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Glossary of Financial Aid Terms

Assets: when determining financial need, anything that is owned, such as cash, real estate, investments or savings accounts.

Award letter: letter sent to students outlining the financial aid package offered. The student needs to sign and return this letter to accept the aid.

College Scholarship Service (CSS): one of the services on which the government and colleges rely when figuring out a family's expected contribution (see Estimated Family Contribution [EFC]).

Congressional Methodology: standard formula developed by Congress under the Higher Education Amendment of 1986, which is used to evaluate parents' income and assets, taking into consideration the number of college-aged children and associated, anticipated college costs. This evaluation helps determine the Estimated Family Contribution (EFC) and the student's eligibility for financial aid.

Consolidation: payment option for students with multiple loan debts that allows borrowers to combine the principals and pay back loans in monthly installments for up to 25 years.

Deferment: postponement of a loan's repayment, offered by many federal loan programs.

Dependent student: student who relies on his or her parents for financial support.

Disbursement: a payment from scholarships, grants or other sources.

Eligibility: degree to which a student qualifies for financial aid.

Estimated Family Contribution (EFC): amount of money a student's family can contribute to the cost of college, determined with a standard formula called the Congressional Methodology and used in determining a student's eligibility for financial aid.

Federal work-study: program through which students work part time and earn money to help pay for college.

Financial aid package: total aid given to a student, from all sources. The financial aid package is explained in the award letter.

Financial need: difference between a college's total cost of attendance and a family's EFC.

Financing programs: commercial services that supplement federally and state-funded loans.

Free Application For Federal Student Aid (FAFSA): federal form used to apply for state and federal aid.

Grant: financial gift that does not need to be paid back.

Independent student: student who does not rely on his or her parents for financial support.

Interest: the charge for money that is borrowed; usually a percentage of the principal amount.

Loan: money that is borrowed from the government, a bank, credit union or other lender that must be paid back.

Parental Loans for Undergraduate Students (PLUS): loans given by the same financial institutions that give Stafford Loans.

Pell Grant: need-based federal financial aid that does not need to be paid back; only available to undergraduate students.

Perkins Loan: low-interest, need-based loan awarded by individual colleges. Students begin paying back Perkins Loans nine months after graduation or leaving school.

Principal: amount of money borrowed, not including interest charges.

Scholarship: money awarded that does not need to be paid back; criteria might include academic excellence, talent, race, religion, group affiliations, state of residence or need.

Stafford Loan: loan given by banks, credit unions, loan associations or individual colleges; sometimes called Guaranteed Student Loan, or GSL.

Subsidized loan: loan that does not accrue interest until the student leaves school.

Total cost of attendance: used in determining a student's eligibility for financial aid, the total amount estimated for all college costs; includes tuition, fees, books, supplies, housing, meal plan, personal expenses and travel expenses.

Unsubsidized loan: loan that accrues interest while a student is still in school.