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A list of terms to help you


The following list contains many of the terms you might encounter as you explore the process of financial aid:


Adjusted Gross Income: All taxable income minus deductions.

Assets: Savings and checking accounts, the value of a business, stocks, bonds, real estate (other than your primary place of residence), trust funds, and so on. Cars are not considered assets, nor are retirement accounts or personal possessions such as stamp collections or musical instruments.


Benefit: Funds that students are entitled to under special conditions.


Co-Signer: This is a credit worthy individual, usually a parent or spouse, who has agreed to share the responsibility for repayment of a student loan with the borrower.


Default: Being delinquent in repaying a student loan more than a certain number of days or failure to comply with any of the other terms of the promissory note.

Deferment: Postponement of the loan repayment for a specified time. However, the interest must still be paid or it is added to the principal. This means the loan will cost the borrower more in the long run, but it may make the loan easier for the borrower to repay.

Delinquency: The act of missing a scheduled payment on a student loan. If delinquency persists, default will occur.

Disbursement: This is the act of sending or handing a loan check to the student or school so that it can be used for the student's education. A student loan could be disbursed in one, two, or three payments. Disbursements can be sent electronically to the student's school to credit his or her school account.


Exclusions from Gross Income: Benefits received by the tax filer that don't have to be included in his or her gross income for tax purposes. Examples are grants and scholarships, employer provided educational assistance, student loan debt forgiveness, and tuition reductions for college employees and their families.

Expected Family Contribution (EFC): A calculation of how much of a family's resources should be available to pay toward the price of attending college, based on the Free Application for Student Aid (FAFSA) analysis.


Financial Aid Administrator: A professional employee at each postsecondary institution with special knowledge and background in student financial aid.

Financial Aid Package: This is the total amount of financial aid a student is to receive. It may include grant, work, and loan funds from a variety of sources, and is assembled by the school's financial aid office.

Financial Need: The difference between the price of attending a postsecondary institution and the family's ability to pay for those costs.

Firstmark Services: A private, for profit company hired by the Office of Higher Education to service its Student Educational Loan Fund loans. A loan servicer bills students for scheduled payments, records those payments when made, encourages payments when not made, and generally monitors the status of a student loan for the student, lender, and guarantor.

Free Application for Federal Student Aid (FAFSA): The form that must be completed by all students and parents who apply for federal student aid. It is also used to apply for Minnesota State Grant funds and, at most postsecondary institutions, for institutional funds. Undocumented students can apply for state financial aid using the Minnesota Dream Act state financial aid application.


Grant: An outright award to the student, usually based on financial need. This money does not have to be repaid.

Guarantee Fee: A fee that is deducted from the proceeds of a loan. It is forwarded to a third party (the guarantor) and acts as insurance against the borrower defaulting on the loan.


Half-time: At schools measuring progress by credit hours and academic terms, at least six semester hours or quarter hours per term; at schools measuring progress by clock hours, at least 12 hours per week; at schools measuring progress by credit hours, but not using academic terms, at least 12 semester hours or 18 quarter hours per year.


Interest: This is the fee charged to borrow money. Interest charges are in addition to the principal of the loan.

Interest Subsidy (Also interest benefits): The payment of interest on Stafford Student Loans by the U.S. Department of Education for student borrowers while they are in school.


Loan: Money borrowed that must be repaid, usually with interest.


Need Analysis: A procedure used to estimate a student applicant's need for financial assistance to help meet his or her educational expenses. It consists of two major components; an estimate of the applicant's and/or the family's ability to contribute to educational expenses, and an accurate estimate of the educational expenses themselves.


Origination Fee: Once a loan has been approved, some lenders may charge a fee for processing the loan application and setting up the actual loan for disbursement to the borrower.


Parents' Contribution: The amount a student's parents can be expected to contribute to their son or daughter's education; based on analysis of their income and assets.

Price of Attendance: The total amount it will cost a student to go to school. Typically included are such items as actual tuition and fees, room and board, and estimates of such expenses as books, transportation, medical, day care and dependents' allowances. For the State Grant Program it includes average tuition and fees, a living allowance, and miscellaneous expenses. Campus financial aid administrators typically use more ample living and miscellaneous allowances than the state program.

Principal: This is the amount borrowed by the student before interest is charged.

Promissory Note: The legal document signed by the borrower prior to receiving a loan. Besides containing a promise to repay the loan, it lists the conditions of the loan and terms for repayment.


Scholarship: An award to students based on academic achievement, family background, or personal activities. It is sometimes based on financial need. The student does not have to repay this money.

Student Budget: The amount of money the student will need to pay tuition and fees, books and supplies, room and board, personal expenses, and transportation. These figures will be determined by the financial aid administrator.

Student Aid Report (SAR): Report containing results of student's need analysis based on information supplied on the Free Application for Federal Student Aid.

Student Contribution (SC): The amount that a student/spouse can be expected to contribute to the price of attendance based on need analysis of income and assets.


Tax Credit: As in the federal American Opportunity and Lifetime Learning Tax Credits, means a credit against a tax liability. The tax filer is able to subtract the amount of credit from tax liability. The tax filer must have tax liability to receive the Lifetime credit (this is what is meant by a "nonrefundable" credit). However, a portion of the American Opportunity tax credit is refundable.

Tax Deduction: Tax deductions are subtractions from income. In the case of student loans, some tax filers may be able to deduct some interest from income. Some tax filers will do this when they "itemize" their tax deductions. However, tax filers who do not itemize will also be able to deduct interest on student loans.