Glossary

Defaulting:

Student loans are one of the rare things in life where you don’t have to think much about them for a few years. But once you graduate and once you are really on your own, lenders are more than happy to congratulate you on your new diploma by reminding how they helped you get it.  

But if you fail to make an installment payment when due or the failure to comply with other terms of your promissory note or written repayment agreement, is called defaulting. If you are a defaulter, that means you’re 270 days or more late in making a loan payment. more info....

Deferment Period:

A term used in permanent health insurance which refers to a period, prior to payment by the insurers to the policyholder after a claim, during which no payments are made.

For example, a typical deferment period could be six months so if a policyholder made a claim after contracting an illness which qualified, it would be six months later that payments would commence. Sometimes an employee's company will continue paying his/her salary during this period so it would be important to ensure that the permanent health insurance co-ordinates with the company's payment commitments. Also, as the deferment period increases so the premiums decrease.

Delinquency:

Failure to make payments when due, as specified in the promissory note and in the selected repayment plan. If you are a delinquent, that means  you’re 30 days or more late. Delinquency can lead to default. even delinquency can be reported to credit bureaus. A delinquency notation remains part of your financial history and could affect your credit rating. 

If you are having problems in repayment of your student loan, you can contact the lender, he will give you some repayment plans & real good options to help you out.

Grace Period:

A period of time between when the borrower graduates or drops below half-time status and when repayment begins. For a FFEL Stafford Loan or Direct Stafford Loan, the grace period is six months. During the grace period on an unsubsidized FFEL Stafford Loan or Direct Stafford Loan, interest that accrues must be paid or it will be capitalized. For a Federal Perkins Loan, the grace period is nine months. There is no grace period for a FFEL PLUS Loan, Direct PLUS Loan, or FFEL Consolidation Loan. A Direct Consolidation Loan usually has no grace period, but a borrower might be entitled to one if at least one of the loans being consolidated is a FFEL Stafford Loan or Direct Stafford Loan that is in an in-school status.

During the grace period on a subsidized loan, you don’t have to pay any principal, and no interest will be charged (the federal government pays the interest). During the grace period on an unsubsidized loan, you don’t have to pay any principal, but interest will be charged. You can either pay the interest or it will be capitalized (added to your principal balance).

Amortization:

The gradual elimination of a liability, such as a mortgage, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest. Writing off an intangible asset investment over the projected life of the assets.

Loan Discharge:

Under a few circumstances listed below, your loan repayment can be discharged, which means you are released from all obligation to repay your loans. more info....

• You become totally and permanently disabled.
• You die. Your loans will be discharged, and any Direct PLUS Loans your parents borrowed for you will be discharged. 
• You cannot complete a course of study because your school closed or because the school falsely certified your eligibility. If your parent borrowed a Direct PLUS Loan for you, that loan will be discharged also. 
• You file for bankruptcy and your loan is discharged. (This discharge occurs only in rare cases). 

Repayment Period: 

The period of time during which you are responsible for payments of principal and interest on your loan. Under a standard repayment schedule, this is ten (10) years. For other types of repayment schedules, the length of the repayment period may be longer. If you request and are granted a deferment or forbearance, you repayment period will be extended by the number of months of the
deferment or forbearance. 

Gross Income:

The income of the borrower before taxes or expenses are deducted.

1. For individuals, it is your total personal income before deductions. 

2. For companies, it is their revenue minus cost of goods sold (also called gross margin). 

Interest Rate:

The rate of interest charged for the use of money, usually expressed as an annual rate. The rate is derived by dividing the amount of interest by the amount of principal borrowed.

Annual Income:

Your annual income. For married couples this is your total combined annual income. 

Loan Principal Amount:

The amount borrowed plus any interest that has been capitalized, or the part of the amount borrowed which remains unpaid (excluding interest), called principal. it is the original investment. 

The part of a monthly payment that reduces the outstanding balance of a mortgage.

Outstanding Balance:

The total amount, including both principal and interest, still to be repaid.

Term of Loan:

The length of time during which the special conditions of the mortgage remain in force. At the end of the term, things such as interest rate, pre-payment privileges, etc. are renegotiated.

Capitalized Interest:

Unpaid, accumulated interest that is added to the loan principal. Because the principal increases, so does the total cost of the loan.

Adjusted Gross Income (AGI):

Income (including wages, interest, capital gains, income from retirement accounts, alimony paid to you) adjusted downward by specific deductions (including contributions to deductible retirement accounts, alimony paid by you); but not including standard and itemized deductions. 

To calculate your AGI, first include all gross income received during the year from the following sources: wages, unemployment, interest, dividends, capital gains, and pension distributions. Then adjust by deducting any IRA contributions, student loan interest, moving expenses or other above-the-line deductions. The result is your adjusted gross income, which is used as a starting point in calculating your taxable income. AGI is the number you write at the bottom of page 1 of your 1040 form, and then copy again to the top of page 2.

Loan:

A loan is a form of financial aid that must be repaid, with interest. 

The FFELP is a public-private partnership created by Congress in 1965 to deliver and administer guaranteed education loans for students and their parents. The program has provided more than $377 billion in low-cost loans to more than 50 million Americans.

The Federal Stafford, Federal PLUS, Federal SLS, and Federal Consolidation Loan programs. These programs offer loans that are funded by private lenders, guaranteed by guarantors, and reinsured by the federal government. 

Federal Direct Student Loan Program (FDLP or FDSLP): 

Congress recently established the William D. Ford Federal Direct Student Loan Program (FDSLP) to reduce the amount of complexity within the financial aid process. FDSLP is a federal loan program that includes the Federal Direct Stafford/ Ford Loan (subsidized and unsubsidized) and the William D. Ford Federal Direct Parent (PLUS) Loan.It includes four components: Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation.

The difference between the William D. Ford Federal Direct Student Loan Program and the Federal Family Education Loan Program is that the William D. Ford Federal Direct Student Loan Program does not involve a private lender in the process. You are borrowing an education loan directly from the federal government and the money will be disbursed to you by the Lexington Community College via the University of Kentucky.

In short Stafford and PLUS loans are available directly from the federal government rather than through commercial lenders. Selected colleges and universities participate in this program. 

Federal Loan: 

Loans that are guaranteed by the U.S. government.

Federal Interest Subsidy: 

Assistance given by the federal government in which they pay the interest on a student's loan while the student is in school and during the grace period before loan repayment begins. 

Free Application for Federal Student Aid (FAFSA):

The first step in applying for financial aid is to complete the FAFSA or Free Application for Federal Student Aid. This four-page form is updated annually and is available from most high school counselors and financial aid offices. Completing the FAFSA is the beginning of the financial aid process. Its purpose is to determine your need for student financial aid. 

You'll be asked on the form to provide information about you and your family's income, which will be used to determine your Expected Family Contribution toward paying for the cost of your education. The difference between your Expected Family Contribution and the costs of attending school will be your financial "need". 

Disbursement:

The release of loan funds to the school for delivery to the borrower. The payment will be made co-payable to the student and the school. Loan funds are first credited to the student's account for payment of tuition, fees, room and board, and other school charges. Any excess funds are then paid to the student by check.

Lender:

A person or entity who loans money to others. He from whom a thing is borrowed. or

Borrower:

someone who receives something on the promise to return it or its equivalent. or

The individual who applies for a loan and receives the proceeds of the loan.

Credit report:

Lenders use credit reports to determine if they should approve a loan and to set the terms (interest rate, fees, and length) of the loan.

Master Promissory Note (MPN):

The promissory note a student signs when taking out a Stafford loan. The master promissory note covers both the subsidized and unsubsidized Stafford loans the student may receive for the same enrollment period. If the student is attending a 4-year or graduate school, the master promissory note also covers subsidized and unsubsidized Stafford loans the student may receive for future enrollment periods.

Promissory note:

The binding legal document a student signs for the student loan. It lists rights and responsibilities, and the terms and conditions of the loan.


Servicer:

The servicer is an organization that administers the student loan program because of its complexity. Loan servicing includes disbursing loan funds, monitoring loans while borrowers are in school, and assisting borrowers during repayment of their loans.

US Department of Education (ED):

Government agency that administers several federal student financial aid programs, including the Federal Pell Grant, the Federal Work-Study Program, the Federal Perkins Loan, the FFELP, and the FDLP.

Loan Balance:

Loan balance is the amount owed, including principal and interest; capped (limited) in a reverse mortgage by a non-recourse limit.

National Credit Bureaus:

The three companies that gather and maintain data, and create a "broad-based risk score" based on their report about an individual. Each defined by law as a "consumer reporting agency" and a "consumer reporting agency that compiles and maintains files on consumers on a nationwide basis."

Credit Rating:

Borrowers are rated by lenders according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.

Income Tax:

The annual tax on income that is levied by the federal government and by certain state and local governments.

Rate Lock:

A rate lock is issued for a fixed number of days - usually 30, 45, or 60 days. The longer the duration, the higher the rate and/or points. It is important that the term of the rate lock is sufficient to allow for the closing of the loan.

Social Security Number (SSN):

The nine digit number assigned to the borrower by the Social Security Administration which is used as a identifier for tracking the borrower, skip tracing and reporting to the Department of Education. This number is required for participation in the FFELP.

Co-Borrower:

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