student's FAFSA, and provides families and schools with the student's EFC (Expected Family Contribution).
Subsidized Loan	A loan, such as a subsidized Federal Stafford Loan, where the federal government pays the interest that accrues while you're in school, during your grace period, during authorized deferment periods, and post-deferment grace periods (if applicable), if the loan meets certain eligibility requirements. During repayment, you pay the interest that accrues.
Total Cost of Degree (TCD)	Your total cost of degree (TCD) is the absolute cost of everything for the entire time you're in school: tuition and fees, books, supplies, transportation, room and board, spending money and health insurance.
Treasury Bill	Like LIBOR and the Prime Rate, Treasury Bills or T-Bills can be used as a index to calculate a loan's interest rate. It's the rate paid by the government on short-term borrowing and is reset periodically.
Unsubsidized Loan	A non-need based loan such as an unsubsidized Federal Stafford or PLUS Loan. The borrower is responsible for paying the interest that accrues while the student is in school, during grace periods and during deferment periods, in addition to repayment periods.
Variable Interest Rate	An interest rate that changes, usually monthly, quarterly or annually. Loans with variable interest rates use an index on which to base their rate, such as LIBOR, the Prime Rate or T-Bills.
Verification	Colleges sometimes double-check information on your FAFSA. When they do so, the process is called verification, and they'll often ask for a copy of your or your parent's signed tax return.
Work-Study, Federal (FWS)	A financial aid program from the government that allows a student to work on campus or with approved off-campus employers to earn money to pay for college expenses.

Important Legal Disclosures and Information

You are encouraged to explore all scholarship, grant and federal borrowing options before applying for a private loan.

PNC does not provide accounting, tax or legal advice.