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NOTE: This glossary includes terms found throughout the Education Finance Partners website. Definitions are based on the usage by Education Finance Partners. In some cases, the meanings of the words may differ slightly from dictionary definitions.
Aggregate
A total amount. The Education Finance Partners Private Loan has no aggregate loan limit, meaning a borrower can receive up to the total cost of education minus any financial aid.
Annual Percentage Rate (APR)
The yearly rate of interest calculated by taking average compound interest over the term of the loan. APR takes into account the interest rate, fees, length of repayment and any discounts.
Award letter
The official document issued by a college's financial aid office that defines the amount and type of financial aid awarded to the student and any conditions attached.
Borrower
The person who is primarily responsible for the obligation to repay borrowed funds. A signed promissory note serves as the formal, legal promise to repay.
Capitalization
When accrued and unpaid interest and loan fees are added to the outstanding principal balance of the loan. For example, if private student loan payments are deferred while the student is in school, the interest that has accrued during the deferment period will be added to the loan principal when the loan goes into repayment.
Closing
Refers to the calendar date when your new loan becomes effective and your old loans are paid off. The closing date is important for calculating the principal and interest required to pay off your old loans, and becomes the date when you begin accruing interest on your new loan.
Collateral
Borrower's property or assets that are pledged as security for a loan. In the event that a borrower defaults on the terms of a loan, the collateral may be sold, with the proceeds used to satisfy any remaining loan obligations.
Cosigner
A person who agrees to be jointly responsible for repaying a loan along with the borrower. A creditworthy cosigner often enables a borrower lacking sufficient credit history to qualify for a loan. The addition of a cosigner on a loan may result in better loan terms (e.g., lower interest rate or lower fees). The cosigner is equally responsible for the debt as long as it is outstanding, unless s/he is formally released from the obligation during repayment.
Cost of attendance (COA) (also referred to as Cost of Education)
Total amount needed to cover education expenses including tuition, fees, room, board, books, supplies and transportation for one academic year.
Credit-based loan
A loan based on a borrower's creditworthiness. The interest rate and fees are calculated based on the borrower's credit history.
Credit report
A record of current and past credit transactions that potential lenders use to help determine a person's ability to pay back debt.
Credit reporting bureau
An agency that collects and sells information about the creditworthiness of individuals. Credit reporting bureaus collect information that they consider relevant to a person's credit habits and history, and use this information to assign a credit score indicating how creditworthy a person is.
Credit Score
Each credit reporting bureau calculates your credit score from the information contained in your credit report. The most commonly used credit score is FICO® (named after its creator, Fair Isaac Corporation). Classic FICO scores range from about 350 to 850. The higher your credit score, the lower your credit risk. The factors used to calculate your credit score are payment history, debt, length of credit history, new credit accounts, and type of credit accounts.
Creditworthy
The ability to demonstrate a history of paying debts in a timely manner and the means to repay debts. Credit criteria for our private loans include 18 months of ongoing credit transactions with satisfactory repayment history.
Debt
An amount of money owed to another person or entity.
Default
Failure to repay a loan according to promissory note terms. Defaults are recorded on your credit record and have long-term adverse consequences such as:
A default may be reported to national credit bureaus and recorded on the borrower's credit record.
A default can affect the borrower's credit history resulting in higher future borrowing costs, or the inability to qualify for future loans.
The borrower may be subject to legal action.
An employer may withhold wages to pay the debt.
Deferment
A period of time during which the borrower, having met certain criteria determined by the lender or loan servicer on behalf of the lender, is not required to make regular monthly payments.
Delinquency
Status of a loan once a loan payment is past due. The number of days past due after which the loan is in delinquency may vary from loan to loan. Delinquency may make the borrower ineligible for a deferment, forbearance, or future financial aid. It may also damage chances for obtaining credit in the future. Delinquencies greater than 30 days are generally reported to national credit bureaus.
Disbursement
When the loan funds are sent. Disbursements for most student loans are made in installments during the course of the academic period and are either sent to the school or directly to the borrower, based on the school's preference. In the case of consolidation loans, the new lender disburses funds to, or "pays off," the existing loan holders directly.
Disbursement date
The date the lender issues the loan funds and sends them to the borrower, school, or existing loan holders.
Education-related costs (or expenses)
Any cost associated with pursuing your education. Examples include tuition, room and board, rent, books, a computer, lab fees and transportation.
Eligible internship or residency program
A program that must be completed in order to receive professional recognition and begin professional practice or service. Also, a health-related program that leads to a degree or certificate awarded by an institution of higher education, hospital or health care facility that offers postgraduate training.
Eligible school
An institution of higher education declared eligible by the United States Department of Education to offer financial aid.
Enrollment status
A student's standing as a full-time or part-time undergraduate, graduate, or professional student, whether or not s/he is seeking a degree. The number of credits required to obtain half-time and full-time status is determined by the school.
Expected Family Contribution
The Expected Family Contribution is calculated by the government based on information provided on your FAFSA. Schools use the EFC to determine a student's financial need and subsequently what federal aid to offer in the financial aid package.
Federal Pell Grant
A need-based grant offered to students by the federal government. The amount awarded is based on the total cost of education, Expected Family Contribution and a student's enrollment status.
Federal loan
An education loan guaranteed against default by the government of the United States.
Federal Supplemental Education Opportunity Grant (FSEOG)
A need-based grant awarded to undergraduate students demonstrating exceptional financial need (e.g., have the lowest Expected Family Contributions). Priority is given to students who receive Pell Grants.
Financial aid
Scholarships, grants, work-study, and loans available to the student from the school, state, or federal government.
Financial aid administrator (FAA)
An employee of the school who prepares and communicates information and provides advice regarding grants, scholarships, student loans, and work-study programs.
Financial aid office
The administrative department of a college or university responsible for determining who is eligible for financial aid, based on federal criteria. The financial aid office also certifies loan amounts for which students are approved and receives disbursements from lenders (if the loan funds are not sent directly to the borrower).
Financial aid package
The total amount of financial assistance a student receives from a school to pay for education-related expenses. The package, outlined in the award letter, can include grants, scholarships, federals loans, and/or work-study.
Fixed interest rate
A fixed interest rate stays constant for the life of the loan. The fixed rate on the Education Finance Partners Private Consolidation Loan is set on the day the loan is funded.
Forbearance
Temporary postponement or reduction of loan payments, based on financial hardship during the repayment period. Forbearance is awarded on a case-by-case basis through the lender, or through the loan servicer on behalf of the lender.
Free Application for Federal Student Aid (FAFSA)
The form that colleges use to determine financial aid eligibility for federal programs. The FAFSA is available online and in paper form. Learn more at FAFSA.ed.gov.
Fully deferred payment option (Private Loan)
This payment option requires no loan payments while the student is in school and during a six-month grace period after graduation, after falling below half-time enrollment status or after withdrawing from school.
Fully disbursed
When all loan funds have been sent to the borrower, to the school, or in the case of consolidation, to the existing private loan holders.
Gap
The total unmet education-related costs calculated by subtracting the financial aid accepted from the total cost of attendance. To calculate your gap, use our In-School Budget Calculator.
Gift aid
Financial aid not requiring repayment (e.g., scholarships and grants).
Grace period
The period of time after a student graduates, falls below half-time enrollment status, or withdraws from school, and before loan repayment begins. Loan payments are deferred during the grace period. The grace period for Education Finance Partners' loans is six months. Details regarding the grace period are outlined in the promissory note.
Grant
A form of financial aid that does not need to be repaid.
Gross Income
Income before taxes and deductions.
Housing expense
Rent, dormitory costs, or mortgage payments.
In school (Private Consolidation Loan)
To defer payments while in school, a student must be enrolled at least half time at a Title IV degree-granting institution.
In-school payment option (Private Loan) (also referred to as Repayment option)
While the student is enrolled half time or more, the borrower of an Education Finance Partners Private Loan can choose to defer all payments or make principal and interest payments.
Index
The 3-Month U.S. dollar LIBOR as published in the "Money Rates" section of The Wall Street Journal five business days before the end of the preceding quarter.
Interest
The fee charged to borrow money. The interest is calculated as a percentage of the principal amount owed.
Pay only the loan interest for the first three years of the loan. After three years, make principal and interest payments on a fixed schedule for the remainder of the loan (up to 27 years). This option is for borrowers who seek low minimum payments for three years, anticipating a greater income—and the ability to make larger payments—once they become established in their careers.
Interim period
The phase of the loan during which payments are not required. The interim period begins on the date the loan is disbursed and ends following the grace period.
LIBOR (London Interbank Offer Rate)
The interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. The LIBOR is used as a base index for setting rates of some adjustable-rate financial instruments. The LIBOR Index can be found daily in The Wall Street Journal's Money Pages.
Loan
A sum of money borrowed. The entity lending the money usually charges interest for use of the money. The amount of money borrowed is typically repaid with interest over a period of time. The "loan amount" may also include fees and late charges that are incurred.
Loan consolidation
Refers to two different scenarios:
Combining two or more loans into one new loan with better terms.
Refinancing a single existing loan and creating a new loan with better terms.
Loan holder
The company that you currently pay under the terms of your original loan. The current loan holder may, or may not, be the original lender.
Loan period
The academic year, or portion of an academic year, during which the student is enrolled and seeking a private loan.
Negative amortization
When monthly payments are not large enough to cover the interest due each month, the unpaid interest is added to the balance of the loan.
Non school-certified loan
A loan not validated by the school.
Origination fee
A processing fee calculated as a percentage of principal payable by the borrower and deducted from the loan upon each disbursement. For private loan programs, the lender may charge an origination fee (based on the borrower's credit history) to cover processing and other costs for originating a loan.
PLUS loan (Parent Loan for Undergraduate Students)
Can be taken out by parents to help cover the cost of their dependent child's undergraduate education. (Graduate students can borrow PLUS loans to cover their own education-related expenses.) Parents can borrow up to the total cost of education minus any financial aid accepted.
Prepayment
Making loan payments in part, or in full, prior to the due date. Payments on Education Finance Partners' loans may be prepaid at any time without penalty.
Prime rate
In general, the prime rate runs approximately 300 basis points (3 percentage points) above the Federal Funds Rate, the interest rate that banks charge to each other for overnight loans made to fulfill reserve funding requirements. The prime rate is usually the same amongst major banks, although it may vary. Adjustments to the prime lending rate are made by banks at the same time, although the prime rate does not adjust on any regular basis. Some private student loan lenders use the prime rate to calculate their interest rates.
Principal
The amount of money a lender disburses. This is usually the amount borrowed minus the origination fee (if any). If interest is capitalized at any point, it is added to the principal, thereby increasing the principal amount.
Principal and interest payment option (Private Loan)
In this payment option, the borrower begins repaying the principal and interest of the loan after the final disbursement (even though the student is still in school). Immediate repayment of an Education Finance Partners Private Loan begins approximately 45 days after the final disbursement.
Private consolidation loan
A single private loan created by combining existing private student loans into one new loan, or refinancing one existing loan under new terms. The private consolidation loan refinances the private student loans with a new interest rate and term. The borrower makes one monthly payment for the private consolidation loan that, in most cases, is lower than the monthly amount owed to the private loan holder(s).
Private student loan (also referred to as an alternative loan)
A credit-based consumer loan that can be used for any education-related purpose, including books, tuition, room, board, and transportation. In general, private loans cover the total cost of education minus any financial aid accepted. Borrowers, cosigners, and/or sponsors must have an established credit history.
Promissory note
The legal contract a borrower (and cosigner, if any) signs to obtain a loan. The note includes all the terms and conditions of the loan and the borrower's promise to repay the loan.
Qualification
The status issued indicating the terms in which an applicant can borrow an Education Finance Partners Private Consolidation Loan. Qualification terms are based on the type and amount of the loans to be consolidated, an applicant's reported ability to repay the loan (individually or with a cosigner), and a preliminary credit check. Once qualified, an applicant must complete the loan application by providing additional information, meet all lender requirements, and sign and submit all loan documents to obtain final approval.
Reference
Your closest living relative or friend who lives in the United States, but not with you.
Repayment
The period during which payments are made on the loan.
Repayment period
The period of time during which a borrower is responsible for making payments on a loan. The repayment period begins on the date the interim period ends. The maximum repayment period for an Education Finance Partners Private Loan is 240 months. The maximum repayment period for an Education Finance Partners Private Consolidation Loan is 360 months.
Scholarship
A form of financial aid that does not need to be repaid.
School-certified loan
A loan amount approved by the school in connection with the anticipated costs and expenses of education at the school.
Servicer
The loan servicer is the company that manages the billing of a loan. This company may, or may not, be the same as the original lender. The loan servicer is indicated on billing statements.
Social Security Number (SSN)
A nine-digit number assigned to United States citizens and non-resident aliens by the Social Security Administration.
Sponsor
A creditworthy person who borrows a loan on behalf of a student.
Spread
The percentage points added to the index to calculate the interest rate. The lender establishes the applicable spread on a loan based on the borrower's (and cosigner's, if any) credit history.
Stafford Loan
A type of federal student loan offered by the government to students to pay for education-related expenses. There are two kinds of Stafford loans-Subsidized Stafford loans and Unsubsidized Stafford loans. The government pays the interest accrued on Subsidized Stafford loans while the student is in school. These loans are awarded based on financial need. On Unsubsidized Stafford loans, the borrower is responsible for paying back the interest accrued while the student is in school. Unsubsidized Stafford loans are not need-based.
Standard repayment option (Private Consolidation Loan)
Borrowers make principal and interest payments on a fixed schedule for the life of the loan (up to 30 years).
Student Loan
A loan used to pay for education-related expenses. There are 2 types of student loans: federal student loans and private student loans.
Title IV School
An institution of higher education declared eligible by the United States Department of Education to offer financial aid.
Total payoff amount (also referred to as total outstanding balances)
The total unpaid amount of all private student loans to be consolidated, plus accrued interest and any fees, due to the current loan holders.
Variable interest rate
An interest rate that moves up and down based on the changes of an underlying interest rate index. The variable interest rate on the Education Finance Partners Private Student Loan is calculated based on the 3-Month LIBOR Index plus a spread, or margin, above the LIBOR rate. A variable rate may decrease or increase over the life of the loan.