Glossary of Financial Terms
The following are definitions of terms you may find online or in materials relating to student loans and financial aid. We've also included some terms specific to your FedLoan Servicing student loan account.
Definitions beginning with the letter A
- Account Access:
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FedLoan Servicing's secure, online borrower portal. Sign in to your own personal student loan account to make payments, update your contact information, and more.
- Accrued Interest:
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The interest that accumulates and is payable on the unpaid principal balance of a loan.
Definitions beginning with the letter B
- Borrower:
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The individual responsible for repaying a loan. In borrowing a loan, the responsible individual has agreed to the loan's terms and conditions by signing the loan's Master Promissory Note (MPN) or Promissory Note.
Definitions beginning with the letter C
- Cancellation Payment:
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A cancellation payment is a payment received within 120 days of a disbursement date. This payment reduces the principal balance, loan fees, and applicable interest.
- Capitalization:
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The addition of unpaid accrued interest to the principal balance of a loan. Capitalization of interest results in a higher principal balance and additional finance charges over the course of repayment and may cause your monthly payment amount to increase.
- Consolidation:
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Combining numerous federal education loans into a single loan with a new repayment schedule and interest rate.
Definitions beginning with the letter D
- Default:
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The failure to repay a loan according to the terms the borrower agreed to when signing the loan's Master Promissory Note (MPN). Default on a federal loan occurs after 270 days of non-payment on the account.
- Deferment:
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An authorized temporary suspension of repayment, granted under certain circumstances.
For subsidized Stafford Loans, the federal government pays the interest during a deferment. For all other loans, the borrower is responsible for paying the interest that accrues during a deferment.
- Delinquency:
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The failure to make scheduled monthly loan payments when they are due.
- Direct Debit:
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When you sign up for Direct Debit, we automatically withdraw your monthly student loan payments from your checking or savings account. The transaction happens on the same date each month, so your payments are always on time.
- Direct Loan:
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A loan that is part of the William D. Ford Federal Direct Loan Program (FDLP). Eligible students and parents borrow Direct Loans directly from the U.S. Department of Education. The FDLP includes subsidized and unsubsidized Stafford Loans, PLUS Loans to parents of dependent students, PLUS Loans to graduate and professional students, and Consolidation Loans.
- Disbursement:
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The transfer of loan funds from a lender to the school or borrower.
Definitions beginning with the letter F
- FAFSA (Free Application for Federal Student Aid):
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The form students must complete to qualify for federal financial aid and for most state grants, scholarships, student loans (including Stafford Loans), work-study programs, and many school-based student financial aid programs. Students will need to include household financial information—such as income, taxes, and assets—to determine Expected Family Contribution.
- Federal Family Education Loan Program (FFELP):
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Private lenders (banks, credit unions, savings and loan associations) provide funds for FFELP Loans, and the federal government guarantees them against default. FFELP includes subsidized and unsubsidized Stafford Loans, PLUS Loans to parents of dependent students, PLUS Loans to graduate and professional students, and Consolidation Loans.
- Fixed Interest Rate:
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A loan with a pre-established interest rate that does not change during a defined period of time. Currently, federal Stafford, Parent PLUS, and Student PLUS Loans have interest rates that are fixed by law for the life of the loan.
- Forbearance:
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An authorized temporary reduction or suspension of repayment, granted under certain circumstances. For both subsidized and unsubsidized federal loans, the borrower is responsible for paying the interest that accrues during the forbearance period.
Definitions beginning with the letter G
- Grace Period:
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A 6-month period before the first payment on a subsidized or unsubsidized Stafford Loan is due. The grace period begins the day after the student graduates, leaves school, or drops below half-time status and ends the day before the repayment period begins.
- Grants:
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Financial aid awards that may not have to be paid back and are generally awarded based on financial need. Grants are available through the federal government, state agencies, colleges, communities, and other organizations.
- Guarantor:
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A state or private nonprofit organization that has an agreement with the U.S. Department of Education to administer a loan guarantee program under the Higher Education Act.
Definitions beginning with the letter I
- Interest:
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The charge for using a lender's money.
- Interest Notice:
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You receive an interest notice—instead of a bill—if your loan is in deferment, forbearance, or grace.
An interest notice differs from a bill because you're not required to make a payment. However, making payments on your interest notice can minimize the amount of interest that will capitalize when your account enters repayment.
Definitions beginning with the letter L
- Lender:
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The bank or other institution that provides the money for FFELP Loan borrowers.
Definitions beginning with the letter M
- Master Promissory Note (MPN):
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A common form that serves as a legal and binding contract for borrowing Stafford, Parent PLUS, and Student PLUS Loans—either in multiple academic years or for a single academic year. The MPN contains the loan's terms and conditions, including the borrower's responsibilities for repaying the loan.
Definitions beginning with the letter P
- Paperless Billing:
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Paperless Billing (eBilling) is a convenient alternative to paper-based billing statements. Get a monthly email payment reminder with a link to your online account. Simply sign in and pay or view your bill.
- Parent PLUS Loan:
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A federal loan for parents of dependent undergraduate students.
- Principal Balance:
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The principal balance on your billing statement includes the original amount you borrowed, plus any applicable loan fees, less any principal payments. It does not include accrued interest but may include interest that was capitalized when your loans entered repayment.
- Private Loan:
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A non-federal loan through a bank or credit union; also called an alternative or direct-to-consumer loan. A private student loan may have a variable interest rate, require a credit check, and may not provide the benefits of federal student loans.
Definitions beginning with the letter S
- Scholarships:
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Financial awards that usually do not have to be paid back. They are given to students who demonstrate or show promise of high achievement in areas such as academics, athletics, music, art, or other disciplines.
- Servicer:
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An entity that enters into a contract with a school or lender to administer any aspect of its participation in a Title IV program.
- Student PLUS Loan:
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A federal loan for graduate or professional students to pay for their education.
- Subsidized Loan:
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A federal Stafford Loan on which the government pays the interest during in-school, grace, and authorized deferment periods.
Definitions beginning with the letter T
- Title IV Loan:
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A category of federal education loans established under the Higher Education Act of 1965, as amended. Title IV loans include loans made under the FFELP, FDLP, and Perkins loan program.
Definitions beginning with the letter U
- Unsubsidized Loans:
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A non need-based loan (such as unsubsidized Stafford, Parent PLUS, or Student PLUS Loans) on which the borrower is responsible for paying the interest that accrues from the date of disbursement until the loan is paid in full.