Loan Terms

Repayment

The repayment period begins with the borrower's first payment due date and ends when the loan is repaid in full. Often, repayment on student loans does not begin until the borrower has graduated, dropped below halftime or otherwise left school.

Garnish

Wages may be garnished, or withheld by an employer to be paid directly to the government or a lender, for repayment of debt.

Interest

When you borrow money, you are often charged interest by the entity that loaned you the money. When you pay back your loan, your payments go toward interest and principal (the amount you borrowed)

Delinquency

Your account becomes delinquent when you miss a payment or fail to make your payment on or before your payment due date.

Credit history

Your credit history shows information about previous credit accounts you've opened and the payments you've made. Lenders use your credit history to judge how well you will be able to repay new debt.

Principal balance

Your principal balance includes the original amount you borrowed, plus any loan fees and capitalized interest, minus any payments you have made.

Disbursement

A student loan is disbursed when the money is transferred from a lender to the school or borrower. A student loan may be disbursed to you or to your school over multiple dates.

Capitalization

Accrued interest that is not paid may be capitalized, or added to, the principal balance of the loan. If you don't make interest payments before beginning or resuming loan payments, the interest on your loans may be capitalized, increasing the principal balance. Each time interest is capitalized, the principal balance increases and may result in higher monthly payment amounts or a longer repayment term.

Forgiveness

All or part of a federal student loan may be forgiven, or canceled, if you meet certain requirements.

Credit report

Consumer reporting agencies generate a credit report with information received from lenders and organizations with which you have a financial relationship. This information contains details about your financial transactions and payment history

Default

Failure to repay a loan according to the terms a borrower agreed to can result in default.

Accrued interest

Interest accumulates on the principal balance, or unpaid portion, of a loan.

Term

The length of time it takes to repay a loan in full is described as its term.

Grace period

Subsidized and unsubsidized federal loans have a six-month grace period, during which you are not required to make payments on your student loan. The grace period begins the day after you graduate, leave school or drop below a half-time enrollment status. Your repayment period begins the day after your grace period ends. Once a grace period is used in its entirety, it may not be used again.

Annual percentage rate (APR)

The APR is the annual rate charged for borrowing money, expressed as a percentage. It includes any fees or additional costs, including yearly interest, associated with the loan.

FAFSA

The Free Application for Federal Student Aid is the first step to qualifying for federal student loans and other types of financial aid for college. This free form is available online at www.studentaid.ed.gov/fafsa

Consumer reporting agency

consumer reporting agencies collect and report information on individuals' borrowing and financial habits. Lenders often review a consumer credit report before approving loans

Comaker

A comaker is one of two joint borrowers on a federal PLUS or consolidation loan or a private loan. Comakers agree to same terms and conditions

Cosigner

A cosigner agrees to pay for another person's debt if that person doesn't meet his or her obligations. Borrowers who have a poor credit history, or haven't established one, often need to provide one or more cosigners.

Deferment

A deferment is an authorized, temporary postponement of your payment schedule. You must meet certain requirements to qualify for a deferment, and interest may accrue during periods of deferment.

Forbearance

A forbearance is an authorized, temporary postponement of your payment schedule. You must meet certain requirements to qualify for a forbearance, and interest accrues during periods of forbearance.

Unsubsidized loan

The borrower is responsible for all interest on an unsubsidized federal loan from the date of the first disbursement until the loan is paid in full. Many lenders encourage you to make payments that at least cover the interest during periods of deferment, forbearance, in-school or grace to avoid capitalization.

Subsidized loan

The federal government pays interest on subsidized federal loans when they are in an in-school status or in an authorized deferment or grace period.

Discharge

Under a few infrequent circumstances, student loans may be discharged, or canceled.