Bad or poor credit If someone has poor credit, that means that they probably have a history of late payments on loans or credit cards. People with poor credit will either be unable to borrow, or will have to borrow at a higher interest rate. See Credit History below.
Capitalization If your loan is building up interest over time, but you are not making payments, the lender may, at a certain time, add all the unpaid interest to your loan and give you a new loan with that larger amount as the "principal" – the new amount that you will have to pay back.
Co-signer This is someone who agrees to pay back your loan if you don’t. You’ll get lower rates with a co-signer, but if you can’t make the payments, the co-signer will have to. Some people who co-signed on their children's student loans have found they need to delay retirement in order to have the income to pay the loans back.
Collection(s) When lenders have special companies call you to make sure you make your payments.
Cost of Attendance (COA) This is sometimes referred to as the “sticker price” of a college. It refers to the full cost of attending college in a given school for a year. (You may see this as “COA” on your award letter.) Colleges are required to estimate this for you. It includes “direct costs” that colleges charge you like tuition and room and board. Colleges also try to estimate your “indirect costs” – all the costs that you may need to pay to stay in school, including books, transportation, living expenses, and entertainment. Be sure to think about everything you may need to pay for. You can use our downloadable budget.
Credit History, Credit Score, Good Credit The rating that lenders use to rate a borrower's reliability in paying back a loan. If you borrow money or have a credit card, and you make all the payments on time, then you will have a good credit score, good credit history, and/or good credit.
Default This is a bad thing. It’s when a borrower stops making payments. There are usually a number of negative consequences when this happens.
Establishing credit If you have never borrowed, you may have no credit score. Borrowing and paying back student loans, and paying credit cards on time will help you establish good credit.
Interest Interest is one of the ways that lenders make money on the amounts you borrow from them. It’s a percentage that is added to the amount you borrow, calculated at an annual rate. When their materials refer to an APR (annual percentage rate), that number includes both interest and fees.
Loan fees This is an amount taken out of your loan every time you begin the process of borrowing more money. Loan fees are designed to pay for the time and effort that lenders put into processing their paperwork.
Loan servicer This is the business that handles the monthly statements and billing for your loan. They may or may not be part of the organization lending you the money.
Loan term This is the pre-agreed time you have to pay your loan back. In most cases, the term is set at the time you borrow, but with student loans it is set when you graduate. Normally most people take ten years. But if you pay it off faster, it will cost you less, because there is less time for the interest to add up.
Net Price This is your personalized cost to attend a school after factoring all aid that you are eligible to receive that you do not have to pay back. This includes college grants, state grants, scholarships, other forms of gift aid as well as tuition waivers. Student loans are not factored into the net price, because you have to pay them back. Try this link to learn more: Sticker vs. Net Price: Finding Colleges You Can Afford
Net Price Calculator Every college is required to have a net price calculator on its website. The calculator will ask a few simple questions and offer an estimate of what you will pay after getting federal aid and college grants. There are financial questions similar to those on the FAFSA. Net price calculators may also ask for your grade point average (or GPA) as well as any SAT or ACT scores. If a net price calculator asks you for academic information, the calculation takes into account your eligibility for college merit aid that is awarded based on academic achievements. Learn more about it at this link: Five Tips for Using a College Net Price Calculator
Parent PLUS loans These are loans that the federal government makes to your parents for your education -- provided they have good credit and enough income to pay the loans back. (see credit history)
Private loans These loans are made to students or their parents by private loan companies. Since these companies need to make a profit, the rates are often high. Each company has its own forms you must fill out.
Promissory note This is an agreement that the student (or parent) signs in which they promise to pay back a student loan. It outlines the details of the loan including the rate, the amount and when it needs to be paid back. Sometimes there are other restrictions including what the money can be used for.
Simple interest, compound interest Simple interest means you pay the interest rate times the amount of your loan every year. Compound interest is when you pay interest on the interest that's adding up, as well as the amount you borrowed. Student loans are calculated using simple interest.
Stafford Loans, William D. Ford loans, Federal Unsubsidized loans, Federal Subsidized loans These are various names for the student loans issued by the Federal Government. They are also known as Federal Direct loans.
Subsidized loans Subsidized loans are for students with financial need. With a subsidized loan, the government pays (or subsidizes) the interest while you are in school. This makes these loans less expensive to pay back. You do not choose whether you’ll be offered subsidized or unsubsidized loans. The government will tell you which kind of loan you will get based on your family income.
Unsubsidized loans The interest on an unsubsidized loan begins to be charged as soon as the college gets the money for the semester. In other words, the interest starts adding up while you're in college, as opposed to a subsidized loan which doesn't add interest until after you graduate. As noted above, you do not choose whether you’ll be offered subsidized or unsubsidized loans. The government will tell you which kind of loan you will get based on your family income.