The financial aid process often seems to have a language of its own. Here are some key terms beginning with the letters A through E and their definitions to help you.
Ability to Benefit
Colleges may or may not award federal aid to students without a high school or equivalency diploma, unless the student has demonstrated that he or she can benefit from the education offered. To do this, one must receive a passing score on an independently administered test approved by the Department of Education.
Academic Year (AY)
This is a measure of the academic work to be accomplished by a student. The school defines its own academic year, but federal regulations set minimum standards to determine federal financial aid awards.
Adjusted Available Income (AAI)
This is the portion of a family's income remaining after deducting federal, state, and local taxes; a living allowance; and other factors used in the Federal Need-Analysis Methodology.
Adjusted Gross Income (AGI)
This includes all taxable income, as reported on a U.S. income tax return.
The amount your family has in savings and investments, including savings and checking accounts, businesses, farms or other real estate, and stocks, bonds, and trust funds. Cars, jewelry and things like stamp collections are not considered assets, but some colleges may count the net value of your family's principal home as an asset when determining their own awards. However, it's not included in the calculation for eligibility for federal funds.
The award letter notifies student financial aid applicants of the assistance being offered. It usually details the types and amounts of aid, as well as program information, student responsibilities, and conditions that govern the award. Students may accept or decline the aid offered; adhering to deadlines is vital.
Colleges and universities deliver their news about your financial aid information as a "package" — usually a mix of different types of awards. Commonly, packages include Pell Grants, Stafford Loans, and Work Study (see below).
An award year generally lasts from July 1 of one year through June 30 of the following year.
For need-analysis purposes, the base year is the 12-month calendar year prior to the award year. For example, 2009 is the base year for the 2010–11 award year.
Bureau of Indian Affairs (BIA) Grant
This is a federal grant program administered by the Bureau of Indian Affairs for students with need who are enrolled members of an Indian, Eskimo, or Aleut tribe and enrolled in accredited institutions in pursuit of an undergraduate or graduate degree.
Property that is used in the operation of a trade or business, including real estate, inventories, buildings, machinery and other equipment, patents, franchise rights, and copyrights. These are considered in determining a family's expected contribution (EFC) under the regular formula.
The term commonly applied to those federal aid programs administered directly by colleges. Programs include the Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and Perkins Loan programs. Since these awards vary from school to school, they are not transferable.
In certain circumstances, a borrower of a federal student loan can fulfill requirements to permit the cancellation or writing off of a designated portion of the principal and interest. Many cancellation provisions involve service as a teacher or nurse.
When interest payments are deferred and added to the principal of a loan.
Citizenship/Eligibility for Aid
To be eligible to receive federally funded student aid, a student must be one of the following:
- A United States citizen
- A non-citizen national
- A permanent resident with an I-151 or I-551 without conditions
- A participant in a suspension of deportation case pending before Congress
- A holder of an I-94 showing one of the following designations: "Refugee," "Asylum Granted," "Indefinite Parole" and/or "Humanitarian Parole," "Cuban/Haitian Entrant, Status Pending," or "Conditional Entrant" (valid if issued before April 1, 1980)
Individuals in the U.S. on an F1 or F2 visa or on a J1 or J2 exchange visa cannot get federal aid.
College Scholarship Service (CSS)
CSS processes the PROFILE financial form which was created to assist postsecondary institutions, state scholarship programs, and other organizations to measure your family's financial strength and analyze its ability to contribute to your college costs. You can submit this form to some 300 private colleges and universities along with the FAFSA when seeking student financial aid from these institutions. Check with your school to see if they require it.
This is a commercial bank, savings and loan association, credit union, stock savings bank, trust company, or mutual savings bank, each of which can act as lenders for the Federal Family Education Loan (FFEL) Program. Loans made by commercial lenders under the FFEL Program are insured by state guarantee agencies with the backing of the federal government against losses from default or inability to pay.
A loan made to enable a borrower with multiple loans to obtain a single loan with one interest rate and repayment schedule. Federal Perkins, Stafford, Direct, Health Education Assistance (HEAL), Health Professions Student, and Loans for Disadvantaged Students may be consolidated, subject to eligibility. A consolidation loan pays off the existing loans; the borrower repays the consolidated loan. It is important to shop around for the best offer.
A college program that alternates between periods of full-time study and full-time employment in a related field. You're paid for your work while gaining practical experience in your major. This helps you apply for jobs after graduation. Co-op programs can take longer — up to five years to obtain your baccalaureate degree.
Cost of education
The cost of your education includes tuition, fees, room and board, books, supplies, transportation, and other miscellaneous expenses. Your financial aid eligibility is the difference between the cost of your education and the Expected Family Contribution computed by the federal government using the FAFSA.
Default (Federal Perkins Loan)
A loan for which the borrower persistently failed to make payments when due (not cured either by payment or other arrangements). A loan discharged in bankruptcy is not considered to be in default.
Default (Federal Stafford, Direct, Federal PLUS, or Direct PLUS Loans)
This is the failure to make a payment or meet other terms of the promissory note. A loan may go into default when the Secretary of Education or guaranty agency concludes that the borrower no longer intends to honor the obligation to repay. A loan discharged in bankruptcy is not considered to be in default.
This is a time during which payments of principal on a loan are not required. For Federal Perkins, Subsidized Stafford, and Direct Subsidized Loans, interest does not accrue. The repayment period is extended by the length of the deferment period. The most common reason for loan deferment is enrollment for at least half-time at an eligible school.
Department of Education, U.S. (ED)
The section of the federal government that administers assistance to students enrolled in postsecondary educational programs under the following programs: Federal Pell Grant, Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), Federal Family Education Loan (FFEL), and William D. Ford Federal Direct Loan. The Secretary of Education, who heads the department, is a member of the President's Cabinet. The programs from this department can be a source of financial aid for college.
This is gift assistance designated for a recipient in a particular academic department. Departmental scholarships are a frequently overlooked source of funding.
Direct Loan (Subsidized and Unsubsidized)
These are long-term, low-interest loans administered by the Department of Education and institutions, with a variable interest rate not to exceed 8.25 percent. Direct Unsubsidized Loans can be used to replace EFC.
Disbursement is the process by which financial aid funds are made available for use in meeting educational and related living expenses. Most schools disburse all funds at the beginning of each term. Some, to help students budget their funds, make smaller payments throughout the term.
Funds, primarily federal, awarded to certain categories of students (veterans, children of deceased veterans or other deceased wage earners, and students with physical disabilities) to help finance their postsecondary education, regardless of financial need.
These are specific conditions that a student must meet to qualify for financial assistance. In addition to demonstrated need, eligibility criteria for federal aid may include citizenship status and selective service registration. Individual programs may also carry other requirements. Certain criteria, such as citizenship, are checked via automated matches of FAFSA information and other federal databases.
An institution of higher education, vocational school, postsecondary vocational institution, or proprietary institution of higher education that meets all criteria to participate in the federal student aid programs.
A person who, though not a U.S. citizen, qualifies for federal aid in one of the following categories:
- U.S. Permanent resident who has an Alien Registration Receipt Card (Form I-151, I-551, usually referred to as green cards) or other evidence of admission for permanent residence
- Conditional permanent resident (I-151C)
- Person designated as lawfully present in U.S. for other than a temporary purpose who has an Arrival-Departure Record (Form I-94) from INS stamped as refugee, granted asylum, indefinite parolee and/or humanitarian parolee, or Cuban-Haitian entrant
- Permanent residents of the Republic of Palau or citizens of the Republic of the Marshall Islands and the Federated States of Micronesia.
NOTE: Non-citizens who are not eligible include holders of Student Visas, Exchange Visitors Visas, G-Series Visas, or those who have only a Notice of Approval to Apply for Permanent Residence.
This is a program that leads to a degree or certificate at a school participating in federal aid programs.
When it refers to financial aid information, this term refers to the opportunity for students to earn money to help pay for their education. Federal Work-Study is one program by which students can defray their expenses. Most colleges also provide off-campus employment opportunities.
Funds obtained and owned by the postsecondary institution that are invested. The income from the investment can be used for various purposes such as construction, research, and financial aid for college.
A registered student is considered an enrolled student; a correspondence school student must be accepted for admission and complete and submit one lesson to be considered enrolled.
At those institutions measuring progress by credit hours, enrollment status refers to a credit-hour workload categorized as either full-time, three-quarter-time, half-time, or less-than-half time.
An entitlement program is funded to ensure that all eligible applicants are guaranteed to receive maximum authorized awards. As long as a student meets the requirements and is enrolled, he or she will receive the award.
Expected Family Contribution (EFC)
This is the amount of financial support your family is expected to contribute toward your college education. The dollar amount is part of the formula used by the federal government to determine financial aid eligibility using the FAFSA form.