It is important that you understand the financial aid process and the terms of your student loan. Following are some important terms:
- Accrued Interest
- Interest that accumulates on unpaid Unsubsidized Stafford loan balances while the borrower is in school. Interest accrues on subsidized and unsubsidized portions of a Consolidation Loan while the borrower is in school, grace, deferment, and regular repayment statuses. Interest accrues on subsidized and the subsidized portion of a Consolidation Loan during regular repayment status. Interest also accrues on PLUS loans while the dependant student is in school, during regular deferment, and regular repayment when the student is no longer in school.
- Borrower Fees
- Fees which the borrower has to pay to get a student loan. The federal government stipulates the amount of the fees to be withheld from loan disbursements.
- Capitalized Interest
- Addition of accrued (unpaid) interest to a loan balance which increases the total debt. Most Unsubsidized Stafford borrowers allow their unpaid interest to be added to their balance at repayment rather than paying it while in school.
- Default
- Failure to repay a loan according to the terms of a promissory note or from failure to submit requests for deferment or cancellation on time. If you default, the lender, servicer, guarantor or federal government will take legal action to recover the loan.
- Deferment
- A period when a borrower who meets certain criteria may suspend loan payments. On Subsidized Stafford Loans, the federal government pays the loan interest during deferments. Unsubsidized Stafford, PLUS, and Grad PLUS borrowers are responsible for the interest during deferment. Deferment is a tool available to borrowers to help avoid default. Interest is paid by the government on the subsidized portion of a Consolidation Loan. Borrowers are responsible for the interest during deferment on the unsubsidized portion of a Consolidation Loan.
- Disbursement
- The release of student loan funds to borrowers by the school. The Financial Aid Office determines the amount of the disbursment and the disbursement date. A student loan may have multiple disbursement dates.
- Forbearance
- A temporary suspension of student loan payments available to borrowers when they are having problems making their regular student loan payments. A forbearance may be used when a borrower is not otherwise eligible for a deferment and can help borrowers avoid defaulting on their loan. OSLA sets a limit to forbearance during repayment.
- Grace Period
- The six-month period after the Stafford Loan borrower is no longer enrolled on an at least a half-time basis and loan payments are not required. Repayment of Stafford loans begins after the grace period has expired. There is not a grace period for PLUS loans; repayment begins immediately after funds are fully disbursed.
- Guarantor
- An agency that insures student loans against default and helps the federal government administer the student loan program.
- Loan Holder
- The owner of the loan. The holder may not be the lender which originally made the loan.
- Master Promissory Note (MPN)
- The binding legal document signed for a student loan. It lists the conditions under which monies are borrowed and the terms under which the loan is paid back. It also includes information about the loan interest rate as well as deferment and cancellation provisions.
- Notice of Loan Guarantee and Disclosure
- Notification from the lender acknowledging loan approval and listing the dates for loan disbursements, the loan interest rate, the amount of borrower fees and the net amount of the loan disbursement.