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Words Starting with A-D

Accrual

The date on which interest charges on an educational loan begin to accumulate (or accrue).

Assignment (of loans)

Assignment occurs when a new lender assumes an educational loan from a previous lender. See also subrogation.

Bankruptcy

A legal proceeding in which an insolvent person, someone who cannot pay debts, may be relieved of financial obligations but loses control over bank accounts and future financial options. Bankruptcy is a last resort for those with debt problems, and although some debts may be discharged, bankruptcy affects a person's credit rating and financial opportunities for many years. Student loans, including alternative student loans, cannot be discharged through bankruptcy.

Borrower

A borrower is the person who has signed and agreed to the terms in the promissory note, and must repay the loan.

Budget

A budget is a plan for the coordination of resources (income, checking/savings accounts, etc.) and expenses to prevent spending more than available resources.

Cancellation

Some loan programs provide for cancellation, waiver of your requirements to repay the loan, under certain circumstances such as death or permanent disability of the borrower. Some types of federal student loans have additional cancellation provisions. For example, students who become teachers in certain national shortage areas may be eligible for cancellation of all or part of the balance of their educational loans. See also forgiveness.

Please check with your loan servicer to determine if you are eligible for partial or total cancellation. The following is a list of occupations, professions, and situations that may be eligible for cancellation: (Note: You may lose these privileges if you consolidate.)

  • Teacher in low income school, special education, or shortage in specified field such as math or science
  • Head Start Administrator
  • Law enforcement or corrections officer
  • Military service in area of hostility
  • Peace Corps volunteer
  • Full-time nurse or medical technician
  • Full-time employee of family services organization working with high-risk children
  • Totally and permanently disabled
  • Death

Capitalize

Capitalizing interest means that all interest accrued is added to the principal amount of your loan. Additional interest would then be based upon the higher principal amount. In other words, you would be paying interest on interest.

If you are borrowing a Federal Direct Stafford Loan that is unsubsidized, you will be able to indicate on your master promissory note (MPN) whether you choose to pay your interest quarterly or have the interest capitalize while you are in school. Choosing to pay your interest quarterly will minimize your loan debt.

Career Maximum Stafford Loan Limit

A student's career maximum Stafford loan limit is the total amount of Stafford loan, both subsidized and unsubsidized, that a student can borrow in all years while pursuing a degree(s).

Certification (of a loan)

When an educational institution certifies a loan, they notify and provide the lender with various pieces of information to complete the loan application including the student's enrollment status, expected graduation date, year in school, loan period, and cost of attendance.

Combined Total (Stafford Loan)

In some scenarios, the subsidized and unsubsidized portions of a Federal Direct Stafford Loan are added together to give you a combined total. This helps you to easily see your total (aggregate) loan borrowing without having to add up the subsidized and unsubsidized components. You can find combined Stafford Loan amounts on the student portal of the National Student Loan Data System (NSLDS).

Consolidation

A consolidation loan combines several student loans into a larger loan from a single lender. The consolidation lender pays off the balances on the other loans giving the student the convenience of making one payment. Carefully review the advantages and disadvantages of consolidating.

Cosigner

A term referring to a person, other than the principal borrower, who signs an agreement to repay a loan. The cosigner assumes equal liability for repayment of the loan.

Cost of Attendance

The cost of attendance is an estimate of a student's educational expenses for a specific period of enrollment.

Your cost of attendance varies based on the number of credits you take, the courses you choose, and your living arrangements. In addition to tuition and fees, living expenses such as meals, rent, transportation, and books are built into each cost of attendance. Your total student aid can never exceed your cost of attendance.

Credit

You are taking an initial step toward establishing credit when you borrow money. Credit is a promise to pay later for goods, services, or money you receive now. Establishing good credit is important. By repaying your loans on time and making informed decisions regarding your student loan needs, you will prevent future credit difficulties.

Credit Bureau

Credit bureaus and credit reporting agencies provide banks and businesses with a credit rating, which assists banks and businesses in deciding whether to issue a loan or extend credit. There are three nationwide consumer credit report companies:

  1. Experian - 888-397-3742
  2. Equifax - 800-685-1111
  3. TransUnion - 877-322-8228

Credit Limit/Line of Credit

An arrangement between a bank or credit card company and a customer which allows the customer to borrow up to a pre-specified amount as determined by the lender.

Credit Rating (Credit Score)

A credit rating or credit score is an evaluation of the likelihood of a borrower to default on a loan. Your credit rating may include your payment history, a list of current and past credit accounts and their balances, employment and personal information, and a history of past credit problems.

People who make all their payments on time are considered good credit risks. People who are frequently delinquent in making their payments are considered bad credit risks. Defaulting on a loan can hurt your credit rating.

Default, Defaulter

A defaulter is a person who fails to meet his or her loan responsibilities. A default will remain on your credit history for up to seven years. Defaulters can be denied access to future credit or investments, and the federal government can deduct payments from wages or seize income-tax refunds. Also see Student Financial Aid Services for more information on the consequences of defaulting.

To avoid default, maintain contact with your lender. (To identify your lender, use NSLDS or the Loan Locator.) It is possible for your lender to change during your college career or during repayment (your loans may be sold to a third-party servicing agency). Keep a detailed file of loan information, and notify your lenders as your situation changes. It is your responsibility to contact your lender if there is a change in your name, address, or enrollment status. See also deferment, forbearance, and loan forgiveness.

Deferment

Deferment is a period of time in which approved borrowers are not required to repay their loans (principal or interest). The following circumstances may enable you to pursue a deferment (note: You may lose these privileges if you consolidate):

  • Full-time or half-time study
  • Active military duty
  • Peace Corps, Vista, ACTION, domestic service, or private/non-profit volunteer
  • Engaged in service listed under cancellation privileges (see also forgiveness)
  • National Oceanic & Atmospheric Administration Corps
  • Graduate fellowship
  • Professional internship
  • Advanced professional training
  • Economic Hardship
  • Hardship (interest accrues)
  • Unable to find full-time employment
  • Pregnancy, adoption, or child care
  • Mother of preschool child who is entering the workforce
  • Temporary or total disability

If you do not qualify for a deferment but are still unable to make satisfactory repayment, you may qualify for a forbearance. Also see grace period. For more information on deferment, access AES/PHEAA's deferment information, or contact your lender. (To identify your lender, use NSLDS or the Loan Locator.)

Delinquency

Delinquency occurs when loan payments are late or missed, as specified in the terms of the promissory note and the selected repayment plan.

Dependent

A dependent student is required to include both student and parent income information on the FAFSA (Free Application for Federal Student Aid). Dependency status is determined using federal guidelines on the FAFSA. Also see independent.

Disbursement

Disbursement occurs when the lender releases the loan funds to the school for delivery to the borrower. At Penn State, educational loans are disbursed directly into the student's Bursar account.

Discharge

When a bankrupt person is legally free and clear of any obligation to repay certain debts. Student educational loans can never be discharged under current bankruptcy laws.

Disclosure Statement

A disclosure statement is a statement of the actual cost of a loan, including the interest costs and the loan fee

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