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Glossary of Student Loan and Consolidation Terms
Because we know that understanding the specific vocabulary of student loans and educational loan consolidation practices is critical to making wise education and financial decisions, we have provided the following definitions of common lending terms:
Accrue
To accumulate or build up a quantity, e.g. money or debt. Accruing money is good; accruing debt interest is not.
Amortization
The process of paying back, or paying off, a debt or loan through monthly payments or installments.
Balance
The amount of money owed on a debt or loan.
Binding Legal Document
An agreement whose term are enforceable by law.
Borrower
A person who is taking out an educational loan to pay college expenses.
Cancellation
The point at which, for any reason, you and your lender no longer have a contractual relationship and the terms of the loan agreement are no longer binding.
Consolidation
The act of combining or bringing together. Student loan consolidation is a means of placing all your debts into one, and usually lower, payment.
Co-signer
An individual who signs the promissory note in addition to the primary borrower. If the borrower is unable to pay for the loan, the co-signer becomes responsible for the payments.
Default
Failure to make payments on a loan for nine (9) consecutive months.
Deferment
A financial hardship status in which your loan is temporarily suspended and payments are placed on hold. There are different types of deferments available. It is the borrower's responsibility to apply for a deferment.
Delinquent
The status of a loan on which one or more payments have not been made. A loan account remains delinquent until you make a payment, or receive deferment or forbearance status.
Disbursement
The money you receive from the lender to pay off your debts.
Forbearance
The time period in which a borrower who is experiencing economic hardship may temporarily suspend or reduce their educational loan payments. Like a deferment, you must qualify for forbearance due to financial hardship, and it is your responsibility to apply for it.
Grants and Scholarships
Financial awards given to the student which do not need to be repaid. Grants are based on financial need, whereas scholarships are based on other qualifying factors, usually grades.
Half-Time Student
Each college independently defines the workload requirements for full- and half-time students. Typically, half the academic workload of a full-time student is between six and eight credit hours
Holder
The institution that granted the borrower's student loans and is entitled to make the collections.
Interest
A fee charged on borrowed money.
Lender
The company that is lending you the money for your student loans, individually or through consolidation, such as the Educational Loan Company.
Outstanding
Remaining, as in the amount of money that is due.
Principal
The original dollar amount borrowed.
Principal Loan Balance
Principal plus the interest, minus the amount you have paid.
Promissory Note
A document that specifies the terms of the loan, which the borrowers signs in agreement with these terms.
Servicer
The financial institution that is sub-contracted by the lender to mail out billing statements and collect loan payments.
Subsidized
The process whereby the government pays the loan interest on behalf of the borrower.
Unsubsidized
Not covered, by another entry, as in loan interest that is solely the responsibility of the borrower.
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