By Eddy Hood, MBA and CEO of Ignite Spot Accounting Services
Navigating the process of figuring out how to finance a college education can be confusing and overwhelming. Before embarking on an application for federal student aid, it's a good idea to learn as much as possible about financial aid. The following terms will help you understand the world of college grants, loans, and scholarships. Many terms apply to general accounting and loans as well.
Aid for Military Family Service: The federal government and some nonprofit organizations offer funds to veterans and active-duty military personnel to pay for college.
Annual Taxable Income: The annual taxable income is the income earned and used to determine how much is owed in taxes for a calendar year.
Award Letter: An award letter is the document that outlines the financial aid offered to a student with terms and deadlines for accepting.
Cost of Attendance: The cost of attendance is the total amount of college expenses prior to applying financial aid.
Credit: Credit is the money borrowed and can also be defined as a consumer's ability to borrow money to pay for goods and services.
Debt Collection: Debtors use debt collection to pursue payment from borrowers.
Debt Consolidation: Debt consolidation is a way of refinancing debt by taking out one loan to pay off other loans.
Default: When a borrower fails to repay a loan according to outlined terms, the loan goes into default.
Deferment: Temporarily postponing loan payments for a period of time is known as deferment.
Demonstrated Need: The demonstrated need is the difference between the expected family contribution and the total cost of attendance.
Direct Subsidized Loan: This type of loan is a federal student loan that does not require interest payments by a student while in school or during the deferment period.
Expected Family Contribution: This measures a family's financial strength to determine the financial aid award that should be needed.
Extended Repayment Plan: An extended repayment plan enables a borrower to repay loans over a longer period.
Federal Pell Grant Program: This is the biggest federal grant program for undergraduate students and is designed to help low-income households.
Financial Aid: Financial aid is the money loaned and/or given to pay for college expenses.
Free Application for Federal Student Aid: Also known as FAFSA, this is the form submitted to apply for federal financial aid.
Graduated Repayment Plan: This type of payment plan begins with lower payments that increase every two years.
Grant: A grant is a gift of financial aid that a student does not have to repay.
Half-Time Enrollment: This type of enrollment applies to students who are only carrying half of the typical course load.
Loan: A loan is a money borrowed and paid back with interest.
Loan Forgiveness: Some student loans may be discharged to encourage students to secure specific types of employment.
Merit Aid: Merit aid includes funds provided to students based on personal achievements.
Rehabilitated Loan: A rehabilitated loan is one that has been brought back out of default status.
Repayment: Repayment is paying back a loan with scheduled payments.
Scholarship: A scholarship is a type of gift aid that students do not need to repay, often based on merit.
State Aid: States offer financial aid to residents to offset educational costs.
Student Loan Debt Burden: This amount is the percentage of a borrower's monthly income that should be used to repay student loans.
Tuition: Tuition is the money owed to pay for a course of study at an institution.
Unsubsidized Loan: An unsubsidized loan is borrowed through the Direct Loan Program and is not based on financial need. It accrues interest while the student is in school.
Work Study: Work study programs enable students to work on a college campus as a part of their financial aid package.