Below is a list of common terms which may help further the understanding of Student Loan Debt:
Accrued Interest: The interest that accumulates on the unpaid balance of a loan.
Annual percentage rate (APR): The interest associated with a loan, which can change or remain the same during the year and term of the loan.
Brunner Test: The legal burden imposed on a debtor in seeking to discharge qualified education loans in all circuits except the 8th and 1st Circuits.
Capitalization: When the accrued interest is added to the principal balance, thus increasing the balance owed and basically charging interest on the interest.
Co-signer: A person who signs a credit agreement besides the borrower and is legally obligated to take responsibility for loan repayment if the borrower does not make payments.
Cost of Attendance: Eligible higher education expenses including tuition, room, board and living expenses as assigned by a particular school as defined in 20 U.S.C. 1087ll. Only debts that are borrowed within the “cost of attendance” are qualified education loans under the Higher Education Act, Bankrutpcy Code, and IRS Code. See: https://nces.ed.gov/ipeds/Home/UseTheData
Default: Failure to repay loans according to the terms of the promissory note. This can lead to legal action by the school, the lender, the state or the federal government to recover the money.
Deferment: Temporary postponement of student loan repayment, limited to borrowers who fall into certain government qualifications.
Delinquent: When at least one loan payment is late or missed. Serious delinquency results in default.
Dependent student: A student whose financial aid eligibility is based on his or her parents’ income and assets.
Disbursement: The release of funds by a lender.
Disclosure statement: A statement of the total cost of the loan, including interest costs and loan fees.
Eligible/accredited Institution: A school recognized under Title IV of the Higher Education Act and defined in 20 U.S.C. 1088. Educational loans must be made to eligible institutions in order to be qualified education loans. See: https://ifap.ed.gov/ifap/fedSchoolCodeList.jsp
Entrance/exit interview: Counseling sessions that are required for federal student loan borrowers. The entrance interview is required before receiving the first loan disbursement; the exit interview takes place before students leave school.
Expected family contribution (EFC): The amount of money reported on a Student Aid Report that a student’s family is expected to pay toward the student’s education.
Federal Student Loan: Any educational debt originated, guaranteed, or insured by the federal government. All federal loans are qualified education loans.
Financial aid officer: A member of your school’s financial aid office who helps administer financial aid programs.
Fixed interest rate: A rate that remains the same from the day of the loan to the last repayment.
Forbearance: The permission to postpone, reduce or extend loan payments because of serious hardship. Interest continues to accrue during forbearance, though, so the amount owed ends up increasing.
Free Application for Federal Student Aid (FAFSA): A comprehensive form that all students applying for financial aid must file.
Grace period: The time between leaving school and when borrowers have to begin making payments on their loans.
Guarantee fee: The fee of up to 1 percent charged to insure or guarantee a student loan.
Independent student: A student who is one of the following: 24 years old by Dec. 31 of the award year; an orphan or ward of the court; a veteran; married or supports legal dependents other than a spouse; a graduate student, or someone who is declared independent by a financial aid administrator.
Interest: The fee, a percentage of the balance, that is charged by the lender when money is borrowed.
IPEDS Report: An online publication of the Department of Education listing a particular school’s “cost of attendance” during a given academic term. See: https://nces.ed.gov/ipeds/Home/UseTheData
Non-Qualified Education Loan: A private education loan that does not meet the statutory requirements for non-dischargeability under the Higher Education Act and the IRS Code.
Origination fee: A charge from the Department of Education that is deducted from the loan to help cover the costs of making the loan.
Principal: The full amount borrowed. During repayment, it refers to the portion of the original amount still owed.
Private Student Loan: Any educational debt originated by a private lender. Not all private loans are qualified education loans.
Promissory note: A legally binding contract between borrower and lender that states the terms and conditions under which the borrower promises to repay the loan.
Qualified Education Loan: A private education loan that meets the statutory requirements for non-dischargeability under the Higher Education Act and the IRS Code, as codified at 26 U.S.C 221(d).
Qualified Higher Education Expenses: The cost of attendance at an eligible educational institution, reduced by the sum of— (A) the amount excluded from gross income, and (B) the amount of any scholarship, allowance, or payment.
Repayment schedule: A statement listing the total amount owed, the amount of the monthly payment and the date the first payment is due.
Subsidized loan: A loan for which the federal government pays the interest while the student is in school, and during grace and deferment periods.
Title IV: Colleges and universities recognized under the Higher Education Act as eligible to participate in federal student loan programs.
Totality of Circumstances Test: The legal burden imposed on a debtor in seeking to discharge qualified education loans in the 8th and 1st Circuits.
Unsubsidized loan: A loan for which the student is responsible for paying all interest at all times. Interest accrues on the loan from the date of first disbursement until the loan is paid in full. To avoid capitalization of the interest, the interest can be paid before the loan repayment is scheduled to begin.
Variable interest rate: A rate that can change periodically, usually annually.