Financial Aid Terms You Need to Know

financial aid terms

Financial Aid Terms You Need to Know

financial aid terms

For all families navigating the college admissions and paying for college process, it’s important  to know and understand the terms used during the financial aid process.

It can be a confusing time, especially with all the acronyms used (FAFSA, EFC, SAR, COA and more). A well-informed parent can help their student navigate the financial aid maze.

Following is an alphabetical list of commonly used terms.

Bookmark it and keep it as a handy guide during the financial aid process.

A

Acceptance Rate — The percentage of students, out of all who applied for admission to a school, who are offered admission.

Accrued Interest—Interest that accumulates from the date of loan disbursement until repayment.

AGI (Adjusted Gross Income)—The amount from your federal income tax used during the financial aid process to determine need.

Aid Package—The total amount of financial aid offered by the college after analyzing data on the FAFSA.

Articulation Agreement — An agreement intended to facilitate transferring from one college to another, particularly from a community college to a four-year college. These agreements generally detail what course credits will and will not be accepted and for what purposes.

Award Letter—An official document issued by the college’s financial aid office listing all the financial aid awarded to the student.

C

COA (Cost of Attendance)—The total cost of attending a college or university for one academic year and listed on the award letter.

CSS Profile (College Scholarship Service Profile)—a non-government FAFSA; not all colleges require it, but most private universities do.

D

Deferment—an agreement between the borrower and lender to reduce or postpone repayment of a loan for a designated period, often during enrollment in college or before being employed after graduation. During deferment, interest does not accrue on subsidized federal student loans.

Demonstrated Need—a demonstrated need is defined as the difference between total college costs (COA) and the family’s ability to pay (EFC). It is the amount of money the family needs for the student to be able to enroll at the college.

Dependent Student—a student dependent on parents or guardians for financial assistance meeting the guidelines established by the Department of Education. The Department of Education has specific criteria to determine dependency for the purpose of student aid.

Direct Loan—a loan offered by the U.S. Department of Education. Direct loans can be subsidized, unsubsidized, parent loans, graduate loans and consolidation loans.

E

EFC (Expected Family Contribution)—the amount your family is expected to pay based on their specific circumstances and finances from data retrieved on the FAFSA.

F

FAFSA (Free Application for Federal Student Aid)—A form that is completed to give colleges a picture of your financial status; colleges use this to determine the amount of aid you need to attend. If you expect to receive any form of financial aid, you must complete this form.

Federal Aid—Aid funded by the federal government and administered by the U.S. Department of Education along with the college or university.

Federal Grant—Money from the federal government that does not have to be repaid.

Federal Methodology—The formula used by the federal government in calculating a student’s Expected Family Contribution (EFC) which determines their eligibility for financial aid.

Financial Aid Appeal—An appeal is directed toward the financial aid office of the college to request additional aid beyond the amount originally offered in the financial aid award letter.

Financial Aid—Any type of grant, scholarship, or work study offered to meet the cost of attendance.

Financial Need—The difference between a college’s cost of attendance (COA) and the expected family contribution (EFC) used to award need-based financial aid.

529 Plan — A college investment tool that allows tax-free growth when funds are used for qualified educational expenses such as tuition, fees, and room and board. This can be used for college, grad school, trade school, and certain apprenticeships.

Forbearance—An agreement between the borrower and their lender to postpone repayment for a designated period based on meeting specific conditions, such as financial difficulties, medical expenses, change of employment, or other reasons acceptable to your loan servicer. During forbearance, interest accrues on all loans.

FSA ID—A required ID made up of a user name and password, that students, parents, and borrowers must create in order to access certain U.S. Department of Education online systems to confirm your identity when accessing your financial aid information and electronically signing your federal student aid documents.

G

Gapping—Refers to colleges not covering 100% of students’ financial need. If a college’s financial aid award doesn’t cover all of the student’s need, the student has been “gapped.”

Grace Period — A defined amount of time after a borrower graduates or ceases to be enrolled at least half-time before beginning repayment.

I

Income-based Repayment—Repayment plan for the major types of federal loans that caps your required monthly payment at an affordable amount based on your income and family size.

Independent student—Student who either lives independently of parents or guardians, is 24 years of age, or fulfills other requirements established by the Department of Education; this student does not include parent information on the FAFSA.

Institutional aid—Financial assistance or aid program funded and administered by the college or university.

Institutional Methodology—Method developed and maintained in partnership with practicing financial aid professionals and economists used by colleges to evaluate a family’s ability to pay for the cost of higher education.

M

Merit aid—Financial aid awarded by the college that is not based on financial need, often based on academics or other achievements and talents.

N

Need Aware—A need aware, or need sensitive, policy means that the college or university makes most of its admissions decisions without considering the student’s need for college money. In other words, they may reserve some spots for students who are able to meet the college program’s full cost of attendance (COA) without the need of loans, grants or scholarships.

Need-based Aid—Aid disbursed to students based on financial need.

Need-blind—The concept of admitting students to a college without considering their ability to pay.

Net price—The real cost for a year of college determined by taking the stated cost of attendance and subtracting free money such as merit and need-based scholarships and grants. The net price is specific to you because it’s based on your personal circumstances and the college’s financial aid policies. (

 Loans do not change the net price.)

P

PLUS (Federal Parent Loans for Undergraduate Students)—A loan with relatively low interest rates for creditworthy parents to pay the cost of education for a dependent student.

Private Parent Loan—A loan offered by a private lender, such as a bank or credit union, to cover the cost of education for a dependent student with higher interest rates. Typically, these loans offer limited deferment and forbearance options and no loan forgiveness, loan discharge or cancellation options.

Private Student Loan—aAloan offered by a private lender such as a bank or credit union, state agency, or a school for students to pay the cost of attendance, typically requiring a creditworthy cosigner to qualify.

S

SAR (Student Aid Report)—A report you receive after completing the FAFSA summarizing the data you provided to determine your expected family contribution (EFC).

Scholarship—Money to help pay for the cost of tuition that does not need to be repaid after graduation; based on specific criteria from the college itself or private organizations.

State Grants—Money from a state that is given to resident students who are attending in-state schools and does not have to be repaid.

Subsidized Loans—Lower interest rate loans awarded based on the student’s financial need with interest deferred until after graduation.

U

Unsubsidized Student Loans—Federally guaranteed loans awarded without regard to financial need with interest accruing immediately upon disbursement and regular payments beginning after graduation.

V

Verification—an asterisk next to the expected family contribution (EFC) on your Student Aid Report (SAR), your FAFSA has been selected for verification. If you’re flagged for FAFSA verification, you’ll be asked to provide documentation that proves the information you submitted is accurate.

W

Work Study—Need-based aid in the form of part-time employment at the college or a non-profit or government agency that helps pay the cost of attendance.

Y

Yield Of all applicants admitted to a school, the percentage who accept and enroll

Yield  Management — Practice some schools employ to protect their yield. For example, rejecting the applicants whom they determine are not really interested. Also called “Yield Protection.”

 

CONNECT WITH OTHER PARENTS TRYING TO FIGURE OUT

HOW TO PAY FOR COLLEGE 

JOIN ONE OR ALL OF OUR FACEBOOK GROUPS:

PAYING FOR COLLEGE 101

HOW TO FIND MERIT SCHOLARSHIPS

In this article:

Upcoming Event!

Upcoming Events

Similar Articles for You

College Grants for Women

12th Graders

College Grants for Women

Grants are a type of “gift aid,”or financial assistance. Unlike a student loan, a grant doesn’t need to be repaid.

What Is FAFSA and How Does It Work?

Finance

What Is FAFSA and How Does It Work?

The Free Application for Federal Student Aid (FAFSA) is one of the most important components of the college application. This

Tips for How to Fill Out the FAFSA, the CSS Profile, and Other Aid Forms

Applications

Tips for How to Fill Out the FAFSA, the CSS Profile, and Other Aid Forms

by Kalman A. Chany, author, The Princeton Review’s Paying for College, and President, Campus Consultants Inc. Applying for financial aid

Become a Member

At Road2College you’ll find everything you need to make the admissions and paying for college process less stressful and more transparent.

TOOLS

Explore College Insights™ — your source for finding affordable colleges and merit scholarships.

Coaching

Get coaching on admissions and college financing.

Community

Join Road2College where parents and experts work together to inform and inspire college-bound families.