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Important Loan Terms

Accrued Interest -- If you choose not to make interest payments while in school, in your grace period, or during an authorized period of deferment, the interest will accumulate, and be added to your principal amount at repayment.

Award Letter -- This official document is issued by the Financial Aid Office. It lists all of the amounts, sources, and types of aid in your financial aid package. The Award Letter also includes the terms and conditions of your financial aid.

Award Year -- The 12-month period during which you attend school.

Capitalization -- The process by which interest is added to the principal loan amount if you choose not to make interest payments (when otherwise required) while in school or in forbearance. This process increases the amount that must be repaid and will make your monthly payment larger

Cost of Attendance (COA) -- These expenses include tuition, room and board, books and supplies, fees and the student’s living costs while attending school. The COA is determined by the school, using federal guidelines.

Default -- When a borrower fails to abide by the terms of a loan by not making payments for a specified period of time.

Deferment -- The option to postpone repayment for a period of time, under certain conditions, with permission from the lender.

Delinquency -- The status of a loan when payment is late. Delinquency may be reported to a credit bureau after 30 days.

Disbursement -- The lender's payment of loan funds to the school. Payment is made by electronic funds transfer (EFT). Disbursement is usually made in two or more installments during the year.

Expected Family Contribution (EFC) -- The Expected Family Contribution is the amount that a student and family (if required) are expected to contribute toward the Cost of Attendance (COA). This amount is based on the family’s income and assets.

Financial Need -- The difference between the student’s Cost of Attendance (COA) and the Expected Family Contribution (EFC).

Forbearance -- The process by which a repayment schedule can be restructured under certain conditions. The amount of the monthly payment may be temporarily reduced or suspended, or months may be added to the repayment term. You must contact your lender to receive a forbearance.

Free Application for Federal Student Aid (FAFSA) -- This is the application that a student must file to apply for financial aid. The FAFSA is printed and distributed free of charge by the U.S. Department of Education. It is also available online at www.fafsa.ed.gov.

Guarantee Fee -- The fee charged by the guarantee agency and deducted from loan proceeds prior to disbursement. This fee helps offset the administrative costs.

Grace Period -- A feature of Federal Stafford loans that gives you six months after you leave school or drop below half-time status before you must start making monthly payments on your loan.

Interest -- The fee that is charged by the lender in exchange for lending the money. The interest rate, usually expressed as a percentage of the loan amount, may stay the same for the term of the loan (fixed rate) or it may change periodically (variable rate).

Origination Fee -- A fee charged by the federal government and deducted from the loan funds prior to disbursement. The fee is used to offset administrative costs.

Principal -- The amount borrowed. This is the amount to which interest is charged.

Separation Date -- The date noted by your school to indicate when you graduate, drop below half-time status or withdraw from school. The grace period on your loan begins on this date.