This is the second post in my FAFSA series. Have you read the first one? If not, click here to read it. Time to decode the FAFSA and financial aid terms!
Now that you know what FAFSA is and how to apply for it, it’s time to understand what all the terms mean! Often, abbreviations or slang terms are used when dealing with financial aid. Some of what’s below isn’t abbreviated, I just want to give you a clear idea of the terms. This can make the process very confusing for those who aren’t familiar.
Please note that this is NOT a comprehensive list! I’m simply listing the terms that are need-to-know for the average family who is applying for federal aid with FAFSA.
Can vary by school but usually refers to the fall and spring semesters of that year. Like right now, you can apply for the 2017-2018 academic year FAFSA.
AGI is the abbreviation for Adjusted Gross Income. This means all of you or your family’s income that must be reported to the IRS, excluding the deductions. Wages, salaries, interests, etc.
Administrative Wage Garnishment. If you owe money on your taxes, the government can have your employer withhold a portion of your earnings. If you are in default (defined later) on your loans, up to 15% can be taken and given to the government!
A degree that is completely usually in two years from a community college or career college.
For high school students, this field on the FAFSA refers to the school that the student will be attending in the future. For college students, this is the school they are currently attending. This is necessary so the government knows where to send your FAFSA information. The school’s financial aid department then processes the information and will present the student and their family with a financial aid package (defined later).
This is the amount of aid that the financial aid estimates it will pay for the student’s academic year. It’s based on several factors.
Award Letter or Financial Aid Package
This is the letter sent to high school students or their parents. College students usually just receive the information on their school account online. It shows how much the award amount is. It will show how much grants, scholarships, and loans are available to you through the government and/or school.
A degree for undergraduates that typically lasts four years.
When a loan is forgiven, the borrower no longer must finish paying. This could be for many reasons. For example, if I agree to work with the state department for one year after graduation in exchange for loan forgiveness.
When you combine multiple loans into one.
Cost of Attendance (COA)
Refers to the total cost it will be for the student to go to school that academic year. It can include tuition, housing, meals and more.
Default occurs when you fail to repay a loan per the terms.
A postponement on payments and/or interest until, usually, six months after graduation. Not all loans are eligible for this.
The determination on whether a student is a dependent or independent.
Most, but not all, students fall into this category. To be a dependent, you must not meet any criteria for being an independent student. Independent criteria: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, someone with legal dependents other than a spouse, an emancipated minor or someone who is homeless or at risk of becoming homeless.
A federal student loan, made through the William D. Ford Federal Direct Loan Program, for which eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans are types of Direct Loans.
Direct PLUS Loan
A loan made by the U.S. Department of Education to graduate or professional students and parents of dependent undergraduate students. The borrower is fully responsible for paying the interest regardless of the loan status.
The quantity of aid paid out to students from the financial aid office.
Payment of federal aid funds from the school to the borrower (student or parent).
A college application policy that allows students to apply early and receive notification of the decision early. Students may submit applications to other schools and do NOT have to attend this school.
College application policy where students can commit to attend that school and apply early. If accepted, they must withdraw all other applications and attend this school.
If you fall under this category, you do not have to be a U.S. citizen and are still eligible for federal aid. Those under this category are: “Refugee”, “Asylum Granted”, “Cuban-Haitian Entrant (Status Pending)”, “Conditional Entrant” (valid only if issued before April 1, 1980), Victims of human trafficking, T-visa (T-2, T-3, or T-4, etc.) holder “Parolee”.
Any person under 18 who has been declared by the court to be an adult.
Mandatory information session that a student must take before their first loan can be disbursed.
Mandatory information session that a student must take when graduating that will explain loan re-payment procedures.
Expected Family Contribution (EFC)
This number is used to determine your eligibility for federal aid. It’s basically much money your family can contribute. Could be $0 or it could be $5000.
Federal Pell Grant
Grant given to undergraduate students with financial need.
This acronym refers to the Federal Supplemental Educational Opportunity Grant. This grant is only offered to students with exceptional need. Most students do not receive this grant.
Federal Perkins Loan
Federal loan made by school for students who demonstrate financial need.
I covered this in the first post, but just in case you forgot! FAFSA is the abbreviated version of Free Application for Federal Student Aid.
Fin Aid is just financial aid shortened. It can also be used to refer to the financial aid office.
Federal Student Loan
Loan for students from the federal government.
A federal aid program that provides students with part-time jobs on campus. You can only apply to this job if you have submitted FAFSA and demonstrated financial need. It is applied for from your financial aid office, not FAFSA. It pays minimum wage and usually has hour restrictions. This is the type of job I have and I’m not allowed to work more than 10 hours a week.
Period where monthly loan payment is temporarily suspended. Some lenders will do this is you are trying to pay but have fallen into bad a financial situation.
Period of time after you graduate, leave school, or fall below a half time student where you don’t have to make payments on loans. Typically 6 months.
Similar to a scholarship. Financial aid, often based on financial need, that does not need to be repaid
An independent student is one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse, an emancipated minor or someone who is homeless or at risk of becoming homeless.
A loan expense charged for the use of borrowed money. Interest is paid by a borrower to a lender. The expense is calculated as a percentage of the unpaid principal amount of the loan.
% at which interest is calculated on your loan
Organization that gives the loan initially
Master Promissory Note
A document that you sign before they will let you borrow loans. Legally binding. You must agree to the terms of the loan and to pay the loan back.
Refers to things being based on merit, such as awards, GPA, etc.
Refers to things being based on financial need, not merit.
A loan available to graduate students and parents of dependent undergraduate students for which the borrower is fully responsible for paying the interest regardless of the loan status.
Sum of money borrowed plus the interest accrued.
Non-federal loan. For example, if you take out a loan from Discover or Sallie Mae, that’s a private loan.
Room and Board
Refers to the amount it costs for a dorm and sometimes can include the meal plan cost.
Satisfactory Academic Progress (SAP)
Each school has a different standard. Here’s an example: At my school, having passed all classes ever taken means you have 100% SAP. Schools usually have a minimum between 70%-80%. If I drop out of one class, my SAP falls, but it will still be above the minimum, so I’m still making SAP. However, if you drop classes too often, you’re SAP will fall too much and there will be consequences, like losing your federal aid!
Money awarded to students based on academic or other achievements to help pay for education expenses. There are also need-based scholarships. There are tons of scholarships! That’s why I started this blog, to help others find scholarships like I did!
A loan based on financial need for which the federal government pays the interest that accrues while the borrower is in an in-school, grace, or deferment status. If you are given a choice between subsidized and unsubsidized, ALWAYS take the subsidized. The government will pay the interest while you’re in school, they won’t if it’s unsubsidized.
A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.
The process your school uses to confirm that the data reported on your FAFSA is accurate. Your school has the authority to contact you for documentation that supports income and other information that you reported.
These are the most important terms in my opinion. I just finished the FAFSA for the third time so I know a thing or two 🙂 However, if you want a look at the full glossary from the government, click here.
Did you learn anything? Please let me know if this was helpful in the comments! Don’t forget to subscribe to email updates (on the sidebar) if you’re enjoying this series! Read part 3 here.