Financial Aid Glossary
By Kay Peterson, Ph. D.
January 04, 2013
Financial Need: The difference between the student’s educational costs and the Expected Family Contribution.
Fixed Interest Loans: Interest rate stays the same for the life of the loan.
Forbearance: The approved temporary suspension of loan payments due to a financial hardship (interest continues to accrue).
Free Application for Federal Student Aid (FAFSA): The application students must first complete to apply for virtually all forms of financial aid. Available by calling 1-800-4-FED-AID, and on the Web by following the links at http://www.fafsa.ed.gov.
Gift Aid: Grants and scholarships that do not need to be repaid.
Grace Perio: The period after a student either graduates or leaves school and before loan payments must begin (typically six to nine months).
Grant: Financial aid that does not have to be paid back – typically based on financial need.
Guarantee Fee: A percentage of the loan that is paid to the guarantor to insure the loan against default. The fee is usually one percent of the loan amount.
Guarantor: A state agency or private, nonprofit organization that administers a student loan insurance program.
Home Equity: The current market value of the home minus the mortgage’s unpaid principal (based on market value).
Income Contingent Repayment: The size of the monthly payments depends on the income earned by the borrower. As the borrower’s income increases, so do payments.
Institutional Methodology: A formula some schools devise to determine financial need for allocating their own institutional financial aid funds.
Lender: A bank, credit union or other financial institution that provides funds to the student or parent for an educational loan.
Merit-based Aid: Financial aid based on academic, artistic, athletic or other merit-oriented criteria (not financial need).
Need Analysis: The process used by a college to evaluate an applicant’s financial resources and determine how much the student or family can pay toward the cost of the education.