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Glossary
Budget/Spending Plan
An itemized forecast of income and expenses commonly broken into monthly intervals and typically covering a one-year period.
Consumer Debt
Debts incurred for personal, as opposed to business or educational, needs.
Co-signer
A person who signs a promissory note that is also signed by one or more other parties. All parties take responsibility for the debt.
Credit Bureau
A company that collects and sells information about how people handle credit. It issues credit reports that list how individuals manage their debts and make payments. The three major national credit bureaus are Equifax, Experian (formerly TRW) and Trans Union.
Credit Report
A report that contains information about your borrowing habits and money-managing skills. Lenders use it to determine whether to approve a loan and to set the terms. A person with a good credit report is likely to get a better interest rate than someone with a poor credit report.
Credit Score/Rating
A judgment of someone's ability to repay debts, based on current and projected income and history of payment of past debts. Sometimes expressed as a number.
Deferment
Federal student loan repayment option that allows the borrower to temporarily postpone payment of the loan. During periods of deferment on subsidized loans, the principal payments are postponed and interest is billed to the government. When unsubsidized loans are deferred, only the principal payments are postponed and the borrower is responsible for the accrued interest.
Direct Debit
The automatic transfer of money from customer accounts for bill payment.
Disbursement Fees
A fee charged by the lender when the loan is disbursed, or paid, to the borrower.
Expenses
Costs incurred. Includes living and food costs, transportation, debt payments, entertainment, etc. When attending school expenses also include tuition, fees and books.
Fees
Charges that may be assessed to your account based on any number of activities or reasons. Types of fees include: origination fee, disbursement fee, repayment fee, supplemental fee, and prepayment penalty. For more information, see the fees listed above in the Glossary.
Fixed Rate
An interest rate on a loan that does not change for the life of the loan.
Forbearance
Student loan repayment option that allows the borrower to temporarily postpone or reduce the monthly payment of the loan. Regardless of the loan type, interest continues to accrue during the forbearance period.
Grace Period
The time period after a borrower leaves school or drops below half-time enrollment during which he/she is not required to make payments on a student loan. The duration of the grace period for Stafford loans is 6 months. Grace periods on private loans vary.
Home Equity Loan
A loan based on the amount of equity a homeowner has in the property. The interest paid on a home equity loan is usually deductible.
Income
Money that an individual earns or receives, typically on a monthly basis. Sources may be salary, gifts, financial aid, etc.
Interest (on loans/credit cards)
A charge for the use of money. Interest is calculated as a percentage rate of the loan/credit account principal. The interest rate can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case it changes periodically. The percentage rate may be tied to one of several indexes such as the Prime Rate, LIBOR or U.S. Treasury Bills.
Interest Deductibility
A government sponsored tax benefit for borrowers in repayment on their federal student loans. A borrower may be able to claim a tax deduction on the amount of interest he/she has paid during the year. Some private loans offer this benefit as well.
Lender
The bank, credit union or other approved entity from which a borrower obtains a loan.
Loan Consolidation (federal loans)
To refinance one or more outstanding federal student loans and create a single new loan. The new loan includes a fixed interest rate, new terms and may have an extended repayment period of up to 30 years.
Loan Forgiveness
The discharge (cancellation) of a loan due to the borrower meeting a certain specific requirement.
Origination Fees
Fee collected by the lender upon the loan's origination (creation).
Personal Loan
A personal loan is a loan from a lender that is not secured by any property.
PLUS Loan (Parent Loan for Undergraduate Students)
Federal educational loan that is taken out by the parent of a dependent, undergraduate student in order to pay for the student's education.
Prepayment Penalty
A lender's charge to the borrower for paying off the loan before the end of the term.
Private Loan
Uninsured educational loan funded by a lending institution. As opposed to federal educational laons that are insured by the government. Private loans are also called alternative loans.
Repayment Fees
A fee charged by the lender at the time the loan enters repayment.
Satisfactory Academic Progress (SAP)
School policy that requires students to maintain a certain GPA and to complete a certain number of credits each term in order to qualify for financial aid. Check with your school for its SAP policy.
Stafford Loan
Federal student loan administered under two programs: the Federal Family Education Loan Program (FFELP) or the William D. Ford Federal Direct Loan Program (Direct Loan).
Subsidized Federal Stafford Loan
Loans based on need. The interest on such loans is paid by the federal government while the student is in school, during the grace period and during eligible deferment periods.
Supplemental Fees
An additional fee that may be charged by the lender.
Unsecured Debt
Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which employ property as collateral.
Unsubsidized Federal Stafford Loan
Loans that are not based on need. The borrower is responsible for paying the interest.
Variable Rate
An interest rate on a loan that changes periodically.