Financial Aid Office
Glossary of Financial Aid Terms
Ability-to-Benefit (ATB)
Basis on which a student without a high school diploma, a recognized
equivalent, or a General Education Diploma (GED) may qualify for federal
student financial assistance. The Department of Education maintains a list
of approved tests for measuring a student's ability to benefit from the
educational program the student seeks. The test must be administered before
the school admits the student.
Academic Period
A measured period of enrollment (e.g., a semester, trimester, quarter, or
clock hours).
Academic Year
For the purposes of Title IV aid, a period that begins on the first day
of classes and ends on the last day of classes or examinations and that
consists of at least 30 weeks of instructional time during which an
undergraduate, full-time student is expected to complete either of the
following:
-
At least 24 semester or trimester hours, or 36 quarter hours in an
educational program that measures program length in credit hours.
-
At least 900 clock hours in an educational program that measures
program length in clock hours.
The Department of Education may, at its option, reduce the minimum number
of weeks in an academic year.
Accredited Institution
Any school that meets standards established by a nationally recognized
accrediting agency, and for which that agency has provided documented
acknowledgment of the school's compliance.
Accrediting Agency
An agency that sets educational standards for schools, evaluates schools,
and certifies that schools have met these standards. A "nationally
recognized accrediting agency" is one that the Department of Education has
recognized to accredit or pre-accredit a particular category of school or
educational program according to 34
CFR Parts 602 and
603. The agency grants accreditation status to schools. The Department of
Education publishes a list of nationally recognized accrediting agencies or
associations that the Department of Education has determined to be reliable
authorities as to the quality of education or training offered. If the
Department of Education determines that there is no nationally recognized
accrediting agency or association qualified to accredit schools in a
particular category, the Secretary of Education shall appoint an advisory
committee, composed of persons specially qualified to evaluate training
provided by schools in such category, to prescribe the standards a school
must meet in order to participate in
Title IV programs and to determine
whether an individual school meets those standards.
Accrued Interest
Interest that accumulates on the unpaid principal balance of a loan.
Act, the
The Higher Education Act of 1965, as amended. Title IV, Part B of the Act
addresses
FFELP loans.
Actual Interest Rate
The annual interest rate a lender charges on a loan, which may be equal
to or less than the "applicable"-or statutory-interest rate on that loan.
Additional Unsubsidized Stafford Loan
The additional amount of a student's eligibility for unsubsidized Federal
Stafford loans. This amount is available only to independent undergraduate
students, graduate/professional students, and dependent undergraduate
students whose parents are unable to obtain a PLUS loan.
Administrative Cost Allowance (ACA)
Money provided by the Department of Education to guarantors to help cover
the costs of administering the FFELP. Schools also
receive ACA's to help with administrative costs for campus-based programs.
Administrative Forbearance
A temporary suspension of, a reduction of, or an extension of time for
making principal and/or interest payments on a Federal Stafford, SLS, PLUS,
or Consolidation loan that is granted by the holder or lender, upon notice
to the borrower or endorser, and that does not require a written request
from the borrower or an agreement signed by the borrower before the
forbearance is granted.
Administrative Wage Garnishment
Process by which a guarantor, under federal law, may intercept a portion
of the wages of a borrower with a defaulted
FFELP loan.
Aggregate Loan Limit
The borrower's maximum allowable unpaid principal amount throughout the
student's academic career.
Agreement
Any written contract, agreement, or letter of understanding between the
guarantor and another entity that specifies the rights and duties of each
party with respect to participation in the guarantor's programs and/or
utilization of the guarantor's services.
AmeriCorps
A national and community service program created by the National and
Community Service Trust Act of 1993 and administered by the Corporation for
National Service. For each year of full-time service in the program,
participants will receive education awards to help finance their
postsecondary education or pay back their student loans.
Annual Loan Limit
The maximum Federal Stafford or PLUS loan amount that a guarantor may
guarantee for a borrower for an academic year.
Anticipated Completion (Graduation) Date
The date on which a student is expected to complete an academic program.
This date is provided by a school official on the borrower's loan
application, and in subsequent enrollment status updates.
Applicable Interest Rate
The maximum annual interest rate (under the Higher Education Act) that a
lender may charge on a loan.
Application
The combined form that contains the loan application and the
promissory
note for a Stafford or PLUS loan.
Assignment
Language placed on or attached to the application/promissory note
indicating a change or transfer of loan ownership.
Authority
Any private nonprofit or public entity that may issue tax-exempt
obligations to obtain funds to be used for the making or purchasing of
FFELP loans. "Authority" also includes any agency,
including a state postsecondary institution or any other instrumentality of
a state or local government unit, regardless of the designation or primary
purpose of that agency, that may issue tax-exempt obligations, any party
authorized to issue those obligations on behalf of a governmental agency,
and any nonprofit organization authorized by law to issue tax-exempt
obligations.
Auxiliary Loans to Assist Students (ALAS)
A previous name for what became the SLS loan. The Omnibus Reconciliation
Act of 1981 extended the Parent Loans for Undergraduate Students (PLUS)
program to include loans for independent undergraduate students and graduate
and professional students. These loans were called Auxiliary Loans to Assist
Students or ALAS. The Higher Education Amendments of 1986 repealed the ALAS
program and authorized two separate loan programs in its place:
- Supplemental Loans for Students (or SLS loans) for graduate
students, professional students, and independent undergraduates; and
- PLUS loans for parents of dependent students.
Award Letter
An official document issued by a financial aid office listing all the
financial aid awarded to the student.
Award Year
The period between July 1 of a given calendar year and June 30 of the
following calendar year.
Bankruptcy
Judicial action to stay the normal collection of debts against the
petitioner, and cause those debts to be satisfied at the direction of the
court. Bankruptcies are classified by "chapters," which refer to parts of a
larger volume--the U.S. Bankruptcy Act.
Base Stafford Loan Amount
The base amount of a student's eligibility for a subsidized and/or
unsubsidized Federal Stafford loan(s). The base amount equals the loan limit
applicable to a dependent undergraduate student.
Base Year
For need analysis purposes, the calendar year preceding the award year.
Blanket Endorsement
A separate form indicating the transfer of contract rights and ownership
of a group of loans. If a blanket endorsement is used to indicate ownership
change, a copy of the endorsement must be placed in the borrower file of
each loan purchased by the lender or secondary market.
Borrower
An individual to whom a
FFELP loan is made.
Borrower-Based Academic Year (BBAY)
An academic year that is individualized per borrower and generally
"floats" with the borrower's attendance and progress. For borrowers enrolled
in programs of study at schools that are not term-based, the academic year
is always a BBAY. A student's BBAY must begin with a term the student
actually attends.
Borrower-Specific Deferment
Refers to the federal requirement that eligibility for a deferment be
applied to all of a borrower's loans, rather than to each separate loan. For
example, a borrower who has used the maximum 24 months of internship
deferment is not entitled to an additional internship deferment.
Branch Campus
A permanent location of a school that is geographically apart and
independent of the main campus; that offers courses leading to a degree,
certificate, or other recognized educational credential; that has its own
faculty and administration or supervision; and that has its own budgetary
and hiring authority. A branch campus is one type of "additional location"
at which schools may offer instruction to students. A school must establish
eligibility for each of its locations.
California Student Aid Commission (CSAC)
The principal state agency responsible for administering financial aid
for students attending schools in California.
Campus-Based Programs
The Federal Perkins Loan, Federal Work-Study, and Federal Supplemental
Educational Opportunity Grant programs. These programs are administered by a
school's financial aid office. A student's financial aid package may contain
aid from one or more of these programs.
Cancellation (of a Guarantee)
The revocation of a loan guarantee, which occurs if any of the following
conditions exist:
- No loan proceeds were disbursed to the borrower.
- The lender checks were never cashed.
- None of the loan proceeds were negotiated within 120 days of the
date on which they were disbursed.
- EFT and master check loan proceeds in the
school's account are not delivered to the borrower within 120 days after
being transferred to the account.
- The loan is repaid in full within120 days of final disbursement.
The guarantee is not lost on the remainder of the loan if one
disbursement is cancelled.
Capitalization
An increase in the principal balance of a Stafford, SLS, PLUS, or Federal
Consolidation loan that occurs when a lender adds the interest accrued on
the loan to the outstanding principal balance.
Capitalized Interest
Accrued interest added to the borrower's outstanding principal.
Subsequent interest accrues on the new total principal balance, which
includes any capitalized interest.
Certification
The act of attesting that something is true or meets a certain standard.
For example, the school completes its section of the application, thereby
confirming the borrower's eligibility for the guarantee and, if applicable,
interest benefits and special allowance. The borrower completes the
borrower's section of an application or deferment form, thereby confirming
that certain eligibility criteria have been met.
Change of Control
An occurrence that signifies that a different person, partnership, or
corporation has obtained authority to control the actions of a school. For
example, a change of control can occur when stock is transferred to the
parent corporation; when schools merge or divide; when a company is retained
to manage a school; or when a school transfers assets or liabilities to the
parent corporation.
Chapter 7
This is the most common form of bankruptcy, often referred to as
"liquidation." In a Chapter 7 bankruptcy, the eligible assets of the
borrower are liquidated and distributed among the creditors by a trustee,
with preference given to secured creditors. This type of bankruptcy is
frequently used by borrowers who are unemployed or have few or no assets.
Chapter 11
A bankruptcy in which the borrower's debts are reorganized. This type of
bankruptcy is seldom used by student borrowers and is most often used by
financially troubled businesses.
Chapter 12
Chapter 12 bankruptcy, which is similar to a Chapter 13 bankruptcy,
applies only to certain farms and family farm operations with specific debt
ceilings.
Chapter 13
This is commonly referred to as the "wage earner" plan. A Chapter 13
bankruptcy allows individuals with regular incomes to satisfy their debts
through a court-directed payment plan. Usually, the Chapter 13 debtor(s) has
significant debts, but sufficient income to eventually pay the debts.
Check
A draft (drawn on a financial institution) that is payable on demand and
that requires the personal endorsement or other written approval of the
borrower to be cashed.
Citizen/Eligible Non-Citizen
An eligibility requirement that must be met by Federal Stafford, PLUS,
and SLS loan borrowers and recipients.
Claim
A request that the lender (servicer) files with the guarantor for
reimbursement of its losses on a Federal Stafford, SLS, PLUS or
Consolidation loan due to the borrower's death, disability, default, or
bankruptcy; school closure; or false certification of the borrower's
eligibility.
Clock Hour
A time period consisting of one of the following:
- 50-60 minutes of class, lecture, or recitation in a 60-minute
period.
- 50-60 minutes of faculty-supervised laboratory, shop training, or
internship in a 60-minute period.
- 60 minutes of preparation in a correspondence course.
Code of Federal Regulations (CFR)
The collection of federal regulations promulgated by the U.S. government.
The Department of Education's regulations are codified in Volume 34.
Cohort Default Rate
The percentage of Stafford and SLS loan borrowers who default before the
end of the fiscal year following the fiscal year in which they entered
repayment on their loans. The Department of Education calculates this rate
annually to determine the default experience of students who attended a
particular school during a particular period of time. Unless otherwise
specifically indicated, the cohort default rate includes the
FFELP cohort default rate or the weighted average
cohort rate.
Collection Charges
Costs incurred by the lender or its agents in collecting overdue
payments. These charges may include, but are not limited to, attorney's
fees, court costs, and telegrams; they may not include routine costs
associated with preparing letters or notices or making telephone calls to
the borrower.
Co-Maker
One of two joint PLUS or Federal Consolidation loan borrowers, who are
each held equally liable for the loan's repayment. Before the introduction
of the common Stafford loan application/promissory note, some lenders may
have required co-makers on old subsidized Stafford loans.
Commissioned Salesperson
A person who receives compensation related to, or calculated on the basis
of, student applications for enrollment, actual student enrollments, or
student acceptances for enrollment.
Common Application
A standardized application and promissory note developed by
FFELP
participants and approved by the Department of
Education by which a borrower applies for a FFELP loan. Different
application forms are required for Federal Stafford loans. Common
applications are periodically revised and approved to reflect major changes
in FFELP regulations.
Confirmation
A process by which the school, lender, or guarantor (on behalf of the
school or lender) advises the borrower of the proposed loan types and
amounts. The borrower must take action to confirm the loan type or request a
specific loan amount.
Congressional Methodology (CM)
A discontinued need analysis formula for campus-based and student loan
programs that has been replaced by the Federal Need Analysis Methodology.
Consolidation
Refinancing multiple educational loans into one new loan with a new
repayment term, monthly payments, and interest rate. Often the monthly
payment amount can be reduced with consolidation.
Consummated Loan
A loan for which a disbursement check has been negotiated or
EFT
or master check funds have been delivered to the
borrower. For example, the loan would be considered consummated if the
borrower had cashed the check, if an individual check, or the school had
applied the proceeds to the student's account, if included in a master check
or EFT transmission before the school returned the proceeds to the lender.
Correspondence Study
A course of study in which the school provides instructional materials,
including examination on those materials, to students who are not physically
attending classes at the school. Instruction may be provided, in whole or in
part, by video technologies. If the school offers 50% or more of its total
courses by telecommunications, or by a combination of telecommunications and
correspondence courses, the telecommunications courses offered by that
school are considered "correspondence courses." A home-study course for
which instruction is provided by video cassettes or discs is also considered
a correspondence course during any award year unless the school provides
instruction via the same media, during the same award year, to its on-campus
students. If a course is a combination of correspondence work and
residential training, the entire course is considered correspondence study.
Co-Signer
A signer of a promissory note who is secondarily liable for a loan
obligation. This term is no longer used in federal regulations. See also
Endorser.
Cost of Attendance (COA)
An estimate of the student's educational expenses for a period of
enrollment.
Cost-Less-Aid
A figure calculated by deducting all financial assistance the student has
been or will be awarded for the loan period from the cost of attendance for
the same period of enrollment.
Cumulative Loan Limit
Reinstatement of a loan's guarantee upon completion of a prescribed
series of loan collection activities; also the process by which the loan's
guarantee is reinstated.
Deactivation
Loss of eligibility for a lender to participate in the
FFELP. Since December 1994, the Department of Education has notified
lenders that have failed to submit an
ED Form 799
for two
consecutive quarters that they are candidates for deactivation.
Dear Partner Letter (DPL)
A communication from USED that explains and clarifies
USED's guidance regarding federal regulations and statutes. Previously known
as the Dear Colleague Letter (DCL).
Debt-Management Counseling
Counseling provided to a student about debt and accumulated indebtedness.
Counseling is required both before the student receives the first
disbursement of the student's first loan (often referred to as entrance
counseling,) and when the student is scheduled to complete an academic
program (commonly referred to as exit counseling).
Default
The failure of a borrower (or
endorser, if any)
to make installment payments when due, or to meet other terms of the
promissory note or other written agreement(s) with
the lender under circumstances where the Department of Education or
guarantor of the loan reasonably concludes that the borrower no longer
intends to honor the borrower's obligation to repay a loan, provided that
this failure persists for the most recent consecutive 180-day period (for a
loan repayable in monthly installments) or the most recent 240-day period
(for a loan repayable in less frequent installments).
Deferment
A period of time during repayment in which the borrower, upon meeting
certain conditions, is not required to make payments of loan principal.
Delayed Delivery
The federally mandated delay in the delivery of the first disbursement of
loan funds for first-year, first-time undergraduate Stafford loan borrowers.
Delivery of the first disbursement must be delayed until the student has
completed the first 30 days of the loan period for which the loan was
intended. Schools that maintain a 10% cohort default rate for three years
are exempt (see chapter 6, page 23 of the July 2001 Common Manual).
Delinquency
A period that begins on the day after the due date of a payment when the
borrower fails to make the equivalent of one full payment.
Department of Education, the (USED)
The U.S. Department of Education or an official or employee of the
Department of Education acting for the Department of Education under a
delegation of authority.
Dependent Student
A student who does not meet the eligibility requirements for an
"Independent Student," under the Higher Education Act of 1965, as amended.
See
Independent Student.
For FAFSA purposes, a dependent student is a student who is less than 24
years of age, unmarried, has no dependent children, is not an orphan or ward of
the court, not working on a masters or doctorate program, or a veteran of the
military.
Diligent Effort
An attempt to perform a required activity in a matter that complies with
federally mandated procedures and requirements.
Disability
A medically determined condition that renders a person unable to work and
earn money, or to attend school. A borrower (or his spouse or dependent) is
considered to be temporarily totally disabled if the condition is expected
to be of a short and finite duration; a borrower is considered totally and
permanently disabled if this condition is expected to continue for a long or
indefinite period of time.
Disbursement
The transfer of loan proceeds by individual check, master check, or
electronic funds transfer (EFT) by a lender to a
borrower, a school, or an escrow agent. For a Consolidation loan,
disbursement is the transfer of borrower loan proceeds from the
consolidating lender to the current holder of the loan being consolidated.
Disbursement Date
For a loan disbursed by check or draft, the date the check or draft is
issued. For a loan disbursed by electronic funds transfer (EFT)
or wire transfer, the date the funds are transferred from the lender to the
school or escrow agent.
Discharge
The release of a borrower from a loan obligation due to the borrower's
bankruptcy, the closing of a borrower's school, the borrower's (or
student's) death, the borrower's total and permanent disability, or the
school's false certification of the borrower's eligibility for a
FFELP loan.
Disclosure Statement
A statement of the total cost of a loan including relevant data such as
loan amount, interest rate, projected maturity and any additional finance
charges.
Disposable Income
That part of a borrower's compensation from an employer and other income
from any source that remains after the deduction of any amounts required by
law to be withheld, or any child support or alimony payments that are made
under a court order or legally enforceable written agreement. Amounts
required by law to be withheld include, but are not limited to, federal and
state taxes, social security contributions, and wage garnishment payments.
Documentation
A written or printed paper, a supporting reference, or a record that can
be used to furnish evidence, proof, or information.
Due Diligence
The procedures required for attempting to satisfactorily resolve a
delinquency and prevent a default in accordance with federal regulations.
The lender must document the performance of these attempts, and the attempts
must be at least as forceful as those generally used for consumer loans.
Economic Hardship
A period during which the borrower is working full-time but is earning an
amount that does not exceed the greater of the minimum wage or the poverty
line for a family of two. Economic hardship also exists if a borrower's
monthly payments on federal education loans are equal to or greater than 20
percent of the borrower's total monthly gross income, as defined in
FFELP
regulations.
ED Form 799
Lender's Interest and Special Allowance Request and Report, a federal
form that a lender uses to report loans made (and resulting origination fees
owed) by the lender to the Department of Education and interest benefits and
special allowance earned by the lender. The fees owed are usually deducted
from what the Department of Education owes the lender for interest benefits
and special allowance.
EDFUND
A nonprofit corporation founded by
CSAC on January 1,
1997. EDFUND was organized as a 501(c)(3) public benefit corporation
pursuant to legislation authorizing CSAC to establish a nonprofit auxiliary
to administer all activities associated with its participation in the
federal student loan program.
Electronic Funds Transfer (EFT)
The electronic transfer of Stafford or PLUS loan proceeds from the lender
to an account at the school or the school's financial institution.
Eligibility Letter
A term used to describe the materials the Department of Education's
Institutional Participation Division sends to a school that has received
federal approval for participation in the
Title IV
programs. The "letter" includes an Approval Notice and a copy of the
school's Program Participation Agreement.
Eligible Borrower
A borrower or potential borrower who meets federal eligibility criteria
for a Federal Stafford loan or, in the case of a parent borrower, a Federal
PLUS loan.
Eligible School
A post-secondary institution of higher education or a vocational school
declared eligible by the Department of Education to participate in the
FFELP. Some guarantors may require schools to complete
a separate agency-specific participation agreement.
Eligible Student
A student who meets federal student eligibility criteria.
Emergency Action
A special action taken by the guarantor or the Department of Education to
temporarily immediately suspend a school, lender, or servicer from
participation in the guarantor's programs prior to the initiation of formal
Limitation, Suspension, and Termination procedures.
Endorser
A signer of a promissory note who is
secondarily liable for a loan obligation, i.e., who agrees to pay if the
borrower does not. A lender may require a PLUS borrower with adverse credit
to obtain a creditworthy endorser in order to receive the loan.
Enrolled
The status of a student who has met either of the following requirements:
- Completed the registration requirements (except for the payment of
tuition and fees) at the school the student is attending; or
- Has been admitted into an educational program offered predominantly
by correspondence and has submitted one lesson, completed by the student
after acceptance for enrollment and without the help of a representative
of the school.
Entity
Any organization, institution, government agency, nonprofit corporation,
or other group that participates in federal student financial aid programs.
Escrow Agent
A guarantor or other eligible lender that receives the proceeds of a
FFELP loan as an agent of an eligible lender for the
purpose of transmitting those proceeds to the borrower or the borrower's
school.
Estimated Financial Assistance (EFA)
The school's estimate of the amount of financial assistance from federal,
state, institutional, or other sources that a student (or parent on behalf
of a student) will receive for a period of enrollment. This may include
scholarships, grants, financial need-based employment, or loans. EFA does
not include certain loans used to replace the expected family contribution
or Federal Perkins Loans or Federal Work-Study funds that the student has
declined.
Expected Family Contribution (EFC)
The amount a student and the student's spouse or family are expected to
pay toward the student's cost of attendance. The Federal Need Analysis
Methodology must be used to calculate the EFC.
FAO
Financial aid office.
Federal Direct Loan Program (FDLP)
A student loan program authorized on July 23, 1992, by Title IV, Part D,
of the Higher Education Act. The Federal Direct Loan Program offers Federal
Direct (Subsidized) Stafford loans, Federal Direct Unsubsidized Stafford
loans, Federal Direct Consolidation loans, and Federal Direct PLUS loans.
The FDLP is similar to the FFELP, except that funding
comes directly from the U.S. Treasury rather than from private lending
institutions.
Federal Family Education Loan Programs (FFELP)
Loan programs authorized by Title IV, part B of the
Higher Education Act of 1965, as amended, including the Federal Stafford,
Federal PLUS, Federal SLS, and Federal Consolidation Loan Programs. These
loan programs are funded by lenders, guaranteed by guarantors and reinsured
by the federal government. These programs are defined individually in 34
CFR 668.
Federal Interest Benefits
The federal government's payment of accrued interest on subsidized
Stafford loans to the lender on behalf of the borrower during in-school,
grace, and deferment periods. Some Consolidation loans also may qualify for
interest benefits.
Federal Need Analysis Methodology (FM)
The formula used to calculate the expected family contribution with
regard to determining the amount of Title IV
assistance
available to a borrower.
Federal Pell Grant See Pell Grant
Federal Perkins Loan See Perkins Loan
Federal Register
A federal government publication, published each weekday (except federal
holidays), that lists regulations, regulatory amendments, notices, and
proposed regulatory changes for all federal executive agencies.
Final Demand
A letter that the lender sends to the borrower demanding full payment of
a delinquent or ineligible account. The letter is required as part of the
due diligence
procedure for collecting a loan
seriously delinquent or ineligible. The Final Demand letter is sent on or
after the 151st day of delinquency for loans payable in monthly
installments. The letter must be sent at least 30 days before the lender
files a default claim.
Final Regulations
Federal program rules, which are published in the Federal Register. Final
regulations usually take effect 45 days after the date of publication.
Financial Aid Administrator (FAA)
A staff member at an eligible school who is charged with the
administration of financial aid programs.
Financial Aid Package
The total amount of financial aid that a school awards a student. Federal
and nonfederal aid such as loans, grants, or work-study are combined into a
"package" to help meet the student's need. Using available resources to give
each student the best possible aid package is one of the major
responsibilities of a school's financial aid administrator.
Financial Aid Processing System (FAPS)
EDFUND's financial aid information system that
maintains the FFEL
program.
Financial Aid Transcript
An official record of the federal financial aid a student has received at
schools the student previously attended. The record is used to assess the
amount of federal financial aid the student has received and to prevent the
award of federal funds for which the student or the parent of a dependent
student is not eligible. The record may be obtained from the National
Student Loan Data System (NSLDS) or may be a paper
report received from the previous schools.
Financial Need
The student's cost of attendance
less the
expected family contribution. In determining a student's
eligibility for a subsidized Stafford loan and a
FFELP
borrower's total loan amount, the student's estimated financial assistance
is also subtracted from the cost of attendance.
Forbearance
A period of time during which the borrower is permitted to temporarily
cease making payments or reduce the amount of the payments. The borrower is
liable for the interest that accrues on the loan during the forbearance
period. Some forbearance's are entitlements for eligible borrowers; others
are granted at the discretion of the lender.
Foreign School
An eligible school located outside the United States and its territories.
Free Application for Federal Student Aid (FAFSA)
The form the student must complete to apply for federal
Title IV financial assistance, including Stafford loans. The student
must include financial information on the student's household so that the
expected family contribution
can be calculated.
Full-Time Student
A student enrolled in an institution of higher education (other than a
student enrolled in a program of study by correspondence) who is carrying a
full academic workload as determined by the school under standards
applicable to all students enrolled in that student's particular program.
The student's workload may include any combination of courses, work,
research, or special studies, whether or not for credit, that the school
considers sufficient to classify the student as a full-time student.
Funds
Any monies (including checks, drafts, or other instruments); any
commitment to provide money; or any commitment of insurance that has been,
or may be, provided under the guarantor's programs to a borrower enrolled at
and attending a participating school, or a borrower accepted for enrollment
at a participating school.
Gap
A period during the servicing of a loan in repayment when
due diligence activities are required by regulations
but no due diligence activities (collection activities) are performed. For a
loan serviced under regulations published December 18, 1992, a gap greater
than 45 days (greater than 60 days in the case of a transfer) results in the
loss of the loan's guarantee. Previously, the term "gap" was defined in
Appendix D of 34 CFR 682, and was applicable to loans
serviced under due diligence provisions published November 10, 1986. For
loans serviced under these "old" due diligence provisions, a gap in due
diligence activities did not result in a loss of the loan's guarantee unless
the lender had committed a violation of at least one due diligence
requirement.
Grace Period
The period that begins the day after a Stafford loan borrower ceases to
be enrolled at least half time at an eligible school, ends the day before
the repayment period begins, and during which payments of principal are not
required. For a borrower with a Stafford loan that has not yet entered
repayment who also has an SLS loan, the grace period for the SLS loan is the
equivalent of the grace period for the Stafford loan if the borrower
requests grace on his or her SLS loan(s).
Grade Level
A student's academic class level, as provided by a school official on the
student's application and promissory note. Undergraduate students are 01
(freshman/first year) through 05 (fifth year/other undergraduate); graduate
and professional students are A (first year) through D (fourth year and
beyond).
Graduate or Professional Student
A student who, is enrolled in a program or course above the baccalaureate
level at an institution of higher education, or enrolled in a program
leading to a first professional degree. Has completed the equivalent of at
least three years of full-time study at an institution of higher education,
either before entrance into the program or as part of the program itself and
is not receiving
Title IV aid as an undergraduate student
for the same period of enrollment.
Graduated Repayment Schedule
A repayment schedule under which the amount of the borrower's installment
payment is scheduled to change (usually by increasing in two or more
increments) during the course of the repayment period. The Graduated
Repayment Schedule cannot exceed 10 years, excluding in-school, grace,
deferment, or forbearance periods.
Grants
Financial aid awards that do not have to be repaid, available through the
federal government, state agencies and colleges.
Guarantee
A conditional legal obligation, as defined in an agreement by and between
a guarantor and a lender, for the guarantor to reimburse the lender for some
portion of a loan that is not repaid by the borrower due to default, death,
disability, bankruptcy, borrower ineligibility, false certification of
borrower eligibility, or school closure.
Guarantee Disclosure
The form used by the guarantor that serves as evidence that the loan
identified on the form has been insured (guaranteed) against loss due to the
borrower's default, death, disability, bankruptcy, false certification of
the loan's application, or closing of the school while the borrower was
enrolled. The form also provides relevant financial data, including the loan
amount, interest rate, guarantee fee, origination fee (if applicable), and
projected maturity date. Some lenders use their own forms; others use a
guarantor's form.
Guarantee Fee
A fee charged by a guarantor for each loan it guarantees. In most cases,
the lender reduces the amount of the loan proceeds by this amount, and the
fee is remitted to the guarantor. The Higher Education Act limits this fee
to no more than one percent of the principal.
Guarantor (or Guaranty Agency)
A state or private nonprofit organization that has an agreement with the
U.S. Secretary of Education to administer a loan guarantee program under the
Higher Education Act.
Guaranty Agency see Guarantor
Half-Time Student
A student who is:
- enrolled in a participating school;
- carrying an academic workload that amounts to at least half of the
workload of a full-time student, as determined by the school; and
- not a full-time student.
A student enrolled solely in an eligible program of study by
correspondence is considered a half-time student.
HEA
The Higher Education Act of 1965, as amended.
HEAL Program Loan
Health Education Assistance Loan available to graduate health
professional students.
Hearing
The orderly presentation of arguments and evidence before a Hearing
Officer.
Hearing Officer
A person with no prior involvement in a dispute under the Limitation,
Suspension, and Termination procedures. The Hearing Officer for any hearing
will be selected by the guarantor.
Holder
An eligible lender in possession of a
FFELP loan
promissory note that is payable to or has been assigned to the lender. A
federal or state agency or an organization or corporation acting on behalf
of such an agency and acting as a conservator, liquidator, or receiver of an
eligible lender may also be considered a holder.
Incarcerated
The status of a borrower who is serving a criminal sentence in a federal,
state, or local penitentiary, prison, jail, reformatory, work farm, or other
similar correctional institution. A borrower who is living in a half-way
house or in home detention or who has been sentenced to serve only weekends
is not considered to be incarcerated.
Income-Contingent Repayment Schedule
A repayment schedule for some FDLP
loans under which
the borrower's monthly payment amount is adjusted annually, based on the
total amount of the borrower's Direct loans, the borrower's family size, and
the Adjusted Gross Income (AGI) reported on the borrower's most recent
income tax return. In the case of a married borrower, who files a joint
income tax, the AGI includes the spouse's income.
Income-Sensitive Repayment Schedule
A repayment schedule for some
FFELP loans under
which the borrower's monthly payment amount is adjusted annually, based
solely on the borrower's expected total monthly gross income received from
employment and other sources during the course of the repayment.
Independent Student
A student who meets one or more of the following criteria:
- An individual who is at least 24 years old by December 31 of the
award year.
- An orphan or ward of the court.
- A veteran of the U.S. Armed Forces.
- A graduate or professional student.
- A married person.
- An individual with legal dependents other than a spouse.
- A student for whom the school's financial aid administrator
determines and documents the student's independent student status based
on the administrator's professional judgment of the student's unusual
circumstances.
Ineligible Borrower
A borrower who does not meet federal eligibility criteria for a Federal
Stafford loan or, in the case of a parent borrower, a Federal PLUS loan.
In-School Period
The time during which a student is enrolled on at least a half-time basis
at a participating school.
Institution
Generally refers to a school participating in the
Title IV
programs.
Institution of Higher Education
A school that is located in a state.
- Admits as a regular student only a person who has a certificate of
graduation from a secondary school or a recognized equivalent, or has
demonstrated the ability to benefit from the school's education or training
program by passing a federally approved standardized test.
- Is legally authorized in each state in which it is physically located to
provide.
- Provides within that state, a program of postsecondary education that
awards an associate, bachelor's, graduate, or professional degree;
or provides a program of not less than two years in length that is
acceptable for full credit toward such a degree or training program of at
least one year that leads to a certificate, degree, or other recognized
credential, and prepares students for gainful employment in a recognized
occupation.
- Is a public or other nonprofit school.
- Is accredited by a nationally recognized accrediting agency or
association approved by the U.S. Department of Education for this purpose,
or if not so accredited, is a school that the Department of Education
determines will meet the accreditation standards of such an agency or
association within a reasonable period of time.
Institutional Student Information Record (ISIR)
An electronic version of the Student Aid Report (SAR), which is sent to the
school.
Intensive Collection Activities (ICA)
A series of collection activities performed within an abbreviated time frame.
Performance of the activities within the time frames prescribed reestablishes
the guarantee on loans on which the lender's noncompliance with due diligence
requirements has resulted in the cancellation of the guarantee.
Interest
The charge made to a borrower for use of a lender's money.
Interim Period
The period during which a Stafford loan borrower is in the in-school or grace
period. If the borrower returns to school before the grace period is fully used,
the borrower continues to qualify for in-school status and to be considered in
the interim period.
Invalid Telephone Number
For purposes of lender due diligence requirements in the collection of loans,
a functioning telephone number that has been assigned to someone who has no
knowledge of or relationship with the borrower.
Invoice
Refers to the Insurance Premium Fee Billing invoice that
EDFUND sends to
lenders and services at month-end. When applicable, lenders and services are
invoiced monthly for insurance (guarantee) fees associated with refunds (returns
of Title IV
aid), paid-in-full returned checks, disbursements and refund
reversals.
IRS Offset
An interception by the U.S. Internal Revenue Service (IRS) of the income tax
refund of a borrower with a defaulted
FFELP loan. The amount offset-less a
processing fee-is forwarded to the Department of Education by the
guarantor and
ultimately applied to the defaulted loan.
Last Date of Attendance (LDA)
The last day the student was physically present in class, as confirmed by the
student's attendance records.
Late Charges
Charges that the lender may require the borrower to pay if the borrower fails
to pay all or a portion of a required installment payment within 15 days after
it is due. This charge may not exceed 6 cents for each dollar of each late
installment.
Late Conversion
The scheduling of a Stafford, SLS, PLUS, or Consolidation loan borrower's
first payment due date beyond the normal regulatory time limits for establishing
that date on the regulatory time frames.
Late Disbursement or Delivery
A disbursement made by a lender or delivered by a school after the end of the
loan period or the date on which the student ceased to be enrolled on at least a
half-time basis.
Leader, Summer Term
A summer term that comes at the beginning of a school's Scheduled Academic
Year.
Leave of Absence
A break in enrollment, not including semester or spring break(s), that is
requested by the student and sanctioned by the school. The leave of absence may
be no longer than 60 days, and the student may be granted no more than one leave
of absence during a 12-month period.
Legal Guardian
An individual appointed by a court to be a "guardian" of a person, and
specifically required by the court to use his or her financial resources for the
support of that person.
Lender Fee
A fee that the holder of the loan must pay to the Department of Education on
any loan first disbursed on or after October 1, 1993. The fee is equal to 0.5%
of the principal amount of the loan and is deducted from interest and special
allowance due the lender. The lender remits the fee by making an entry on the
ED
Form 799 that results in an offset of the amount of quarterly interest and
special allowance benefits due to the lender. The lender may not pass this fee
on to the borrower.
Lender ID
The first six digits represent the lender code assigned by
USED, and the last
two digits represent the branch ID (or suffix) assigned by
EDFUND.
Lender of Last Resort (LLR)
A lender (or guarantor, in some cases) that agrees to make a subsidized
Stafford loan to an otherwise eligible borrower who has been unable to find a
lender willing to make a loan.
Lender Participation Questionnaire for New Lenders
The application form that a lender must complete and return to the Department
of Education before receiving approval to participate in the
FFELP.
Lender's Request for Assistance (LRA)
A form or procedure by which a lender requests
preclaims
assistance from the
guarantor.
Limitation
The continuation of a school's eligibility to participate in the guarantor's
programs, subject to compliance with special conditions or restrictions
established by agreement with the Department of Education or the guarantor.
Loan Period
The period of time for which a loan application is certified.
Loan Proceeds
The amount of loan funds that have been guaranteed.
Loan Transaction Statement
A guarantor report, also referred to as an enrollment update report, that
provides enrollment updates to the lender.
Loan Transfer
A change in the identity of the party that owns a borrower's loan(s), or the
servicer of the loan.
Mandatory Administrative Forbearance
Forbearance that a lender is required to grant for periods during which the
borrower is involved in a local or national emergency or military mobilization
or resides in a designated disaster area. A lender is also required to grant a
mandatory administrative forbearance for up to three years if the borrower's
repayment period must be extended due to the effect of changes in the variable
interest rate on standard or graduated repayment terms and for up to five years
to accommodate income-sensitive repayment schedules.
Mandatory Forbearance
Forbearance that a lender is required to grant for medical or dental
internships and residencies after the borrower's in-school deferment period has
expired, for service in AmeriCorps, for excess student loan debt burden, for
participation in the student loan repayment programs as administered by the U.S.
Department of Education of Defense, and for non-medical or dental internships.
Master Check
A single check issued from a lender or disbursing agent to a school that
includes loan disbursements for two or more borrowers; a non-electronic process
for transferring funds that mirrors electronic funds transfer (EFT).
Master Promissory Note (MPN)
A promissory note
under which the borrower may receive loans for either a
single period of enrollment or multiple periods of enrollment.
Multiple Data Entry (MDE) Processor
An organization under contract with the Department of Education that collects
all the data required to calculate eligibility for the
Pell Grant
program and
performs need analysis.
Multiple Disbursements
Disbursement at pre-designated times of a Federal Stafford or PLUS
loan-usually in two or more installments of approximately equal increments.
National and Community Service Trust Act
The federal legislation that created a national and community service
program, including AmeriCorps.
The program is administered by the Corporation
for National Service.
National Credit Bureau
A credit reporting agency with a service area encompassing more than a single
region of the country.
National of the United States
A citizen of the United States or, as defined in the Immigration and
Nationality Act, a non-citizen who owes permanent allegiance to the United
States.
National Student Loan Data System (NSLDS)
A database comprised of information from guarantors, schools, lenders, and
the Department of Education which contains information on
Title IV aid received
by students.
Need Analysis
A standardized assessment of the ability of a student or of a student's
family to contribute toward educational expenses.
New Borrower
A borrower who has no outstanding balance on a
FFELP loan at the time he/she signs a
promissory note for a FFELP loan.
Non-subsidized Loan
A loan that is not eligible for federal interest benefits. The borrower is
responsible for paying the interest on the outstanding principal balance of a
non-subsidized loan throughout the life of the loan. During in-school, grace,
and deferment periods, these interest payments are normally made on a monthly or
quarterly basis, or are capitalized.
Non-Term-Based Institution
A school that measures its academic year in credit or
clock hours rather than
academic terms (e.g., semesters, trimesters, or quarters).
Normal Commercial Skip Tracing
Techniques used to locate a person whose address is unknown. Examples of
these techniques may include contacting an
endorser (e.g., to locate a
borrower), a borrower (e.g., to locate an endorser or co-maker), a relative, a
reference, individuals, entity identified in a borrower's loan file, Directory
Assistance or a comparable database; attempting to contact the person by calling
the last known telephone number; performing a social security number search via
a credit report; reviewing city directories; processing information contained on
the current credit report; or checking with a state licensing agency, a trade
association, or a motor vehicle bureau.
Notification (as it relates to MPN)
A process by which the school, lender or
guarantor notifies the borrower of
the proposed loan types and amounts. The borrower is required to take action
only to reject or adjust the type or amount of the loan.
Official
The person at the guarantor
with the responsibility for initiating an Action
under the Limitation, Suspension, or Termination procedures.
One-Academic-Year Training Program
A program that is at least 30 weeks in length during which the student earns
at least:
- 24 semester or trimester hours or units, or 36 quarter hours or units at
a school using credit hours or units to measure academic progress.
- 900 clock hours of supervised training at a school using clock hours to
measure academic progress.
- 900 clock hours in a correspondence program.
Origination Fee
A fee charged to offset the cost of interest, special allowance, and
reinsurance payments by the federal government on a
FFELP loan. This fee, like
the guarantee fee, is subtracted from the borrower's proceeds.
Overaward
Any amount of a student's total financial assistance (excluding
Pell Grants)
that exceeds the student's financial need.
Parent
A student's natural or adoptive mother, father, or court-appointed
legal
guardian.
Partial Cancellation
Cancellation of a disbursement or a portion of a disbursement rather than of
an entire loan.
Payment Period
The basis on which a school must schedule and deliver disbursements for a
particular loan period. A payment period is determined based on the structure of
the school's academic program. At a school that does not use standard terms, a
payment period is measured in credit or clock hours completed by the student in
relation to the length of the student's program of study. The payment period
requirement does not eliminate the multiple disbursement requirement for a
school to deliver loan proceeds in substantially equal installments, with no
installment exceeding one-half of the loan amount.
Pell Grant
A federal need-based grant.
Period of Enrollment
As defined by federal regulation, the period for which a Stafford or PLUS
loan is intended. The period of enrollment must coincide with a bona fide
academic term established by the school for which the school's charges are
generally assessed, i.e., semester, trimester, quarter, length of the student's
program or the school's academic year. The period of enrollment is also referred
to as the loan period. In addition, the term "period of enrollment" is commonly
used by the financial aid community to refer to the period of time during an
academic year when a student is enrolled at the school.
Perkins Loan
A federally insured loan funded by the federal government and awarded by the
school, featuring a low interest rate and repayable over an extended period.
Permanent Resident of the United States
A person who meets certain requirements of the Immigration and Naturalization
Service (INS). Valid documentation of permanent residency includes the
following:
- I-551
- I-151
- I-181
- I-94
- A passport stamped processed for I-551, "Temporary evidence of lawful
admission for permanent residence."
PLUS Loan Parent Loans for Undergraduate Students
Federally insured loans for parents of dependent students.
Post-Deferment Grace Period
A period following a deferment during which payments are not required. The
6-month post-deferment grace period applies only to loans disbursed before
October 1, 1981, and, in some cases, to loans for borrowers who participated on
active-duty status in certain emergency military mobilizations, such as
Operations Desert Shield/Desert Storm.
Pre-Accredited School
A public or private nonprofit school that is progressing towards
accreditation within a reasonable period of time, as certified by an
accrediting agency. The status must be recognized
by the Department of Education for purposes of
Title IV
program eligibility.
Preclaims Assistance
The help provided to a lender by the
guarantor in order to prevent a
delinquent loan from defaulting. See also Lender's Request for Assistance (LRA).
Preclaims Request Period
The period during which a lender must submit a request for
preclaims
assistance from a guarantor. This period begins 10 days prior and ends 10 days
after the date established by the guarantor.
Pre-Hearing Conference
Contact by any method, including telephone, between the parties for the
purpose of settling or narrowing a dispute related to Limitation, Suspension,
and Termination proceedings.
Prepayment
A payment received when the borrower is not required to make either principal
or interest payments; when a borrower is required to make interest payments, but
previously authorized the lender to capitalize accruing interest; or when the
borrower makes a payment that is greater than the amount of the borrower's
regular installment or the amount due.
Principal Balance
The outstanding amount of the loan, on which the lender charges interest. As
the loan is repaid, a portion of each payment is used to satisfy interest that
has accrued, and the remainder of the payment is used to reduce the outstanding
principal balance.
Pro-Rata Refund
The method by which a school must determine the amount it must refund to a
first-year student who withdraws before completing at least 60% of the program
in which the student was enrolled.
Professional Judgment
The flexibility given to a Financial Aid Administrator (FAA) under the Higher
Education Act to make adjustments to student eligibility for federal aid on a
case-by-case basis.
Program Participation Agreement
An agreement that a school and the Department of Education must sign,
permitting participation in one or more of the
Title IV student financial
assistance programs. This agreement also states that the initial and continued
eligibility to participate in the Title IV Student Financial Assistance Programs
is conditional upon compliance with the provisions of applicable laws and
program regulations. The agreement includes a school's participation in the
following federal programs: Federal Pell, Federal Supplemental Educational
Opportunity Grant, Federal Work-Study, Federal Family Education Loans, and
Direct Loans.
Program Review
A comprehensive review of a lender's, school's, or servicer's administrative
procedures for handling Federal Stafford, PLUS, SLS, and Consolidation loans.
The review is conducted to ensure that those procedures are in compliance with
federal regulations and with the
guarantor' policies and procedures.
Promissory Note
A legally binding agreement the borrower signs to obtain a loan under the
FFELP, in which the borrower promises to repay the loan, with interest, in
periodic installments. The agreement also includes information about any grace
period, deferment, or cancellation provisions and the student's rights and
responsibilities with respect to the loan.
Proportional Proration
Proration based on a straight percentage of the credits the student plans to
take and the number of credits in the school's academic year.
Proration
A reduction of the standard annual loan limit for an undergraduate student.
Proration of the loan amount is required if the student's program or the
remainder of the student's program is less than a full academic year in length.
Reauthorization
Refers to the legislative process-generally carried out every 5 years in the
case of the Higher Education Act-whereby Congress reviews and either renews,
terminates, or amends existing programs. The most recent reauthorization of the
Act, as amended, was in 1992.
Recall (of a claim)
A lender request that the guarantor return a default claim that has already
been filed before claim reimbursement because the claim no longer qualifies for
default.
Recognized Equivalent of a High School Diploma
A General Education Development (GED) Certificate or a state certificate
received by a student after the student has passed a state-authorized
examination that the state recognizes as the equivalent of a high school
diploma.
Record
With respect to recordkeeping requirements for lenders and schools, official
information or data relating to a borrower's loan account or file that can be
used as evidence.
Refund
The difference between the amount the borrower paid toward institutional
charges (including financial aid and/or cash paid) and the amount the school can
retain under the appropriate refund policy. This "unearned" amount of
institutional charges must be returned to student financial aid (SFA) programs
on behalf of a student who received SFA funds and who has ceased attending
school.
Regulation B
The section of the Equal Credit Opportunity Act (12 CFR 202) that prohibits
creditors from discriminating against credit applicants on the basis of race,
color, religion, national origin, sex, marital status, or age.
Rehabilitation (of a defaulted loan)
A process by which a borrower may bring a
FFELP loan out of default by
adhering to specified repayment requirements.
Reinstatement (of borrower Title IV eligibility)
A process by which a borrower with a defaulted
FFELP loan may regain
eligibility for Title IV aid by adhering to strict repayment requirements.
Reinstatement (of institutional eligibility)
Formal permission by the guarantor for a school, lender, or servicer whose
eligibility to participate in the
guarantor's programs has been terminated to
resume participation after meeting specific conditions.
Release of Proceeds
Delivery of loan proceeds by the school to the borrower. Release of proceeds
is not disbursement
of proceeds by the lender.
Repayment Period
The period during which interest accrues on the borrower's loan and principal
payments are required. For FFELP loans, the repayment period excludes any period
of authorized deferment or forbearance; however, interest will continue to
accrue during these periods for unsubsidized Stafford, SLS, and PLUS loans.
Repayment Schedule
The legal addendum to the
promissory note stating the terms of loan repayment
and fulfilling disclosure requirements. The Repayment Schedule is a plan that
indicates the total principal and interest due, an installment amount, and the
number of installments required to pay the loan in full. The Repayment Schedule
also contains the interest rate for the loan(s) included on the schedule, the
due date of the first and subsequent installments, and the frequency of
installments.
Repayment Start Date
The date the repayment period begins. For Stafford loans, repayment begins on
the day following the last day of the grace period. For PLUS and SLS loans,
repayment begins on the date the loan is fully disbursed.
Repurchase (of a claim)
The lender's purchase back from the guarantor of a defaulted loan for which
the lender has already been reimbursed by the guarantor.
Return of Title IV Funds
The federally mandated process by which a school
calculates the amount of federal funds to be returned for a
Title IV aid
recipient who withdraws or who ceases attendance during a payment period or
period of enrollment. See also Refund.
Rolling Delinquency
A delinquency that occurs whenever the delinquent status of a loan is
increased or reduced but not completely eliminated as result of a payment, the
reversal of a payment, a deferment or
forbearance, or the receipt of a new
out-of-school date.
Rule of 78s
A procedure for calculating the outstanding principal balance of a loan that
is prohibited for loans made to a borrower who entered repayment on or after
June 26, 1987. Seventy-eight is the sum of the digits from one to twelve (the
number of months in a one-year installment contract).
Satisfactory Academic Progress (SAP)
The level of academic progress required of a student by the Higher Education
Act in order to receive Title IV aid, including Federal Stafford, PLUS, or SLS
loans. Each school must establish a standard for evaluating a student's efforts
to achieve an educational goal within a given period of time. In making this
evaluation, the school must establish the normal time frame for completion of
the course of study in which the student is enrolled, and a method, such as
grades or work projects completed, to measure the quality of the student's
performance. Students who exceed one and a half times the normal time required
to complete their academic program are not eligible for additional Title IV
assistance for that period that is in excess of 150% of the academic period
normally required.
Satisfactory Repayment Arrangement
A specified number of consecutive, on-time, voluntary, reasonable and
affordable full monthly payments made by a borrower to the holder of any loan or
loans in default. The borrower may make three such payments to become eligible
to consolidate a defaulted loan. The borrower must make six such payments to
regain eligibility for Title IV financial aid programs, and may regain
eligibility under reinstatement provisions only once. The borrower must make 12
such payments to rehabilitate a defaulted loan.
SAY see Scheduled Academic Year
Scheduled Academic Year (SAY)
The "fixed" academic period, as advertised in a school's printed
materials, that generally begins and ends at the same time each year
according to an established schedule. The SAY is the academic period to
which the statutory definition of an Academic Year must be applied.
Non-term-based institutions may not use an SAY. The summer term may be
treated as an add-on at the beginning (leader) or end (trailer) of the SAY.
School
A term in this manual that is used interchangeably with "Institution."
School Lender
A school, other than a correspondence school, that has been approved as a
lender under the FFELP and has entered into a contract of guarantee with the
Department of Education or a similar agreement with a
guarantor.
Secondary Market
An entity that purchases education loans from eligible lenders in order to
increase the amount of funds available for education loans. The secondary market
obtains funds from investors and uses those funds to purchase existing education
loans from lenders. The lenders then use the proceeds of those sales to make new
education loans.
Separation Date
The date the student ceases to be enrolled on at least a half-time basis at
an eligible school.
Servicer (or Third-Party Servicer)
An entity that enters into a contract with a program participant to
administer any aspect of its participation in a
Title IV program.
Skip Tracing
Diligent efforts to locate a borrower's telephone number or address when such
information is unknown. See also Normal Commercial Skip Tracing.
Social Security Number (SSN)
The 9-digit number assigned to the borrower by the Social Security
Administration. The SSN is used as an identifier for tracking the borrower's
loan account(s), skip tracing, and reporting to the Department of Education. A
borrower must have an SSN in order to apply for a
FFELP loan.
Special Allowance
A percentage of the daily average unpaid principal balance, paid to a lender
by the Department of Education on an eligible Stafford, PLUS, SLS, or Federal
Consolidation loan. Special allowance payments act as an incentive for lenders
to make education loans by, in effect, making up the difference between the
interest rate charged to a FFELP borrower and market interest rates. The special
allowance rate is set by statutory formula.
Special Occurrence
An event-such as the lender's receipt of a borrower's correct address and/or
correct telephone number-that affects the lender's
due diligence requirements
but does not change the payment due date of the loan.
Standard Repayment Schedule
A repayment schedule under which the borrower pays the same amount for each
installment payment throughout the entire repayment period or pays an amount
that is adjusted to reflect annual changes in the loan's variable interest rate.
The Standard Repayment Schedule cannot exceed 10 years, excluding in-school,
grace, deferment, or forbearance periods.
State
A state of the Union, the District of Columbia, the Commonwealth of Puerto
Rico, American Samoa, Guam, the Trust Territory of the Pacific Islands, the
Virgin Islands, and the Commonwealth of the Northern Mariana Islands.
State Lender
In any state, a single state agency or private not-for-profit agency
designated by the state that has been approved as a lender and that has entered
into a contract of guarantee with the Department of Education or a similar
agreement with a guarantor.
Statement of Educational Purpose
The borrower's signed statement that any
Title IV aid received will be used
only for education-related expenses at the school at which the student is
enrolled or accepted for enrollment.
Statutory Interest Rate
The maximum annual interest rate (under the Higher Education Act) that a
lender may charge on a loan.
Student Aid Report (SAR)
The student's need analysis report, which is generated by the Department of
Education's central processing system or
MDE processor. The SAR summarizes
information that the student reported on the
FAFSA. An electronic version sent
to the school is called an ISIR
(Institutional Student Information Record).
Student Educational Plan (SEP)
Educational plans are made that include specific courses that will be taken
by the student for each subsequent term until their degree objective is
obtained. Students must have a major or goal selected and Mathematics and
English Assessment Tests completed before making a Student Educational Plan.
Subrogation
A transfer in the ownership of a defaulted
FFELP loan from a guarantor to the
Department of Education. Loans to be subrogated must meet criteria established
and be revised annually by the Department of Education.
Subsidized Loan
A loan eligible for interest benefits paid by the federal government. The
federal government pays the interest that accrues on subsidized loans during the
student's in-school, grace, authorized deferment, and (if applicable)
post-deferment grace periods, if the loan meets certain eligibility
requirements.
Suspension
Suspension of the eligibility of a school, lender, or
servicer to participate
in a guarantor's
programs for a specified period of time until specified
requirements are met.
Teacher Shortage Area
A federally designated geographic area, grade level, or academic,
instructional, subject matter, or discipline that has been classified as a
shortage area as defined by the Department of Education.
Teach-Out Program
A program of study offered by a school that is substantially similar to a
borrower's program of study at a school that closed and ceased to provide
educational services during the borrower's loan period.
Term-Based School
A school that uses standard academic terms, such as semesters, trimesters, or
quarters.
Termination
Withdrawal of the eligibility of a school, lender, or
servicer to participate
in the guarantor's programs.
Third-Party Servicer
In the case of a lender or
guarantor, a state or private for-profit or
nonprofit organization or an individual that enters into a contract with the
lender or guarantor to administer any aspect of the lender's or guarantor's
FFELP as required by statutory or regulatory provisions related to part B of
Title IV of the Higher Education Act. In the case of a school, a state or
private for-profit or nonprofit organization or an individual that enters into a
contract with the school to administer any aspect of the school's participation
in any Title IV
program.
Three-Times Rule
The federal requirement that no single installment of a graduated or
income-sensitive repayment schedule may be more than three times greater than
any other installment.
Three-Year Rule
The statutory provision that a school loses its eligibility to participate in
the FFELP if its cohort default rates exceed acceptable statutory levels for the
three most recent consecutive fiscal years. The current acceptable level is a
cohort default rate of less than 25%.
Title IV
A section of the Higher Education Act of 1965, as amended, that authorizes
federal loan, work, and grant education financial assistance programs.
Totally and Permanently Disabled
The condition of an individual who is unable to
work and earn money or attend school due to an injury or illness that is
expected to continue indefinitely or result in death.
Trailer, Summer Term
A summer term that comes at the end of a school's Scheduled Academic Year.
Treasury Bill (T-bill)
A note or bill issued by the U.S. Treasury as legal tender for all debts.
U.S. Citizen or National
The term "citizen" includes all native or naturalized persons who owe
allegiance to the United States and are entitled to protection by it. The U.S.
includes the fifty states, the District of Columbia, Guam, Northern Mariana
Islands, Puerto Rico, and the Virgin Islands. The term "national" includes all
U.S. citizens and citizens of American Samoa and Swain's Island.
Unconsummated Loan
Loan proceeds that the school returned to the lender prior to the borrower's
having cashed the check, if an individual check, or the school having applied
the proceeds to the student's account, if included in a master check or
EFT
transmission. This includes checks that may have been released by the school but
remain uncashed by the 120th day following disbursement and EFT and master check
transactions that have not been completed by the 120th day following
disbursement.
Undergraduate Student
A student who is enrolled at a school in a course of study, at or below the
baccalaureate level, that usually does not exceed four academic years, or is up
to five academic years in length and is designed to lead to a first degree.
Undue Hardship (Adversary) Petition
A motion to have a loan discharged under a Chapter 7 or 11 bankruptcy case on
the grounds of undue hardship. (In most cases, a Chapter 7 or 11 bankruptcy
claim is paid only if the loan has been in repayment for more than seven years.)
Unsubsidized Loan
A non-need-based loan such as an unsubsidized Federal Stafford loan or a
Federal PLUS loan. The borrower is responsible for paying the interest on an
unsubsidized loan during in-school, grace, and deferment periods, in addition to
repayment periods.
Variable Interest Rate
An interest rate that changes, usually annually, according to prescribed
methods.
Variable Interest Rate Conversion
The conversion of a fixed interest rate to a annually variable interest rate,
which carries a federally mandated cap.
Verbal Request
A request that is made orally, as opposed to in writing.
Verification
A school's procedure for checking the accuracy of information reported by the
student on the FAFSA. Verification may include requesting a copy of the tax
returns filed by the student and, if applicable, the student's parents.
Voluntary Flexible Agreement
The 1998 reauthorization of the Higher Education Act authorized the
Department of Education to
negotiate modifications to its relationship with up to six guaranty agencies.
These modifications were termed voluntary flexible agreements, and they were
intended to update and advance the regulations placed on
FFELP guaranty
agencies.
Week
A consecutive seven-day period in which for an educational program using a
semester, trimester, or quarter system or an educational program using clock
hours, at least one day of regularly scheduled instruction, examinations, or
preparation for examinations occurs for an educational program using credit
hours but not using a semester, trimester, or quarter system, at least 12 hours
of regularly scheduled instruction, examinations, or preparation for
examinations occur.
Weighted Average Cohort Rate
For a school that has former students entering repayment in a fiscal year on
both FFELP and
FDLP loans, the Department of Education calculates a weighted
average cohort rate.
Windfall Profits
Rebate of excess interest for Stafford loans first disbursed before July 1,
1992, or first disbursed to a new borrower on or after July 23, 1992, and before
October 1, 1992, as required by the Technical Amendments of 1993. If a loan's
fixed interest rate exceeds the current average of bond equivalent rates of
91-day Treasury bills plus a factor (3.25% or 3.10%) for a particular quarter,
the lender must calculate an adjustment to excess interest and rebate the
difference to the borrower's account based on a federally proscribed formula.
Withdrawal Date
The date the student withdraws, as determined by the school.
Write-Off
A loan amount for which there has been a total cessation of collection
activity.
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