Financial Aid Glossary: Key Terms to Know When Seeking Aid
For many people, a college education is one of the most important investments they'll ever make. This means that when it comes to paying for school and identifying sources of aid, it's important to do your homework. Here are some key terms you'll likely encounter as you navigate the complex world of student financial aid.
FAFSA (Free Application for Federal Student Aid)
The FAFSA is a form created by the US Department of Education and used to initiate the process of identifying your eligibility for student financial aid. The federal government, as well as some states and schools, uses the information submitted on the FAFSA to determine who qualifies for aid, and how much.
SAR (Student Aid Report)
After submitting a FAFSA, you'll receive your Student Aid Report, which outlines the types of financial aid you may be eligible for, as well as the contribution you and your family will be expected to make toward your education expenses.
EFC (Expected Family Contribution)
This amount, based on a complex series of calculations, is what a student or his/her family is assumed to be capable of paying toward annual college expenses. The size of the EFC will have an impact on the amount, if any, of need-based aid that a student qualifies for.
COA (Cost of Attendance)
This amount is an estimate of the money a student can expect to have to spend per year of college, including tuition, textbooks, room and board, living expenses, and any other applicable fees or costs. This figure will vary by institution.
A grant is money awarded to a student that does not have to be repaid, provided you complete your degree and/or meet other specific stipulations of the grant.
Scholarships are also money awarded, without having to be repaid, to be put toward college expenses. A scholarship is typically given based on achievement and other eligibility criteria.
Unlike a grant or scholarship, a loan is an amount of college financial aid that does require repayment. Loans can come from sources such as the government, schools, or private lenders like banks. Loans will typically have interest that increases the total amount of money owed. Before accepting a loan, it's important to know and understand all of the terms and obligations that come with it.
APR (Annual Percentage Rate)
The annual percentage rate of a loan refers to the amount of interest charged, in yearly terms, on the principal (unpaid balance) of a loan. The higher the APR, the more a student will have to repay for the same base loan amount over time.
This grant is awarded by the federal government to students based on need.
A subsidized loan, such as the federal Perkins or Stafford loans, has its interest paid by the federal government during school as well as any grace periods or deferment periods.
For this type of loan, the borrower is responsible for interest at all times.
This term refers to any length of time during which repayment of a loan and its interest is postponed. Generally, a deferment isn’t granted unless you qualify for one under particular situations which can be discussed with your lender.
The major difference from a deferment is that interest accrues at a normal rate, but it also allows you to postpone making payments on student loans for a set period of time. Each loan and lender may have their own rules and eligibility qualifications (such as financial hardship).
Written by Ashford University staff