Glossary

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Adapted from the 2010 Common Manual.

Academic Period: A measured period of enrollment (e.g., a semester, trimester, quarter, or clock hours).

Academic Year: For the purposes of determining a borrower’s Title IV aid eligibility, a period during which an undergraduate, full-time student is expected to complete either of the following:

• At least 30 weeks of instructional time and 24 semester or trimester hours, or 36 quarter hours in an educational program that measures program length in credit hours.
• At least 26 weeks of instructional time and 900 clock hours in an educational program that measures program length in clock hours.

Administrative Forbearance: A temporary suspension of, a reduction of, or an extension of time for making principal and/or interest payments on a Federal Stafford, SLS, PLUS, or Consolidation loan that is granted by the holder or lender, upon notice to the borrower or endorser, and that does not require a written request from the borrower or an agreement signed by the borrower before the forbearance is granted.

Agreement: Any written contract, agreement, or letter of understanding between the guarantor and another entity that specifies the rights and duties of each party with respect to participation in the guarantor’s programs and/or utilization of the guarantor’s services.

Annual Loan Limit: The maximum loan amount a student may borrow for each academic year of study under the Federal Stafford Loan Program.

Anticipated Completion (Graduation) Date: The date on which a student is expected to complete an academic program. This date is provided by a school official when certifying the borrower’s loan, and in subsequent enrollment status updates.

Application: The form the borrower uses to apply for a Stafford, PLUS, or Consolidation loan.

Applicable Interest Rate: The maximum annual interest rate (under the Higher Education Act) that a lender may charge on a loan. Sometimes referred to as the Statutory Interest Rate.

Authority: Any private non profit or public entity that may issue tax-exempt obligations to obtain funds to be used for the making or purchasing of FFELP loans. “Authority” also includes any agency, including a state postsecondary institution or any other instrumentality of a state or local government unit, regardless of the designation or primary purpose of that agency, that may issue tax-exempt obligations, any party authorized to issue those obligations on behalf of a governmental agency, and any non profit organization authorized by law to issue tax-exempt obligations.

Award Year: The period between July 1 of a given calendar year and June 30 of the following calendar year.

Bankruptcy: Judicial action to stay the normal collection of debts against the petitioner, and cause those debts to be satisfied at the direction of the court. Bankruptcies are classified by “chapters,” which refer to parts of a larger volume—the U.S. Bankruptcy Act. Types of bankruptcies include:

• Chapter 7 - This is the most common form of bankruptcy, often referred to as “liquidation.” In a Chapter 7 bankruptcy, the eligible assets of the borrower are liquidated and distributed among the creditors by a trustee, with preference given to secured creditors. This type of bankruptcy is frequently used by borrowers who are unemployed or have few or no assets.
• Chapter 11 - A bankruptcy in which the borrower’s debts are reorganized. This type of bankruptcy is seldom used by student borrowers and is most often used by financially troubled businesses.
• Chapter 12 - Chapter 12 bankruptcy, which is similar to a Chapter 13 bankruptcy, applies only to certain farms and family farm operations with specific debt ceilings.
• Chapter 13 - This is commonly referred to as the “wage earner” plan. A Chapter 13 bankruptcy allows individuals with regular incomes to satisfy their debts through a court-directed payment plan. Usually, the Chapter 13 debtor(s) has significant debts, but sufficient income to eventually pay the debts.

Borrower: An individual to whom a FFELP loan is made.

Campus-Based Programs: The Federal Perkins Loan, Federal Work-Study, and Federal Supplemental Educational Opportunity Grant programs. These programs are administered by a school’s financial aid office. A student’s financial aid package may contain aid from one or more of these programs.

Cancellation (of a Guarantee): The revocation of a loan guarantee, which occurs if any of the following conditions exist:

• No loan proceeds were disbursed or delivered to the borrower.
• The lender check(s) was never cashed.
• None of the loan proceeds were negotiated within 120 days of the date on which they were disbursed.
• EFT and master check loan proceeds in the school’s account are not delivered to the borrower within 120 days after being transferred to the account.
• The loan is repaid in full within 120 days of final disbursement.

The guarantee is not lost on the remainder of the loan if one disbursement is canceled.

Certification: The act of attesting that something is true or meets a certain standard. For example, the school certifies the borrower’s eligibility for a loan and, if applicable, interest benefits. The borrower completes an application, promissory note, or deferment form, thereby certifying that certain eligibility criteria have been met.

Certification Date: The date the school certifies the borrower’s eligibility for a loan and, if applicable, interest benefits. The borrower completes an application, promissory note, or deferment form, thereby certifying that certain eligibility criteria have been met.

Check: A draft (drawn on a financial institution) that is payable on demand and that requires the personal endorsement or other written approval of the borrower to be cashed.

Citizen/Eligible Noncitizen: An eligibility requirement that must be met by Federal Stafford, PLUS, and SLS loan borrowers and recipients.

Claim: The process by which the lender (or lender’s servicer) requests reimbursement from the guarantor for its losses on a Federal Stafford, SLS, PLUS, or Consolidation loan due to the borrower’s default or eligibility for loan discharge or forgiveness.

Cohort Default Rate: The percentage of Stafford and SLS loan borrowers who default before the end of the fiscal year following the fiscal year in which they entered repayment on their loans. The Department calculates this rate annually to determine the default experience of students who attended a particular school during a particular period of time. Unless otherwise noted, the cohort default rate pertains to the FFELP cohort default rate or the dual program cohort default rate.

Cosigner: A signer of a promissory note who is secondarily liable for a loan obligation. This term is no longer used in federal regulations.

Cost of Attendance: (COA) An estimate of the student’s educational expenses for the loan period.

Cost of Education: See Cost of Attendance

Cost-Less-Aid: A figure calculated by deducting all financial assistance the student has been or will be awarded for the loan period from the cost of attendance for the same loan period.

Deactivation: Loss of eligibility for a lender to participate in the FFELP. The Department will notify lenders that have failed to submit a Lender’s Interest and Special Allowance Request and Report (LaRS report) for two consecutive quarters that they are candidates for deactivation.

Debt-Management Counseling: Counseling provided to a student about debt and accumulated indebtedness. Counseling is required both before the student receives the first disbursement of the student’s first loan—often referred to as entrance counseling, and when the student is scheduled to complete an academic program—commonly referred to as exit counseling.

Default: The failure of a borrower (or endorser or comaker, if any) to make installment payments when due, or to meet other terms of the promissory note or other written agreement(s) with the lender under circumstances where the Department or guarantor of the loan reasonably concludes that the borrower no longer intends to honor the borrower’s obligation to repay a loan, provided that this failure persists for the most recent period of 270 consecutive days (for a loan repayable in monthly installments) or the most recent 330-day period (for a loan repayable in less frequent installments).

Default Aversion Assistance: (DAA) The help provided to a lender by the guarantor in order to prevent a delinquent loan from defaulting.

Default Aversion Assistance Request Period: The period during which a lender must submit a request for default aversion assistance from a guarantor. This period begins no earlier than the 60th day and ends no later than the 120th day of the borrower’s delinquency.

Deferment: A period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make payments of loan principal.

Delayed Delivery: The federally mandated delay in the school’s delivery of the first disbursement of loan funds for first-year, first-time undergraduate Stafford loan borrowers. Schools subject to delayed delivery must delay the delivery of the first disbursement until the student completes the first 30 days of his or her program of study.

Delayed Disbursement: The federally mandated delay of the first disbursement of loan funds for first-year, first-time undergraduate Stafford loan borrowers. The school is prohibited from scheduling the first disbursement of a loan to these students earlier than:

• The 28th day of the first payment period if the loan is disbursed by EFT or master check.
• The first day of the first payment period if the loan is disbursed by individual check.

Delinquency: A period that begins on the day after the due date of a payment when the borrower fails to make the equivalent of one full payment.

Department, the: The U.S. Department of Education or an official or employee of the Department acting for the Department under a delegation of authority.

Dependent Student: A student who does not meet the eligibility requirements for an “Independent Student,” under the Higher Education Act of 1965, as amended.

Disability: A medically determined condition that renders a person unable to work and earn money, or, in some cases, to attend school. A borrower (or his spouse or dependent) is considered to be temporarily totally disabled if the condition is expected to be of a short and finite duration; a borrower is considered totally and permanently disabled if this condition is expected to continue for a long or indefinite period of time, or to result in death.

Disbursement: The transfer of loan proceeds by individual check, master check, or electronic funds transfer (EFT) by a lender to a borrower, a school, or an escrow agent. For a Consolidation loan, disbursement is the transfer of borrower loan proceeds from the consolidating lender to the current holder of the loan being consolidated.

Disbursement Date: For a loan disbursed by check or draft, the date the check or draft is issued. For a loan disbursed by electronic funds transfer (EFT) or wire transfer, the date the funds are transferred from the lender to the school or escrow agent.

Discharge: The release of a borrower or any comaker from all or a portion of his or her loan obligation, as applicable, due to bankruptcy, school closure, death, total and permanent disability, an unpaid refund by the school, or the school’s false certification of a FFELP loan.

Due Diligence: The procedures required for attempting to satisfactorily resolve a delinquency and prevent a default in accordance with federal regulations. The lender must document the performance of these attempts, and the attempts must be at least as forceful as those generally used for consumer loans.

Economic Hardship: A period during which the borrower is working full time but is earning an amount that does not exceed the greater of the minimum wage or the poverty line for a family of two. Economic hardship also exists if a borrower’s monthly payments on federal education loans are equal to or greater than 20 percent of the borrower’s monthly income, as defined in FFELP regulations.

Electronic Funds Transfer: (EFT) The electronic transfer of Stafford or PLUS loan proceeds from the lender to an account at the school or the school’s financial institution.

Electronic Signature: Information in electronic format that is attached to or logically associated with an electronic record and used by a person with the intent to sign the electronic record.

Eligible Borrower: A borrower or potential borrower who meets federal eligibility criteria for a Federal Stafford loan or, in the case of a parent borrower, a Federal PLUS loan.

Eligible Student: A student who meets federal student eligibility criteria.

Endorser: A signer of a promissory note who is secondarily liable for a loan obligation, i.e., who agrees to pay if the borrower does not. A lender may require a PLUS borrower with adverse credit to obtain a creditworthy endorser in order to receive the loan.

Enrollment Reporting: The method by which schools confirm and report to the National Student Loan Data System (NSLDS) the enrollment status of attending students who receive Title IV loans. This process was formerly known as the Student Status Confirmation Report (SSCR).

Entity: For purposes of this manual, any organization, institution, government agency, non profit corporation, or other group that participates in federal student financial aid programs.

Entrance Counseling (or Entrance Interview): See Debt-Management Counseling.

Estimated Financial Assistance: (EFA) The school’s estimate of the amount of financial assistance from federal, state, institutional, or other sources that a student (or parent on behalf of a student) will receive for a period of enrollment. This may include veterans’ and national service awards and benefits (except when determining eligibility for a subsidized Stafford Loan), scholarships, grants, financial need-based employment, or loans. EFA does not include Federal Perkins Loans or Federal Work-Study funds that the student has declined or certain loans used to replace the expected family contribution.

Exceptional Performer: A designation conferred upon a qualified lender, servicer, or guarantor by the Department of Education for an exceptional level of performance in servicing FFELP loans, if the lender, servicer, or guarantor requests such status and meets all statutory and regulatory requirements.

Exit Counseling (or Exit Interview): See Debt-Management Counseling.

Expected Family Contribution: (EFC) The amount a student and the student’s spouse or family are expected to pay toward the student’s cost of attendance. The Federal Need Analysis Methodology must be used to calculate the EFC.

Federal Consolidation Loan Application and Promissory Note: A common form that a borrower—or, as applicable, spouses as comakers—must complete to apply for a Federal Consolidation loan.

Federal Default Fee: A fee collected by the guarantor either by deduction from the proceeds of the loan or from other nonfederal sources. The Higher Education Act requires that this fee equal one percent of the loan principal. This fee replaced the guarantee fee.

Federal Direct Loan Program: (FDLP) A student loan program authorized on July 23, 1992, by Title IV, Part D, of the Higher Education Act. The Federal Direct Loan Program offers Federal Direct (Subsidized) Stafford loans, Federal Direct Unsubsidized Stafford loans, Federal Direct Consolidation loans, and Federal Direct PLUS loans. The FDLP is similar to the FFELP, except that funding comes directly from the U.S. Treasury rather than from private lending institutions.

Federal Family Education Loan Program: (FFELP) Loan programs authorized by Title IV, part B of the Higher Education Act of 1965, as amended, that includes the Federal Stafford, Federal PLUS, Federal SLS, and Federal Consolidation Loan Programs. These loan programs are funded by lenders, guaranteed by guarantors, and reinsured by the federal government.

Federal Interest Benefits: The federal government’s payment of accrued interest on subsidized Stafford loans to the lender on behalf of the borrower during in-school, grace, and deferment periods. Some Consolidation loans also may qualify for interest benefits.

Federal Need Analysis Methodology: (FM) The formula used to calculate the expected family contribution with regard to determining the amount of Title IV assistance available to a borrower.

Federal PLUS Loan Application and Master Promissory Note: (PLUS MPN) A common form that allows a parent or graduate or professional student borrower to receive loans for either a single academic year or multiple academic years. The parent borrower must complete a separate PLUS MPN for each dependent student for whom he or she wishes to borrow.

Federal Stafford Loan Master Promissory Note: (Stafford MPN) A common form that allows a student borrower to receive loans for either a single academic year or multiple academic years.

FFELP: See Federal Family Education Loan Program.

File Transfer Protocol: (FTP) A standard Internet protocol that allows the transmission of data files.

Financial Aid Administrator: (FAA) A staff member at an eligible school who is charged with the administration of financial aid programs.

Financial Aid Package: The total amount of financial aid that a school awards a student. Federal and nonfederal aid such as loans, grants, or work-study are combined into a “package” to help meet the student’s cost of attendance. Using available resources to give each student the best possible aid package is one of the major responsibilities of a school’s financial aid administrator.

Financial Aid Transcript: (FAT) An official record of the federal financial aid a student has received at schools the student previously attended. The record is used to assess the amount of federal financial aid the student has received and to prevent the award of federal funds for which the student or the parent of a dependent student is not eligible. The record may be obtained from the National Student Loan Data System (NSLDS) or may be a paper report received from the previous schools.

Financial Need: The student’s cost of attendance less the expected family contribution. In determining a student’s eligibility for a subsidized Stafford loan and a FFELP borrower’s total loan amount, the student’s estimated financial assistance is also subtracted from the cost of attendance.

Forbearance: A period of time during which the borrower is permitted to temporarily cease making payments or reduce the amount of the payments. The borrower is liable for the interest that accrues on the loan during the forbearance period. Some forbearances are entitlements for eligible borrowers; others are granted at the discretion of the lender.

Foreign School: An eligible school located outside the United States and its territories.

Forgiveness: The release of a borrower or any comaker, as applicable, from all or a portion of his or her loan obligation due to qualifying child care service or qualifying teaching service as authorized by Title IV, Part B of the Higher Education Act, as amended.

Free Application for Federal Student Aid: (FAFSA®) The form the student must complete to apply for federal Title IV financial assistance, including Stafford loans. The student must include financial information on the student’s household so that the expected family contribution can be calculated.

Full-Time Student: A student enrolled in an institution of higher education (other than a student enrolled in a program of study by correspondence) who is carrying a full academic workload as determined by the school under standards applicable to all students enrolled in that student’s particular program. The student’s workload may include any combination of courses, work, research, or special studies, whether or not for credit, that the school considers sufficient to classify the student as a full-time student.

Funds: Any monies (including checks, drafts, or other instruments); any commitment to provide money; or any commitment of insurance that has been, or may be, provided under the guarantor’s programs to a borrower enrolled at and attending a participating school, or a borrower accepted for enrollment at a participating school.

Grace Period: The period that begins the day after a Stafford loan borrower ceases to be enrolled at least half time at an eligible school, ends the day before the repayment period begins, and during which payments of principal are not required. For a borrower with a Stafford loan that has not yet entered repayment who also has an SLS loan, the grace period for the SLS loan is the equivalent of the grace period for the Stafford loan if the borrower requests grace on his or her SLS loan(s).

Grad PLUS Loan: A PLUS loan made to a graduate or professional student.

Grade Level: A student’s academic class level, as certified by a school official. Undergraduate students are 01 (freshman/first year) through 05 (fifth year/other undergraduate); graduate and professional students are A (first year) through D (fourth year and beyond).

Graduate or Professional Student: A student who:

• Is enrolled in a program or course above the baccalaureate level at an institution of higher education, or enrolled in a program leading to a first professional degree.
• Has completed the equivalent of at least three years of full-time study at an institution of higher education, either before entrance into the program or as part of the program itself.
• Is not receiving Title IV aid as an undergraduate student for the same period of enrollment.

Graduated Repayment Schedule: A repayment schedule under which the amount of the borrower’s installment payment is scheduled to change (usually by increasing in two or more increments) during the course of the repayment period. The graduated repayment schedule cannot exceed 10 years (or 25 years for borrowers eligible for an extended repayment schedule), excluding in-school, grace, deferment, or forbearance periods.

Guarantee: A conditional legal obligation, as defined in an agreement by and between a guarantor and a lender, for the guarantor to reimburse the lender for some portion of a loan that is not repaid by the borrower due to default, death, disability, bankruptcy, borrower ineligibility, false certification of borrower eligibility, or school closure.

Guarantee Disclosure: The form used by the guarantor that serves as evidence that the loan identified on the form has been insured (guaranteed) under the guarantor’s program (see also Guarantee). The form also provides relevant loan data, which may include the loan amount, interest rate, guarantee and origination fees (if applicable), and projected maturity date.

Guarantee Fee: A fee the guarantor was permitted to charge on a loan disbursed on or after July 1, 1994, and for which the date of guarantee of principal was before July 1, 2006. charged by a guarantor for each loan it guarantees. In most cases, the lender reduces the amount of the loan proceeds by this amount, and the fee is remitted to the guarantor. The Higher Education Act limits this fee to no more than one percent of the principal. This fee was replaced by the federal default fee.

Guarantor (or Guaranty Agency): A state or private non profit organization that has an agreement with the U.S. Secretary of Education to administer a loan guarantee program under the Higher Education Act.

Half-Time Student: A student who is: (1) enrolled in a participating school; (2) carrying an academic workload that amounts to at least half of the workload of a full-time student, as determined by the school; and (3) not a full-time student. A student enrolled solely in an eligible program of study by correspondence is considered a half-time student.

HEA: The Higher Education Act of 1965, as amended.

Income-Contingent Repayment Schedule: A repayment schedule for some FDLP loans under which the borrower’s monthly payment amount is adjusted annually, based on the total amount of the borrower’s Direct loans, the borrower’s family size, and the Adjusted Gross Income reported on the borrower’s most recent income tax return. In the case of a married borrower, who files a joint income tax, the AGI includes the spouse’s income.

Income-Sensitive Repayment Schedule: A repayment schedule for some FFELP loans under which the borrower’s monthly payment amount is adjusted annually, based solely on the borrower’s expected total monthly gross income received from employment and other sources during the course of the repayment period.

Independent Student: A student who meets one or more of the criteria listed on the Free Application for Federal Student Aid (FAFSA®) that classify a student as independent for Title IV purposes. A student also may be classified as independent if a financial aid administrator determines and documents that the student is independent based on his or her professional judgment of the student’s unusual circumstances.

Ineligible Borrower: A borrower who does not meet federal eligibility criteria for a Federal Stafford loan or, in the case of a parent borrower, a Federal PLUS loan.

In-School Period: The time during which a student is enrolled on at least a half-time basis at a participating school.

Institution of Higher Education (Institution): A school that:

• Is located in a state (see State).
• Admits as a regular student only a person who has a certificate of graduation from a secondary school or a recognized equivalent or is beyond the age of compulsory school attendance in the state in which the school is physically located and has demonstrated the ability to benefit from the school’s education or training program by passing a federally approved standardized test.
• Is legally authorized in each state in which it is physically located to provide, and provides within that state, a program of postsecondary education that awards an associate, bachelor’s, graduate, or professional degree; or provides a program of not less than two years in length that is acceptable for full credit toward such a degree; or provides a training program of at least one academic year that leads to a certificate, degree, or other recognized credential and prepares students for gainful employment in a recognized occupation.
• Is a public or other non profit school and is accredited by a nationally recognized accrediting agency or association approved by the U.S. Department of Education for this purpose, or if not so accredited, is a school that the Department determines will meet the accreditation standards of such an agency or association within a reasonable period of time. See Participating School and School.

Institutional Student Information Record: (ISIR) The electronic output record provided to the school by the Department’s Central Processing System that includes information provided by the student on the Free Application for Federal Student Aid (FAFSA®). The ISIR also contains the student’s expected family contribution (EFC) and the results of federal database matches. The paper version that is sent to the student is called a Student Aid Report (SAR).

Insurance Premium: See Federal Default Fee and Guarantee Fee.

Interest: The charge made to a borrower for use of a lender’s money.

Interim Period: The period during which a Stafford loan borrower is in the in-school or grace period. If the borrower returns to school before the grace period is fully used, the borrower continues to qualify for in-school status and to be considered in the interim period.

Invalid Telephone Number: For purposes of lender due diligence requirements in the collection of loans, a functioning telephone number that has been assigned to someone who has no knowledge of or relationship with the borrower.

Late Charges: Charges that the lender may require the borrower to pay if the borrower fails to pay all or a portion of a required installment payment within 15 days after it is due. This charge may not exceed 6 cents for each dollar of each late installment.

Leader, Summer Term: A summer term that comes at the beginning of a school’s Scheduled Academic Year.

Leave of Absence: For purposes of the Common Manual, a leave of absence is a status in which the student is considered to be continuously enrolled for Title IV program purposes, as approved by the school. An approved leave of absence is a break in enrollment, not including a semester or spring break, that is requested by the student and approved by the school based upon the school’s published leave of absence policy. The student’s request must be in writing and must include the reason for the leave. In an approved leave of absence, the student does not incur any additional charges. The total number of days of all approved leaves of absence may never exceed 180 days in any 12-month period.

Lender: For purposes of the Federal Family Education Loan Program (FFELP), a lender is an entity that has entered into an agreement to participate in the FFELP. A lender may be a national or state chartered bank, a mutual savings bank, a savings and loan association, a stock savings bank, a credit union, a pension fund, an insurance company, a single state agency, the Student Loan Marketing Association (SLMA), a Rural Rehabilitation Corporation, a non profit private agency functioning in a state as a secondary market, a consumer finance company subsidiary of a national bank, a guarantor, or a school. Each entity must meet the specific eligibility qualifications, as applicable.

Lender Fee: A fee that the holder of the loan must pay to the Department on any loan first disbursed on or after October 1, 1993. The fee is equal to 0.5% of the principal amount of the loan and is deducted from interest and special allowance due the lender. The lender remits the fee by making an entry on the Lender’s Interest and Special Allowance Request and Report (LaRS report) that results in an offset of the amount of quarterly interest and special allowance benefits due to the lender. The lender may not pass this fee on to the borrower. For more information about the lender fee.

Lender’s Interest and Special Allowance Request and Report: (LaRS Report) An accounting mechanism that a lender uses to report to the Department the loans that it has made and to request from the Department interest benefits and special allowance that it has earned. The federal origination and lender fees that the lender must pay to the Department are usually deducted from the amount that the Department owes the lender for interest benefits and special allowance. The lender may submit the report using the automated Lender Reporting System or the paper form.

Loan Proceeds: The amount of loan funds that have been guaranteed.

Loan Sale: The change in ownership of a loan from one eligible FFELP lender or holder to another lender or holder.

Loan Transfer: Any action that results in a change of the system used to monitor or conduct collection activities on the loan, such as a change in servicer.

Location Cure Procedure: See Intensive Collection Activities.

Mandatory Administrative Forbearance: Forbearance that a lender is required to grant in certain cases.

Mandatory Forbearance: Forbearance that a lender is required to grant in certain cases.

Master Check: A single check issued from a lender or disbursing agent to a school that includes loan disbursements for two or more borrowers; a nonelectronic process for transferring funds that mirrors electronic funds transfer (EFT).

Master Promissory Note: (MPN) See Federal Stafford Loan Master Promissory Note (Stafford MPN) and Federal PLUS Loan Application and Master Promissory Note (PLUS MPN).

MPN: See Master Promissory Note

Multiple Disbursements: Disbursement at predesignated times of a Federal Stafford or PLUS loan—usually in two or more installments of approximately equal increments.

National Credit Bureau: A credit reporting agency with a service area encompassing more than a single region of the country.

National of the United States: A citizen of the United States or, as defined in the Immigration and Nationality Act, a noncitizen who owes permanent allegiance to the United States.

National Student Loan Data System: (NSLDS) A database comprised of information from guarantors, schools, lenders, and the Department of Education which contains information on Title IV aid received by students.

Need Analysis: A standardized assessment of the ability of a student or of a student’s family to contribute toward educational expenses.

New Borrower: A borrower who has no outstanding balance on a FFELP loan at the time he or she signs a promissory note for a FFELP loan.

Nonsubsidized Loan: A loan that is not eligible for federal interest benefits. The borrower is responsible for paying the interest on the outstanding principal balance of a nonsubsidized loan throughout the life of the loan. During in-school, grace, and deferment periods, these interest payments are normally made on a monthly or quarterly basis, or are capitalized. Nonsubsidized loans were guaranteed by some guarantors before the introduction of unsubsidized Stafford loans.

Non-Term-Based Institution: A school that measures its academic year in credit or clock hours rather than academic terms (e.g., semesters, trimesters, or quarters).

Origination Fee: A fee charged to offset the cost of interest, special allowance, and reinsurance payments by the federal government on a FFELP loan. This fee, if charged to the borrower, may be subtracted from the borrower’s loan proceeds.

Out-of-School Date: The date the student ceases to be enrolled on at least a half-time basis at an eligible school.

Paid Ahead: A type of payment in which money is paid ahead of time, in anticipation of repayment or other future adjustment.

Parent: For purposes of PLUS loan eligibility, a student’s natural or adoptive mother, father, or the spouse of a parent who remarried if the spouse’s income and assets would have been taken into account when calculating a dependent student’s expected family contribution.

Parent PLUS Loan: A PLUS loan made to the parent of a dependent undergraduate student.

Partial Cancellation: Cancellation of a disbursement or a portion of a disbursement rather than of an entire loan.

Participating School: An eligible school that meets the standards for participation in Title IV programs in subpart B, has a current Program Participation Agreement with the Department, and is eligible to receive funds under these programs.

Payment Period: The basis on which a school must schedule and deliver disbursements for a particular loan period. The payment period begins on the first day of regularly scheduled classes. A payment period is determined based on the structure of the school’s academic program. At a school that does not use standard terms, a payment period is measured in credit or clock hours completed by the student in relation to the length of the student’s program of study. The payment period requirement does not eliminate the multiple disbursement requirement for a school to deliver loan proceeds in substantially equal installments, with no installment exceeding one-half of the loan amount.

Pell Grant: A federal need-based grant.

Period of Enrollment: As defined by federal regulation, the period for which a Stafford or PLUS loan is intended. The period of enrollment must coincide with a bona fide academic term established by the school for which the school’s charges are generally assessed, i.e., semester, trimester, quarter, length of the student’s program or the school’s academic year. The period of enrollment is also referred to as the loan period. In addition, the term “period of enrollment” is commonly used by the financial aid community to refer to the period of time during an academic year when a student is enrolled at the school.

Permanent Resident of the United States: A person who meets certain requirements of the U.S. Immigration and Naturalization Service (INS). Valid documentation of permanent residency includes the following: I-551, I-151, I-181, I-94, or a passport stamped processed for I-551, “Temporary evidence of lawful admission for permanent residence."

PLUS MPN: See Federal PLUS Loan Application and Master Promissory Note.

Post-Deferment Grace Period: A 6-month period following a deferment during which payments are not required. The 6-month post-deferment grace period applies only to loans disbursed before October 1, 1981, and, in some cases, to loans for borrowers who participated on active-duty status in certain emergency military mobilizations, such as Operations Desert Shield/Desert Storm.

Post-Withdrawal Disbursement: A disbursement made when the calculations for the school’s return of Title IV funds result in the student being eligible to receive more Title IV aid than was disbursed or delivered prior to his or her withdrawal. A post-withdrawal disbursement must meet certain conditions for late disbursement.

Prepayment: A payment received when the borrower is not required to make either principal or interest payments; when a borrower is required to make interest payments, but previously authorized the lender to capitalize accruing interest; or when the borrower makes a payment that is greater than the amount of the borrower’s regular installment or the amount due.

Principal Balance: The outstanding amount of the loan, on which the lender charges interest. As the loan is repaid, a portion of each payment is used to satisfy interest that has accrued, and the remainder of the payment is used to reduce the outstanding principal balance.

Professional Judgment: The flexibility given to a financial aid administrator (FAA) under the Higher Education Act to make adjustments to student eligibility for federal aid on a case-by-case basis.

Professional Student: See Graduate or Professional Student.

Program of Study: A Department-authorized postsecondary educational program that leads to a degree, certificate, or other educational credential.

Program Participation Agreement: (PPA) An agreement that a school and the U.S. Department of Education must sign, permitting participation in one or more of the Title IV federal student aid programs. This agreement also states that the initial and continued eligibility to participate in the Title IV federal student aid programs is conditional upon compliance with the provisions of applicable laws and program regulations. The agreement includes a school’s participation in the following federal programs: Federal Pell, Federal Supplemental Educational Opportunity Grant, Federal Work-Study, Federal Family Education Loans, and Direct Loans.

Program Review: A comprehensive review of a lender’s, school’s, or servicer’s administrative procedures for handling Federal Stafford, PLUS, SLS, and Consolidation loans. The review is conducted to ensure that those procedures are in compliance with federal regulations and with the guarantor’ policies and procedures.

Promissory Note: A legally binding agreement the borrower signs to obtain a loan under the FFELP, in which the borrower promises to repay the loan, with interest, in periodic installments. The agreement also includes information about any grace period, deferment, or cancellation provisions and the student’s rights and responsibilities with respect to the loan.

Proration: A reduction of the standard annual loan limit for an undergraduate student. Proration of the loan amount is required if the student’s program or the remainder of the student’s program is less than a full academic year in length.

Proportional Proration: A required calculation performed to determine the applicable annual Stafford loan limit for an undergraduate student whose program of study is less than an academic year, or whose remaining program of study is less than an academic year.

Qualified Education Benefit: Refers to qualified tuition programs (e.g., 529 prepaid tuition plans and savings plans), prepaid tuition plans offered by a state, and Coverdell education savings accounts.

Reaffirmation: A borrower’s acknowledgment of a loan repayment obligation—including all principal, interest, collection costs, legal costs, and late charges—in a legally binding manner.

Reauthorization: Refers to the legislative process— generally carried out every 5 years in the case of the Higher Education Act—whereby Congress reviews and either renews, terminates, or amends existing programs. The most recent reauthorization of the Act, as amended, was in 1998.

Recall (of a claim): A lender request that the guarantor return a default claim that has already been filed before claim reimbursement because the claim no longer qualifies for default.

Recognized Equivalent of a High School Diploma: A recognized equivalent of a high school diploma is any one of the following:

• A General Education Development (GED) Certificate.
• A state certificate received by the student after passing a state-authorized examination recognized by the state as the equivalent of a high school diploma.
• The academic transcript of a student who has successfully completed at least a two-year program acceptable for full credit toward a bachelor’s degree.
• For a student seeking enrollment in at least an associate degree program or its equivalent, who has not completed high school but has excelled academically at the high school level, documentation obtained by the participating school that the student excelled academically and has met the participating school’s written policies for admitting such students.

Record: With respect to recordkeeping requirements for lenders and schools, official information or data relating to a borrower’s loan account or file that can be used as evidence.

Refund: The difference between the amount the student paid toward institutional charges and the amount the school can retain under the appropriate (e.g., institutional, state, or accrediting agency) refund policy.

Regular Student: A person enrolled or accepted for enrollment for the purpose of obtaining a degree, certificate, or other recognized educational credential.

Reinstatement (of borrower Title IV eligibility): A process by which a borrower with a defaulted FFELP loan may regain eligibility for Title IV aid by adhering to strict repayment requirements.

Repayment Period: The period during which payments of principal and interest are required. The repayment period follows any applicable in-school or grace period and excludes any period of authorized deferment or forbearance.

Repayment Schedule: The legal addendum to the Promissory Note stating the terms of loan repayment and fulfilling disclosure requirements. The Repayment Schedule is a plan that indicates the total principal and interest due, an installment amount, and the number of installments required to pay the loan in full. The Repayment Schedule also contains the interest rate for the loan(s) included on the schedule, the due date of the first and subsequent installments, and the frequency of installments.

Repayment Start Date: The date the repayment period begins. For Stafford loans, repayment begins on the day following the last day of the grace period. For PLUS and SLS loans, repayment begins on the date the loan is fully disbursed. For Consolidation loans, repayment begins on the date the loan is disbursed.

Repurchase (of a Claim): The lender’s purchase back from the guarantor of a defaulted loan for which the lender has already been reimbursed by the guarantor.

Return of Title IV Funds: The federally mandated process by which a school calculates the amount of federal funds to be returned for a Title IV aid recipient who withdraws or who ceases attendance during a payment period or period of enrollment. The calculations may result in a reduction of the student’s Title IV loan and grant aid to reflect the percentage of the payment period or period of enrollment that the student attended, if he or she attended 60% or less of the period. Based on these calculations, the school and the student may be required to return “unearned” federal assistance.

Rolling Delinquency: A delinquency that occurs whenever the delinquent status of a loan is increased or reduced but not completely eliminated as result of a payment, the reversal of a payment, a deferment or forbearance, or the receipt of a new out-of-school date.

SAP: See Satisfactory Academic Progress.

SAR: See Student Aid Report.

Satisfactory Academic Progress: (SAP) The level of academic progress required of a student by the Higher Education Act in order to receive Title IV aid, including Federal Stafford, PLUS, or SLS loans. Each school must establish a standard for evaluating a student’s efforts to achieve an educational goal within a given period of time. In making this evaluation, the school must establish the normal time frame for completion of the course of study in which the student is enrolled, and a method, such as grades or work projects completed, to measure the quality of the student’s performance. Students enrolled in an undergraduate program who are enrolled beyond the school’s maximum time frame for program completion are not eligible for additional Title IV assistance. A school’s maximum time frame for program completion cannot exceed 150% of the published program length.

Satisfactory Repayment Arrangement: A specified number of consecutive, on-time, voluntary, reasonable and affordable full monthly payments made by a borrower to the holder of any loan or loans in default. Satisfactory repayment arrangements may be established by a borrower either to regain eligibility for Title IV funds, to rehabilitate a defaulted loan, or to consolidate a defaulted loan. The loan holder’s determination of a “reasonable and affordable” payment amount is based on the borrower’s total financial circumstances. “Voluntary” payments are payments made directly by the borrower, and do not include payments obtained by state offsets or federal Treasury offset, garnishment, or income or asset execution. An “on-time” payment is a payment received by the guarantor within 15 days before or after the scheduled due date.

Scheduled Academic Year: (SAY) The “fixed” academic period, as published in a school’s printed materials, that generally begins and ends at the same time each year according to an established schedule. The SAY is the academic period to which the statutory definition of an academic year must be applied and must meet the statutory requirements of an academic year as defined by the Department. Schools may not use a SAY for borrowers enrolled in clock-hour and non-term-based credit-hour programs of study. The summer term may be treated as an add-on at the beginning (leader) or end (trailer) of the SAY.

School: An institution of higher education, a proprietary institution of higher education, or a postsecondary vocational school declared eligible by the U.S. Department of Education to participate in one or more Title IV programs. Some guarantors may require schools to complete a separate agency-specific participation agreement. See Participating School.

School Lender: A school, other than a correspondence school, that has been approved as a lender under the FFELP and has entered into a contract of guarantee with the Department or a similar agreement with a guarantor.

Secondary Market: An entity that purchases education loans from eligible lenders in order to increase the amount of funds available for education loans. The secondary market obtains funds from investors and uses those funds to purchase existing education loans from lenders. The lenders then use the proceeds of those sales to make new education loans.

Servicer (or Third-Party Servicer): An entity that enters into a contract with a program participant to administer any aspect of its participation in a Title IV program.

Skip Tracing: Diligent efforts to locate a borrower’s telephone number or address when such information is unknown.

Social Security Number: (SSN) The 9-digit number assigned to the borrower by the Social Security Administration. The SSN is used as an identifier for tracking the borrower’s loan account(s), skip tracing, and reporting to the Department. A borrower must have an SSN in order to apply for a FFELP loan.

Special Allowance: A percentage of the daily average unpaid principal balance, paid to a lender by the Department on an eligible Stafford, PLUS, SLS, or Federal Consolidation loan. Special allowance payments act as an incentive for lenders to make education loans by, in effect, making up the difference between the interest rate charged to a FFELP borrower and market interest rates. The special allowance rate is set by statutory formula.

SSN: See Social Security Number.

Stafford MPN: See Federal Stafford Loan Master Promissory Note

Standard Repayment Schedule: A repayment schedule under which the borrower pays the same amount for each installment payment throughout the entire repayment period or pays an amount that is adjusted to reflect annual changes in the loan’s variable interest rate. The standard repayment schedule cannot exceed 10 years, excluding in-school, grace, deferment, and forbearance periods.

Standard-Standard: A repayment schedule available to a borrower under the Income-Based Repayment plan. The payment amount is calculated on the basis of both of the following:

• The borrower’s outstanding loan balance when the borrower initially entered repayment on the loan.
• A 10-year repayment period.

State Lender: In any state, a single state agency or private not-for-profit agency designated by the state that has been approved as a lender and that has entered into a contract of guarantee with the Department or a similar agreement with a guarantor.

Statutory Interest Rate: The maximum annual interest rate (under the Higher Education Act) that a lender may charge on a loan.

Student Aid Report: (SAR) The paper output record provided to the student by the Department’s Central Processing System that includes information provided by the student on the Free Application for Federal Student Aid (FAFSA®). The SAR also contains student’s expected family contribution (EFC), and the results of federal database matches. The electronic version that is sent to the school is called an Institutional Student Information Record (ISIR).

Subsidized Loan: A loan eligible for interest benefits paid by the federal government. The federal government pays the interest that accrues on subsidized loans during the student’s in-school, grace, authorized deferment, and (if applicable) post-deferment grace periods, if the loan meets certain eligibility requirements.

Suspension: Suspension of the eligibility of a school, lender, or servicer to participate in a guarantor’s programs for a specified period of time until specified requirements are met.

T-bill: See Treasury Bill.

Teacher Shortage Area: A federally designated geographic area, grade level, or academic, instructional, subject matter, or discipline that has been classified as a shortage area as defined by the Department.

Term-Based School: A school that uses standard academic terms, such as semesters, trimesters, or quarters.

Termination: Withdrawal of the eligibility of a school, lender, or servicer to participate in the guarantor’s programs.

Third-Party Servicer: In the case of a lender or guarantor, a state or private for profit or non profit organization or an individual that enters into a contract with the lender or guarantor to administer any aspect of the lender’s or guarantor’s FFELP as required by statutory or regulatory provisions related to part B of Title IV of the Higher Education Act. In the case of a school, a state or private for profit or non profit organization or an individual that enters into a contract with the school to administer any aspect of the school’s participation in any Title IV program.

Three-Times Rule: The federal requirement that no single installment of a graduated or income-sensitive repayment schedule may be more than three times greater than any other installment.

Title IV: A section of the Higher Education Act of 1965, as amended, that authorizes federal loan, work, and grant education financial assistance programs.

Totally and Permanently Disabled: The condition of an individual who is unable to work and earn money due to an injury or illness that is expected to continue indefinitely or result in death.

Trailer, Summer Term: A summer term that comes at the end of a school’s Scheduled Academic Year.

Transfer: For purposes of defining due diligence time frames, a transfer is any action (such as the sale of a loan) that results in a change of the system used to monitor or conduct collection activities on the loan.

Treasury Bill: (T-bill) A note or bill issued by the U.S. Treasury as legal tender for all debts.

Treasury Offset: An interception by the United States Treasury Department’s Financial Management Service or a state agency of any payment of applicable federal funds (tax refunds, Social Security benefits, federal retirement benefits, etc.) or state funds otherwise due a borrower who has defaulted on a FFELP loan.

Unconsummated Loan: Loan proceeds that the school returned to the lender prior to the borrower’s having cashed the check, if an individual check, or the school having applied the proceeds to the student’s account, if included in a master check or EFT transmission. This includes checks that may have been released by the school but remain uncashed by the 120th day following disbursement and EFT and master check transactions that have not been completed by the 120th day following disbursement.

Undergraduate Student: A student who is enrolled at a school in a course of study, at or below the baccalaureate level, that usually does not exceed four academic years, or is up to five academic years in length and is designed to lead to a first degree.

Undue Hardship (Adversary Complaint) Petition: A motion to have a loan discharged in a bankruptcy case on the grounds of undue hardship.

Unknown Telephone Number: The lack of any telephone number assigned to a particular borrower, endorser, or reference.

Unsubsidized Loan: A non-need-based loan such as an unsubsidized Federal Stafford loan or a Federal PLUS loan. The borrower is responsible for paying the interest on an unsubsidized loan during in-school, grace, and deferment periods, in addition to repayment periods.

U.S. Citizen or National: The term “citizen” includes all native or naturalized persons who owe allegiance to the United States and are entitled to protection by it. The U.S. includes the fifty states, the District of Columbia, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands. The term “national” includes all U.S. citizens and citizens of American Samoa and Swain’s Island.

Variable Interest Rate: An interest rate that changes, usually annually, according to prescribed methods.

Variable Interest Rate Conversion: The conversion of a fixed interest rate to an annually variable interest rate, which carries a federally mandated cap.

Verbal Request: A request that is made orally, as opposed to in writing.

Verification: A school’s procedure for checking the accuracy of information reported by the student on the FAFSA®. Verification may include requesting a copy of the tax returns filed by the student and, if applicable, the student’s parents.

Withdrawal Date: The date the student withdraws, as determined by the school. The requirements that the school must follow for determining the student’s withdrawal date depend upon whether the school is required to take attendance.

Write-Off: A loan amount for which there has been a total cessation of collection activity.