Important Terms You Need to Know

Academic Year

A period of time schools use to measure a quantity of study. For example, a school's academic year may consist of a fall and spring semester during which a student must complete 24 semester hours. Academic years vary from school to school and even from educational program to educational program at the same school.

A.A.

This stands for an "associate of arts" degree, which can be earned at most two-year colleges.

A.A.S.

This refers to an "associate of applied science" degree, which can be earned at some two-year colleges.

ACT

This is a test published by American College Testing, which is located in Iowa City, Iowa. The ACT measures a student's aptitude in English, mathematics, reading, and science reasoning.

Many colleges in the South and Midwest require students to take this test and submit their test scores when they apply for admission. Some colleges accept this test or the SAT. (See below for explanation of SAT.) Most students take the ACT or the SAT during their junior or senior year of high school.

B.A. or B.S.

B.A. stands for "bachelor of arts," and B.S. stands for "bachelor of science." Both degrees can be earned at four-year colleges.

Cost of Attendance (COA)

The total amount it will cost you to go to school - usually expressed as a yearly figure. It's determined using rules established by law. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care. It also includes miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Costs related to a disability are also covered. The COA includes reasonable costs for eligible study-abroad programs as well. For students attending less than half time, the COA includes only tuition and fees and an allowance for books, supplies, transportation, and dependent-care expenses. Talk to the financial aid administrator at the school you're planning to attend if you have any unusual expenses that might affect your cost of attendance.

Default

Failure to repay a loan according to the terms agreed to when you signed a promissory note. For the FFEL and Direct Loan programs, default is more specific-it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently). The consequences of default are severe. Your school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This affects your credit rating for a long time. For example, you might find it very difficult to borrow money from a bank to buy a car or a house. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck. Also, you're liable for loan collection expenses. If you return to school, you're not entitled to receive additional federal student aid. Legal action also might be taken against you. In many cases, default can be avoided by submitting a request for a deferment, forbearance, or discharge (cancellation) and by providing the required documentation.

Dividends

Dividends are payments of part of a company's earnings to people who hold stock in the company.

Eligible Noncitizen

You must be one of the following to receive federal student aid:

  U.S. citizen
  U.S. national (includes natives of American Samoa or Swain's Island)
  U.S. permanent resident who has an I-151, I-551, or I-551C (Alien Registration Receipt Card)

If you're not in one of these categories, you must be an eligible noncitizen, and you must have an Arrival-Departure Record (I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:

  "Refugee"
  "Asylum Granted"
  "Cuban-Haitian Entrant, Status Pending"
  "Conditional Entrant" (valid only if issued before April 1, 1980)
  "Parollee" (You must be paroled into the United States for at least one year, and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose and intend to become a citizen or permanent resident.)

If you have only a Notice of Approval to Apply for Permanent Residence (I-171 or I-464), you aren't eligible for federal student aid.

If you're in the United States on certain visas, including an F1 or F2 student visa, or a J1 or J2 exchange visitor visa, you're not eligible for federal student aid.

Also, persons with G series visas (pertaining to international organizations) are not eligible. For more information about other types of visas that are not acceptable, check with your school's financial aid office.

Citizens and eligible noncitizens may receive loans from the FFEL Program at participating foreign schools. Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau are eligible only for Federal Pell Grants, Federal Supplemental Educational Opportunity Grants, or Federal Work-Study. These applicants should check with their schools' financial aid offices for more information.

Eligible Program

A program of organized instruction or study that leads to an academic, professional, or vocational degree or certificate, or other recognized educational credential. To receive federal student aid, you must be enrolled in an eligible program, with two exceptions:

  If a school has told you that you must take certain course work to qualify for admission into one of its eligible programs, you can get a Stafford Loan for up to 12 consecutive months while you're completing that preparatory course work. You must be enrolled at least half time, and you must meet the usual student aid eligibility requirements.

  If you're enrolled at least half time in a program to obtain a professional credential or certification required by a state for employment as an elementary or secondary school teacher, you can get a Federal Work-Study, Federal Perkins Loan, a Stafford Loan, or your parents can get a PLUS Loan, while you're enrolled in that program.

Expected Family Contribution (EFC)

An amount, determined by a formula that is specified by law, that indicates how much of a family's financial resources should be available to help pay for school. Factors such as taxable and non-taxable income, assets (such as savings and checking accounts), and benefits (for example, unemployment or Social Security) are all considered in this calculation. The EFC is used in determining eligibility for Federal need-based aid.

Fees

These are charges that cover costs not associated with the student's course load, such as costs of some athletic activities, clubs, and special events.

Financial Aid Package

The total amount of financial aid (federal and nonfederal) a student receives. The financial aid administrator at a postsecondary institution combines various forms of aid into a "package" to help meet a student's need. Using available resources to give each student the best possible package of aid is one of the aid administrator's major responsibilities. Because funds are often limited, an aid package might fall short of the amount a student is eligible for. Also, the amount of federal student aid in a package is affected by other sources of aid received (scholarships, state aid, etc.).

General Education Development (GED) Certificate

A certificate students receive if they've passed a specific, approved high school equivalency test. Students who have a GED can still qualify for federal student aid. A school that admits students without a high school diploma must make available a GED program in the vicinity of the school and must inform students about the program.

Financial Need

In the context of student financial aid, financial need is equal to the cost of education (estimated costs for college attendance and basic living expenses) minus the expected family contribution (the amount a student's family is expected to pay, which varies according to the family's financial resources).

Grant

A grant is a sum of money given to a student for the purposes of paying at least part of the cost of college. A grant does not have to be repaid.

Guaranty Agency

The organization that administers the Federal Family Education Loan (FFEL) Program in your state. This agency is the best source of information on FFELs. For the name, address, and telephone number of the agency serving your state, contact the Federal Student Aid Information Center.

Half time

At schools measuring progress in credit hours and semesters, trimesters, or quarters, "half time" is at least six semester hours or quarter hours per term for an undergraduate program. At schools measuring progress in credit hours but not using semesters, trimesters, or quarters, "half time" is at least 12 semester hours or 18 quarter hours per year. At schools measuring progress in clock hours, "half time" is at least 12 hours per week. Note that schools may choose to set higher minimums than these. You must be attending school at least half time to be eligible for a Stafford Loan. Half-time enrollment is not a requirement to receive aid from the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal Work-Study, and Federal Perkins Loan programs.

Interest

This refers to the amount that your money earns when it is kept in a savings instrument.

Investment

An investment refers to using your money to invest in something that will enable you to earn interest or dividends over time.

Liquidity

A term that refers to how quickly you can gain access to money that you invest or deposit in some kind of savings instrument.

Loan

A loan is a type of financial aid that is available to students and to the parents of students. An education loan must be repaid. In many cases, however, payments do not begin until the student finishes school.

Merit-based Financial Aid

This kind of financial aid is given to students who meet requirements not related to financial needs. Most merit-based aid is awarded on the basis of academic performance or potential and is given in the form of scholarships or grants.

Need-based Financial Aid

This kind of financial aid is given to students who are determined to be in financial need of assistance based on their income and assets and their families' income and assets, as well as some other factors.

National Student Loan Data System (NSLDS)

A national database for federal student aid-you can find out about the aid you've already received. (If you've only just applied for aid, you won't find any information on NSLDS yet.) NSLDS receives data from schools, agencies that guarantee loans, and U.S. Department of Education programs. The NSLDS Web site is generally available 24 hours a day, seven days a week. By using your PIN, you can get information on federal loan or grant amounts, outstanding balances, the status of your loans, and disbursements made. You can access NSLDS at www.nslds.ed.gov.

Pell Grants

These are federal need-based grants.

Perkins Loans

This is a federal financial aid program that consists of low-interest loans for undergraduates and graduate students with exceptional financial need. Loans are awarded by the school.

PLUS Loans

These federal loans allow parents to borrow money for their children's college education.

Postsecondary

This term means "after high school" and refers to all programs for high school graduates, including programs at two-and four-year colleges and vocational and technical schools.

Principal

This refers to the face value or the amount of money you place in a savings instrument on which interest is earned.

Proprietary

This is a term used to describe postsecondary schools that are private and are legally permitted to make a profit. Most proprietary schools offer technical and vocational courses.

PSAT/NMSQT

This stands for the Preliminary Scholastic Assessment Test/National Merit Scholarship Qualifying Test, a practice test that helps students prepare for the Scholastic Assessment Test (SAT I). The PSAT is usually administered to tenth or eleventh grade students. Although colleges do not see a student's PSAT/NMSQT score, a student who does very well on this test and who meets many other academic performance criteria may qualify for the National Merit Scholarship Program.

Promissory Note

The binding legal document you sign when you get a student loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what the deferment and cancellation provisions are. It's very important to read and save this document because you'll need to refer to it later when you begin repaying your loan.

Regular Student

One who is enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate, or other recognized educational credential offered by that institution. Generally, to receive aid from the programs discussed in this Web site, you must be a regular student. (For some programs, there are exceptions to this requirement. See the definition of eligible program above.)

Return

Return refers to the amount of money you earn through a financial investment or savings instrument. You earn money on investments and savings instruments through interest earnings or dividends.

Risk

In reference to saving or investing, risk refers to the danger of losing money you set aside in some kind of savings plan.

ROTC

This stands for Reserve Officers Training Corps program, which is a scholarship program wherein the military covers the cost of tuition, fees, and textbooks and also provides a monthly allowance. Scholarship recipients participate in summer training while in college and fulfill a service commitment after college.

SAT

This stands for the Scholastic Assessment Test, published by the College Board, a non-profit organization with headquarters in New York City. The SAT is a test that measures a student's mathematical and verbal reasoning abilities. Many colleges in the East and West require students to take the SAT and to submit their test scores when they apply for admission. Some colleges accept this test or the ACT. (See above for an explanation of the ACT.) Most students take the SAT or the ACT during their junior or senior year of high school.

SAT Subject Test

SAT subject tests (also known as SAT II tests) are offered in many areas of study including English, mathematics, many sciences, history, and foreign languages. Some colleges require students to take one or more SAT subject tests when they apply for admission.

Satisfactory Academic Progress

To be eligible to receive federal student aid, you must meet and maintain your school's standards of satisfactory academic progress toward a degree or certificate offered by that institution. Check with your school to find out its standards.

Savings Instrument

Savings instrument refers to any kind of savings plan or mechanism you can use to save money over time. Examples of savings instruments discussed in this handbook are savings accounts, certificates of deposit (CDs), and money market accounts.

Scholarship

A scholarship is a sum of money given to a student for the purposes of paying at least part of the cost of college. Scholarships can be awarded to students based on students' academic achievements or on many other factors.

SEOG (Supplemental Educational Opportunity Grant)

This is a federal award that helps undergraduates with exceptional financial need, and is awarded by the school. SEOG does not have to be paid back.

Selective Service Registration

To receive federal student aid, if you are a male born on or after January 1, 1960, are at least 18 years old, and are not currently on active duty in the U.S. Armed Forces, you must register, or arrange to register, with the Selective Service. (Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau are exempt from registering.)

Stafford Loans

These are student loans offered by the federal Government. There are two types of Stafford Loans -- one need-based and another non-need-based. Under the Stafford Loan programs, students can borrow money to attend school and the federal Government will guarantee the loan in case of default.

Transcript

This is a list of all the courses a student has taken with the grades that the student earned in each course. A college will often require a student to submit his or her high school transcript when the student applies for admission to the college.

Tuition

This is the amount of money that colleges charge for classroom and other instruction and use of some facilities such as libraries. Tuition can range from a few hundred dollars per year to more than $45,000. A few colleges do not charge any tuition.

William D. Ford Federal Direct Loans

Under this new program, students may obtain federal loans directly from their college or university with funds provided by the U.S. Department of Education instead of a bank or other lender.

Work-Study Programs

These programs are offered by many colleges. They allow students to work part time during the school year as part of their financial aid package. The jobs are usually on campus and the money earned is used to pay for tuition or other college charges.