Federal Student Loans

Entrance Counseling

A mandatory information session, which takes place before you receive your frst federal student loan; entrance counseling explains your responsibilities and rights as a student borrower.

forbearance

A period during which your monthly loan payments are temporarily suspended or reduced. ED may grant you forbearance if you are willing but unable to make loan payments due to certain types of fnancial hardships. During forbearance, principal payments are postponed but interest continues to accrue (accumulate). Unpaid interest that accrues during the forbearance will be capitalized (added to the principal balance of your loans), increasing the total amount you owe.

Grace Period

A period of time (generally six months) after a borrower graduates, leaves school, or drops below half-time enrollment during which the borrower is not required to make payments on certain federal student loans. Some federal student loans will accrue interest during the grace period, and if the interest is unpaid, it will be added to the principal balance of the loan when the repayment period begins.

deferment

A postponement of payment on a loan. Deferment is allowed under certain conditions. During deferment, interest does not generally accrue (accumulate) on Direct Subsidized Loans, Subsidized Federal Stafford Loans, and Federal Perkins Loans. All other federal student loans that are deferred will continue to accrue interest. Any unpaid interest that accrued during the deferment period may be capitalized (added to the principal balance of the loans).

grant

Financial aid, often based on fnancial need, that does not have to be repaid (unless, for example, you withdraw from school and owe a refund).

Capitalization

The addition of unpaid interest to the principal balance of a loan. When the interest on your federal student loan is not paid as it accrues (accumulates), ED will capitalize the interest under certain circumstances. This increases the outstanding principal* amount due on the loan and may cause your monthly payment amount to increase. Interest is then charged on that higher principal balance, increasing the overall cost of the loan.

Adverse Credit History

a credit history is a summary of your financial strength, including your ability to repay future loans. Your credit history may be considered adverse if you have experienced bankruptcy discharge or foreclosure within the past five years, or if you have any accounts that are 90 days or more delinguent.