Glossary of Financial Aid Terms
In your financial aid application process, you might hear or see some of the following terms:

Accruing Interest: This is the interest that began accumulating since the loan disbursed, increasing the cost of borrowing the loan.

Alternative Loan: A credit based, private loan from a commercial lender that should not be borrowed unless all federal, state, and institutional financial aid resources have been exhausted.

Annual Percentage Rate (APR): The annual rate it costs to borrow a loan when the loan fees required to secure the loan are added to the interest rate calculation.

Award year (AY): The time period for which your financial aid award offer is meant to cover. An award year does not exceed 12 months; the reason you must complete a new FAFSA for each aid year.

Campus Based Aid: Financial Aid terminology that refers to the three federal student aid programs that are awarded at the campus level: The Federal Perkins Loan, the Federal Work Study program, and the Federal Supplemental Educational Opportunity Grant.

Capitalized: The interest that has accrued since the loan disbursed that is not paid, but is instead added to the loan principal. Capitalization will occur on the Unsubsidized Direct Loan, Parent PLUS, Grad PLUS and private alternative loans if the accruing interest is not paid as it accumulates.

Cohort Default Rate: The percentage of borrowers who entered loan repayment over the past three years, who have defaulted on their federal student loans in that time. Each school has a cohort default rate calculated by the federal government, as well as each state and each type of school (Two or four year public school, non-profit four year private schools, and two and four year for-profit proprietary schools).

Cost of Attendance (COA): The full cost of attending a school for the award period of your financial aid award, including tuition and fees, room and meals, book and supplies, and personal and transportation expenses. The sum of your financial aid, outside scholarships, and any private loans cannot exceed this amount.

Data Release Number (DRN): This number is printed on the Student Aid Report which you can provide to a school so that school can add themselves to list of schools authorized to receive your FAFSA information.

Default: Failure to make payments on a federal student loan for more than 270 days. A defaulted federal student loan will cause you to be ineligible for additional federal student aid, probably lower the FICO score on your credit report, add collection costs to your loan balance, and possibly result in the garnishment of your wages.

Deferment: A postponement of loan payments without accruing interest on a subsidized loan. Deferments are available for in-school enrollment (half-time or greater), economic hardship, military active duty or post military active duty student status. Students must request a deferment with their lender.

Dependent Student: For financial aid purposes, a dependent student must provide parental information when completing the FAFSA. A dependent student is anyone under the age of 24, is unmarried when completing the FAFSA, is without dependent children, (or providing less than 50% of their support), is not a veteran of the U.S. armed forces, is not on active military service, and is not enrolled in graduate school. Also see "Independent Students".

Direct Loan (DL): The largest federal education loan program for students and parents, known officially as the William D. Ford Federal Direct Loan Program.

Disbursement: When your scholarships, grant, or loan is paid to you or onto your school's student account, it has been "disbursed".

Electronic Funds Transfer (EFT): The moving of money via electronic means from one agency or destination to another. For instance, a lender might EFT your private loan funds to your school, or the Washington Student Achievement Council might EFT your Washington State Need Grant to your school.

Entrance Counseling: This is a session that students complete prior to borrowing a federal student loan so they are aware of their rights and responsibilities as a borrower. Entrance counseling for Federal Direct Student Loans is completed online at:

Exit Interviews: This is a session that borrowers of a federal student loan complete when they graduate, withdraw, drop out, or drop below half time enrollment. This session will advise them of their rights and responsibilities as they enter loan repayment. Exit interviews can be completed at

Expected Family Contribution (EFC): The amount the family is expected to contribute towards the student cost of attendance for one year, based on the information submitted on the FAFSA.

Federal Methodology: This is the need analysis formula that is used to calculate your Expected Family Contribution (EFC) from your FAFSA information.

Federal Family Education Loan Program (FFELP): Federal program that authorized commercial lenders to make federal education loans to students and parents. Discontinued after the 2009-10 academic year and replaced with the William D. Ford Federal Direct Loan Program.

Federal Student Aid Identification (FSA ID): Your electronic signature you create to sign your FAFSA, complete loan documents at, as well as, access your federal student aid records at or The FSA ID is acquired at

Forbearance: The option to postpone, suspend, or reduce loan payments for up to 12 months, due to a financial hardship. The borrower is required to request forbearance from the lender. Private loan lenders are not required to grant loan forbearance.

Gift Assistance: Scholarships and grants that do not have to be repaid. Generally require conditions to be met for renewal.

Grace Period: The time period between a student's graduation date, withdrawal date, or date of dropping below half time enrollment and when student loan payments begin. Grace periods are either six or nine months, depending on the loan type borrowed. Private loans may have shorter grace periods. Students should complete the exit interview to be sure of the length of their grace period.

Grants: Gift aid that does not have to be repaid, generally awarded on the basis of financial need.

Immigration and Naturalization I-9 Form: The document you must complete with your employer prior to beginning employment to prove that you are eligible to work in the United States. Requires government issued picture I.D.

Independent Student: For financial aid purposes, anyone over the age of 24, is married at the time of completing the FAFSA, is providing more than 50% support of their dependent child(ren), is on active military duty or a veteran of the U.S. armed forces, has been declared an emancipated minor or homeless by the courts, or for whom, both parents are deceased.

Interest Rate: The annual percentage that a loan accrues interest on the outstanding loan principal borrowed which is added to the loan principal that must be repaid.

Loans: Financial aid that must be repaid, usually after the student graduates, withdraws, or drops below half-time enrollment.

Need: The difference between the FAFSA generated expected family contribution and the cost of attendance at a particular school.

National Student Loan Data System (NSLDS): A federal on-line warehouse where you can view your borrowing history for the Federal Perkins, Direct, Grad PLUS, and Stafford Loans.

Origination fee: The fees charged for borrowing a loan, often deducted from the loan prior to its disbursement. There is no origination fee for the Federal Perkins or Federal Nursing Loans. The fee amount is a percentage that is set annually by the federal government.

Principal: The amount of money borrowed. Interest is charged on this amount.

Promissory Note: A promissory note is a binding legal document you sign when you borrow a loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan. It will include information on how interest is calculated and what deferment and cancellation provisions are available to the borrower.

Satisfactory Academic Progress (SAP): Requirement that recipients of financial aid meet minimum standards of academic progress to continue receiving financial aid. Standards include both a quantitative (number of credits earned, for instance) and qualitative measure (cumulative Grade Point Average, for instance). Check with your school for the parameters of their policy, as policies may vary from school to school.

Student Aid Report (SAR): The output that is emailed to you after you complete the FAFSA. It summarizes the information you provided on the FAFSA and your calculated EFC.

Self Help: Work study is payment for hours worked and/or student loans that require repayment.

Stafford Loans: The primary federal student loan program under the Federal Family Education Loan Program through commercial lenders which was discontinued after the 2009-10 academic year and replaced with the William D. Ford Federal Direct Loan Program.

Subsidized Loan: Need-based loans whose interest does not begin to accrue until the student enters repayment, usually six to twelve months after the student graduates, withdraws, or drops below half-time enrollment. These include the Subsidized Direct Loan and the Federal Perkins and Nursing Loans.

Truth-in-lending Act (TILA): Federal law that requires lenders to provide a disclosure statement to the borrower prior to loan disbursement, which discloses the true cost of their loan.

Tuition Waiver: A state program that allows public colleges and universities to waive some or all of the cost of tuition for designated populations of students. Awarding policies for tuition waivers are made at each campus.

Unsubsidized Loan: A loan that is not need-based, whose interest begins to accrue as soon as the loan is disbursed to the student. These include the unsubsidized Direct Loan, the Federal Parent PLUS and Grad PLUS loans, as well as all private/alternative loans.

U.S. Department of Education (USED or DOE): The federal department that provides most of funding and regulations for the federal student aid programs.

U.S. Department of Health and Human Services (HHS): The federal department that provides some targeted federal health professions financial aid programs. Most programs offered through the "HHS" must be applied for directly with the department.

U.S. Department of Veterans Affairs (VA): The federal department responsible for administering the array of veterans' educational benefits. Application for these programs is made directly with the VA.

Verification: A process a school must perform to verify the accuracy of the data you submit on the FAFSA. Students are notified that they have been selected for verification on their SAR. To complete the verification process, you must either use the IRS Data Retrieval Tool in FAFSA or submit a copy of your Tax Return Transcript from the IRS as well as a Verification Worksheet.

Work Force: A need-based program that provides students with short term financial assistance to complete an educational program that leads to a high demand occupation within the state. A separate application is made with a Workforce Center.

Work Study: A need-based federal or state program that provides students with an opportunity to work and receive a pay check to help cover a portion of their educational cost.

WSAC or Washington Student Achievement Council: The state agency responsible for oversight of the state's primary financial aid programs. (see

W-2 Form: An Internal Revenue Form (IRS) that you must complete with your employer so federal withholding taxes, if required, are deducted from your paycheck per IRS federal regulations.

Yellow Ribbon: A program in which participating schools agree to match a portion of a student's veteran's benefits with their own scholarships or grants. See U.S. Department of Veterans Affairs website above.