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Wondering what EFC means? Check out this list of important financial aid terminology and definitions!
Acceptance Rate - Percentage of students, out of all who applied, who were offered admission to a certain school.
Accrued Interest - The amount of unpaid interest that has accumulated or grown, as of a specific date, on a loan.
Adjusted Gross Income (AGI) - An income-related dollar amount that comes from your federal tax return and reflects how much you earned, minus certain deductions. AGI includes more than just wages earned. It can include alimony, Social Security, and business income. When completing the FAFSA, your AGI is factored into your Expected Family Contribution (EFC).
Award Letter - An official document provided by your school's financial aid office listing all of the financial aid available to a student. The financial aid may include grants, scholarships, work-study programs, as well as loans. A student is not required to use the lender or loan included in the Award Letter.
Capitalization or Capitalized Interest - The process of adding unpaid interest to the principal balance of an educational loan, increasing the amount of the loan that must be repaid.
Consolidation - A loan program that allows a borrower to combine several educational loans into one new loan. This process extends the repayment period and allows for a single monthly payment. This simplifies the repayment process, sometimes results in a lower interest rate, and usually extends the repayment period.
Co-signer - When a borrower is unable to qualify for a loan on their own, certain loans will allow a co-signer who meets credit requirements to help the borrower qualify. The co-signer takes equal responsibility for the loan and, as a result, is legally obligated to repay the loan in full. The debt, and any missed or late payments on the debt, are reflected on both the borrower's and the co-signer's credit report.
Cost of Attendance (COA) - The total cost of an education at a certain school - usually expressed as a yearly figure. COA includes tuition and fees, room and board, an allowance for books and supplies, transportation, and miscellaneous expenses and is determined by the financial aid office of the institution.
Default - Failure to repay a student loan according to the terms of a promissory note signed by the student. The organization that holds the loan (the state or the federal government) can take action to recover the money, including notifying national credit bureaus of the default. Wages and/or tax returns of the defaulter may be garnished, and the borrower will no longer be eligible to receive federal financial aid until the defaulted loan is repaid or the borrower has made six consecutive monthly payments.
Deferment - This is an authorized period of time during which a borrower may postpone principal and interest payments. Deferments are available to borrowers who are in school at least half time, enrolled in a graduate fellowship program, during periods of unemployment or economic hardship, undergoing cancer treatment, and in some cases, for teaching in shortage areas or low-income schools or for volunteering with the Peace Corps, or VISTA, etc.
Dependent Student - For financial aid purposes, an undergraduate student is usually classified as a dependent and is expected to have access to parental financial resources if he/she is not married, does not have legal dependents, is not a veteran, and is not an orphan or ward of the court. Federal Student Aid provides information on who it considers a dependent student or independent student.
Entrance/Exit Interviews - Federal Direct Loan borrowers are required to have counseling sessions before their first loan disbursement can be released and before the borrower leaves school.
Expected Family Contribution (EFC) - Determined by a Federal Student Aid formula, this figure indicates how much of a family's financial resources should be available to help pay for the student's education. The EFC is used in determining eligibility for financial aid. Both FM (federal methodology) and IM (institutional methodology) use the EFC concept, although the calculated EFC under the two methodologies may differ.
FAFSA (Free Application for Federal Student Aid) - This is the application that must be completed by students who want to be considered for federal, state, or institutional need-based financial aid. Students can begin completing the FAFSA starting October 1st of each year preceding the next academic year (typically 10 months before the start of the fall semester).
Federal Direct Student Loan Program (FDSLP or Direct Loans) - Under this program education loans are made available directly from the U.S. government. Participating schools serve as agents for subsidized and unsubsidized Stafford Loans and Parent PLUS loans.
Federal Methodology (FM) - This is an eligibility formula used by the federal government that calculates the student's and the family's Expected Family Contribution (EFC) which determines their eligibility for financial aid.
Financial Aid Package - The total financial aid a student receives to meet educational expenses is called the "financial aid package" and is typically described in an Award Letter. It may include federal, state, and private aid such as grants, loans, work-study, and scholarships.
Financial Need - This is the difference between the Cost of Attendance and the Estimated Family Contribution and is used in determining what the student's aid package will be.
Fixed Interest Rate - A type of interest rate on a loan that does not change over the course of the loan term.
Forbearance - When the lender agrees to temporarily postpone a borrower's principal repayment obligation for a period of time, this is called "Forbearance." Interest continues to accrue on the loan during the forbearance period.
Forgivable Loan Program (or Student Loan Forgiveness) - A loan program designed to allow borrowers to have the balance of their loan partially or totally forgiven if they meet certain conditions. North Carolina offers several State Forgivable Loan Programs to assist students committed to working in certain employment shortage professions such as education, allied health, nursing, and medicine. Federal student loans also have certain Student Loan Forgiveness programs.
FSA ID - Username and password combination used to log in to the U.S. Department of Education online systems. The FSA ID is used to complete the FAFSA and students and parents need separate and individual FSA IDs.
Full-Time Student - For undergraduate students, this is usually a minimum of 12 semester hours of enrollment in a degree-granting program.
General Education Development (GED) - This is a certificate that students receive if they've passed a specific, approved high school equivalency test. Students who don't have a high school diploma but who have a GED may still qualify for federal and state student aid.
Gift Aid - Gift aid usually refers to grants and scholarships. It is money offered to qualifying students that does not need to be repaid.
Grace Period - Period of time when a borrower leaves school or drops below half-time enrollment and the borrower is not obligated to begin repayment of his/her loans - usually six or nine months.
Grant - Money awarded on the basis of need or merit that the student is not obligated to repay. There are federal grant programs, state grant programs, and institutional grants from certain schools. The first step toward qualifying for any grants is to complete the FAFSA.
Independent Student - For financial aid purposes, a student is classified as an independent student if at least one of the following applies: he/she is 24 years old or older, is married, is enrolled in a graduate or professional educational program (beyond a bachelor's degree), has legal dependents other than a spouse, is an orphan or ward of the court (or was a ward of the court until age 18), or is a veteran of the US Armed Forces ("veteran" includes a student who attended a US military academy who was released under a condition other than dishonorable). Federal Student Aid provides information on who it considers a dependent student or independent student.
Institutional Methodology (IM) - This need-analysis formula was developed by College Board's College Scholarship Service. It determines the student's and the family's capacity to pay for college each year and is used by some postsecondary institutions for awarding institutional and private financial aid.
Interest - The amount of money charged to borrowers for use of loan proceeds. Interest on education loans is simple interest calculated on the daily unpaid principal balance. The interest rate may be constant throughout the life of the loan (fixed rate) or it may change at specified times (variable rate) as specified by the terms of the loan.
Monthly Payments - A minimum monthly payment of $50 is required for Stafford and PLUS Loans under a standard repayment schedule.
Months to Repay - The number of months in which a borrower has to repay a loan. The maximum number of months to repay is 120 months.
Needs Analysis - This is the process of reviewing a student's aid application to determine the ability of the family to contribute to the costs of education. Completing a needs analysis form (e.g., FAFSA or PROFILE) is the required step in applying for most types of financial aid.
Principal - The outstanding amount of the student loan. Interest is charged on this amount. As the loan is repaid, a portion of each payment goes to pay the interest and reduce the outstanding principal balance.
Profile (College Board’s CSS Profile™) - A need-analysis form required by some institutions for non-federal aid and processed through the College Scholarship Service (CSS).
Promissory Note - A borrower must sign a legal document when he/she receives an educational loan that lists conditions under which the money is borrowed and the terms under which he/she agrees to repay the loan with interest. The borrower's promissory note is usually returned to him/her when the loan is repaid in full.
Residency (RDS) - In North Carolina, a person must complete the NC Residency Determination Service to determine if they are eligible for in-state tuition, state grants, or other benefits. A person does not necessarily have to be a U.S. citizen in order to be classified as a North Carolina resident for tuition purposes.
Satisfactory Academic Progress (SAP) - A student must be making satisfactory academic progress in order to continue receiving federal aid. Each institution develops its own satisfactory academic progress standards for financial aid eligibility.
Scholarship - A form of financial aid given to students on the basis of need or merit (or a combination of both) to help pay for their education expenses. Some scholarships have community service requirements and geographic, institutional or academic major restrictions. Most scholarships require the student to maintain satisfactory academic progress for renewal.
Scholarship/Loan - A form of financial aid that has a service and/or cash repayment obligation as a condition for receiving the funds. A student must promise to repay the money upon graduation or withdrawal from the program within a specified time period either through service in a certain geographical and/or subject area or in cash at a predetermined interest rate.
Selective Service Registration - A male student must register with the Selective Service to receive federal and/or state student aid. The requirement applies to males who were born on or after January 1, 1960, are at least 18 years old, are citizens or eligible non-citizens, and are not currently on active duty in the armed forces.
Self-Help Aid - Self-help aid is money offered to students that must either be paid back or requires something in return, such as volunteer hours or a certain number of work hours.
Student Aid Report (SAR) - After the student submits the FAFSA to the federal processor, this form is returned to the student. The SAR reports the information that was processed and indicates federal eligibility. It may also be used by the institutional financial aid office in determining a student's eligibility for other state or private programs of financial assistance.
Subsidized Loan - This is a need-based loan on which the interest is paid by the federal government while the borrower is enrolled in school or during grace and deferment periods.
Unsubsidized Loan - This is a non-need-based loan for which borrowers are responsible for the interest from the date the loan is disbursed.
Variable Interest Rate - A type of interest rate on a loan that can change and may increase or decrease over the course of the loan term.
Verification - This is a review process to determine the accuracy of the information on a student's FAFSA. If a student is selected for verification, he/she is required to submit documentation (such as federal tax returns) to support information on his/her federal aid application.
Work Study - Employment program that allows undergraduate or graduate students with financial need to work part-time to help pay for their education expenses.