Aggregate Loan Limit:
The maximum amount you can borrow in Federal Student Loan money over your lifetime.
Capitalization of Interest:
The addition of unpaid interest to the principal balance of a loan. When the interest is not paid as it accrues during periods of in-school status, the grace period, deferment, or forbearance, your lender may capitalize the interest. 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.
Failure to repay a loan according to the terms agreed to in the promissory note. For most federal student loans, you will default if you have not made a payment in more than 270 days. You may experience serious legal consequences if you default.
A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue 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 added to the principal balance (capitalized) of the loan(s).
A loan is delinquent when loan payments are not received by the due dates. A loan remains delinquent until the borrower makes up the missed payment(s) through payment, deferment, or forbearance. If the borrower is unable to make payments, he or she should contact his or her loan servicer to discuss options to keep the loan in good standing.
Direct Consolidation Loan:
Allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages:
One Lender and One Monthly Payment: With only one lender and one monthly bill, it is easier than ever for borrowers to manage their debt. Borrowers have only one lender, the U.S. Department of Education, for all loans included in a Direct Consolidation Loan.
Flexible Repayment Options: Borrowers can choose from multiple plans to repay their Direct Consolidation Loan, including plans that base the required monthly payment amount on the borrower's income. These plans are designed to be flexible to meet the different and changing needs of borrowers. With a Direct Consolidation Loan, borrowers can switch repayment plans at any time.
No Minimum or Maximum Loan Amounts or Fees: There is no minimum amount required to qualify for a Direct Consolidation Loan! In addition, consolidation is free.
Reduced Monthly Payments: A Direct Consolidation Loan may ease the strain on a borrower's budget by lowering the borrower's overall monthly payment. The minimum monthly payment on a Direct Consolidation Loan may be lower than the combined payments charged on a borrower's Federal education loans.
More information about consolidation loans may be found at Federal Student Aid Consolidation Loans.
A federal student loan, 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 Loans:
Made 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. A credit check is required for the borrower.
Direct Subsidized Loans:
Based on financial need, the federal government pays the interest that accrues while the borrower is in an in-school or deferment status. (Interest accruing during your grace period depends on when your loan was dispersed- check with your loan servicer for more info on your specific loan(s) and grace period interest accrual). If offered, take these out first.
Direct Unsubsidized Loans:
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. Financial need is not required. A credit check is not required.
Federal Student Loan:
A student loan funded by the federal government to help pay for your education. A federal student loan is borrowed money you must repay with interest.
The difference between the cost of attendance (COA) at a school and your Expected Family Contribution (EFC). Your EFC is determined by your completed FAFSA. While COA varies from school to school, your EFC does not change based on the school you attend.
A period during which your monthly loan payments are temporarily suspended or reduced. Your lender may grant you a forbearance if you are willing but unable to make loan payments due to certain types of financial hardships. During forbearance, principal payments are postponed but interest continues to accrue. Unpaid interest that accrues during the forbearance will be added to the principal balance (capitalized) of your loan(s), increasing the total amount you owe.
A period of time after borrowers graduate, leave school, or drop below half-time enrolment where they are 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.
The cost to borrow money. The expense is calculated as a percentage of the unpaid principal amount of the loan.
The rate at which interest is paid by a borrower for the use of money that they borrow from a lender. Specifically, the interest rate is a percentage of principal to be paid.
The organization that made the loan initially; in the case of Federal Student Loans, the lender is the U.S. Department of Education.
A fee charged for each student loan you receive that is a percentage of the total loan amount you are borrowing (gross amount). The loan fee is deducted proportionately from each disbursement of your loan. This reduces the actual loan amount you receive (net amount).
A company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a lender. This is who your loan payments go to.
Minimum Monthly Payment
The smallest payment you can make towards your unpaid balance to remain in good standing with the credit card company. Making the minimum monthly payment on time will avoid late fees and positively affect your repayment history on your credit report. The amount of the minimum monthly payment is calculated as a small percentage of your total credit balance and you can find this on your monthly statement.
The total sum of money borrowed plus any interest that has been capitalized.
The binding legal document that you must sign when you get a federal student loan. It lists the terms and conditions under which you agree to repay the loan and explains your rights and responsibilities as a borrower. It’s important to read and save this document because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.