If you come across unfamiliar terminology during the loan process, this handy glossary can be a big help. You'll find the most common loan-related words and phrases, all defined in "customer-friendly" language.

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529 Plan:

A savings plan whose purpose is to set aside money to pay for college. There are no income restrictions. Withdrawals are tax free provided they go toward eligible higher-education expenses. A 529 plan is considered a parental asset when a student is seeking financial aid. For more information, visit www.sec.gov/investor/pubs/intro529.htm

A

Academic Year:

A period of time, typically eight to twelve months, in which a full-time student is expected to complete the equivalent of at least two semesters, two trimesters, or three quarters of study.

Annual Percentage Rate (APR):

The interest rate is simply the cost of borrowing money. The APR is the measure of the cost of credit, expressed as a yearly rate. In addition to interest, it may include other fees and costs associated with the loan.

Award Letter:

The official document from the college financial aid office that summarizes all the financial aid awarded to a student (including scholarships, grants, loans, and work-study arrangements.) It also mentions the amount of money the student still requires (unmet need) to handle the cost of attending college in the upcoming year.

B

Borrower Rewards:

Offered by lenders to motivate borrowers to conscientiously repay their loans. One example would be a discount if the borrower sets up an automatic payment system. Borrower rewards can be taken away if the borrower no longer meets the specified requirements. Other names for borrower rewards are 'borrower benefits' and 'loan discounts'.

C

Canceled Disbursement:

A private loan disbursement for which the funds are not distributed to or on behalf of the borrower within 60 days of the date of disbursement.

Capitalization:

At the time specified, accrued and unpaid interest and the unpaid origination fee are added to the outstanding principal balance of a loan. After that, interest accrues on the new principal balance, including the capitalized amount.

Certified Loan:

With a certified loan, the school confirms the student’s enrollment and eligibility for the amount of money requested. The loan money is paid directly to the school and covers up to 100% of tuition, fees, and books as well as room and board. Once these costs have been covered, leftover funds are paid to the student. Certified loans generally have lower variable APRs than non-certified loans. The interest is typically tax deductible.

Cosigner:

One who commits to guaranteeing payment of a loan if the signer cannot repay it. Having a cosigner with good credit can help secure a lower APR on the loan.

Credit-ready Borrower:

A student (18 or older) who does not yet have a FICO®— score and does not have any claims, derogatories (negative credit items such as late payments), and/or delinquencies.

Credit Report:

A report issued by one of the credit reporting agencies (Experian, Equifax, or TransUnion). It contains financial information about a person, such as past and current debts, late payments, and credit card payment history as well as tax liens and bankruptcies. A lender uses the details from the credit report to decide whether to loan money and what loan terms to set.

Credit Union:

A cooperative financial institution, owned and controlled by the people who use its services (who are called members). Credit unions serve groups that have something in common, such as where they work, live, or worship. Credit unions are not-for-profit and exist to provide a safe, convenient place for members to save money and get loans at reasonable rates. Like other financial institutions, credit unions are closely regulated. The National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration (an agency of the Federal government), insures deposits of credit union members. Deposits are insured up to $250,000.

Creditworthy Borrower:

A person whose credit is good enough to allow them to borrow money or co-sign a loan.

D

Debt-to-income Ratio:

The total amount of debt payments per month divided by total gross income per month. This ratio is used by lenders to determine the creditworthiness of borrowers.

Default:

Failing to repay a loan according to its terms. For a CompleteEd loan, default occurs when the loan is more than 180 days overdue.

Deferment:

Approved postponement of loan repayment for a certain period of time. For a CompleteEd loan, principal and interest payments can be deferred for up to 60 months while the student is continuously enrolled at least half time at an approved school in an undergraduate or graduate program. Interest will continue to accrue during deferment and will be added to the loan amount once the student enters repayment.

Delinquency:

Period of time that starts the day after the due date of a loan payment when the borrower has not made a full payment.

Delinquent:

A loan is considered to be delinquent when the borrower does not make consistent, on-time payments.

Disbursement:

Release of loan funds either to the student or the school. With a CompleteEd loan, funds go directly to the school.

Disbursement Date:

The date a lender releases loan funds, either by check or electronically. CompleteEd loans are disbursed directly to the school.

Discharge:

When a borrower or co-signer is no longer responsible for repaying a loan.

E

Eligible Schools:

In order to qualify for a CompleteEd™ loan, students must be enrolled at least half-time in a four or five year undergraduate program at a U.S. public, private or not-for-profit school which does not exceed minimum Department of Education student loan default rates. Neither foreign locations of U.S. schools nor trade schools are considered eligible.

Enrollment Status:

Whether a student is considered to be full-time, half-time, or less than half-time by the school. For CompleteEd loans, students must be full-time or at least half-time students who are working toward a degree.

Expected Family Contribution:

Amount a family or spouse is expected to contribute to a student's college costs. It is based on factors such as income, size of family, and number of students in college.

F

FAFSA:

Free Application for Federal Student Aid from the U.S. Department of Education. The FAFSA determines eligibility for Federal loans and is used to help calculate the Expected Family Contribution toward the cost of college. Many schools and states also use FAFSA information in providing financial aid. The FAFSA must be filled out each year. For an online application, go to www.fafsa.ed.gov

Federal PLUS loans (Parent Loan for Undergraduate Students):

Loans guaranteed by the Federal government for qualified parents of dependent undergraduate students. They offer a low, fixed APR. An amount up to the full cost of education (less other financial aid received) can be borrowed. The borrower has up to 10 years to repay--up to 25 years if the repayment amount is over $30,000. Up to $2,500 in student loan interest is tax-deductible per year, depending on income. Loan qualification criteria are based on the borrower's credit history. Repayment cannot be deferred. To learn more, go to http://studentaid.ed.gov/PORTALSWebApp/students/english/parentloans.jsp?tab= funding.

Federal Supplement Educational Opportunity Grants:

Provide funds based on financial need to low-income undergraduate students. Students can obtain these grants at any of about 4,000 participating schools. The money does not have to be paid back. Financial aid administrators at the schools have a great deal of control over the amount of money awarded. Top priority goes to students with "exceptional need" and students who have also received Pell grants. To learn more, visit http://www.ed.gov/programs/fseog/index.html.

FICO® Score:

A numerical score lenders use to assess the risk associated with lending money. It predicts the likelihood that a borrower will become delinquent. The name comes from the Fair Isaac Corporation.

Forbearance:

Refraining from enforcing a debt that is due. For a CompleteEd loan, up to six months’ forbearance may be requested initially. There is a maximum of 24 months of cumulative forbearance.

G

Grace Period:

The additional amount of time a lender provides for a borrower to make payment on a debt without penalty. CompleteEd adds a six-month grace period to the “in-school” period for each private student loan. Only one grace period is allowed per loan.

Grant:

Financial aid that does not have to be paid back. It is generally awarded based on financial need.

H

Home Equity Loan:

A means of financing a college education using the applicant’s home as collateral. These loans have attractive APRs and their interest is tax-deductible. However, such a loan does put the family home at risk.

I

In-school Period:

For CompleteEd loan purposes, the maximum in-school period is 60 months, when all in-school periods are added up. Students with CompleteEd loans must be full-time or at least half-time students and be working toward a degree.

L

LIBOR:

The London Interbank Offered Rate (or LIBOR, pronounced LYE-bor) is a reference rate based on the interest rates that banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market).

Loan Period:

The time for which a loan is requested. The school determines the loan period. One example would be from September to June.

Loan Proceeds:

The funds a lender disburses on behalf of a borrower to a school, an agent, or the borrower himself/herself. The funds can be sent by check or electronically.

M

Minimum Monthly Payment:

The least amount that must be provided each month toward repaying the loan. The figure due is calculated based on the principal plus accrued interest. For a CompleteEd student loan, the amount is $50. However, other student loans may have a higher minimum monthly payment.

N

Non-certified Loan:

A loan awarded based on credit history and an institution’s lending limits. Non-certified loans are usually associated with higher variable APRs than certified loans. The loan money is paid directly to the student and may be used for a variety of college expenses. The interest paid on these loans is not tax deductible.

O

Origination Fee:

Payment from a borrower to a lender to cover the cost of administering a loan. The fee is based on the co-signer’s credit score, which is calculated when the application is received. The origination fee can be added to the loan amount. For example, if the loan is for $25,000 and the origination fee is $1,000, the total amount that can be borrowed is $26,000. At CompleteEd, the origination fee varies from zero to 3 percent.

P

Pell Grants:

Funds for low-income undergraduate and certain postgraduate students. The grants can be used at any of about 5,400 participating institutions. The money is paid to the school, the student, or a combination of both. Pell grant funds do not have to be repaid. A student may receive Pell grant funds from only one school at a time. For more information, visit http://www.ed.gov/programs/fpg/index.html.

Perkins Loans:

Federal government loans offering a very low fixed APR. They are made through participating schools for students with exceptional financial need. The annual limit is $4,000 for undergraduates and $6,000 for graduate students. No interest is paid while the student is in school at least half-time. Repayment begins 9 months after graduation or if student falls below half-time enrollment. There are no fees and the student has up to 10 years to repay. To learn more, visit http://www.studentaid.ed.gov/students/attachments/funding/PerkinsLoanInfo.pdf.

Permanent Resident:

A person who, though not a U.S. citizen, has the authorization of the U.S. Department of Immigration and Naturalization Services to live in the United States without conditions and who has presented a current, valid resident alien card.

Prepayment:

Repaying part or all of the loan before it is due. Some types of loans have a prepayment penalty.

Prime Rate:

The interest rate charged to customers with the best credit. It is often used as a benchmark for calculating the rate of interest for loans and credit cards. CompleteEd private student loan APRs are variable based on the Prime rate as reported by the Wall Street Journal on the first business day of the month. If the rate changes during the month, it could be different from the rate we are using.

Principal:

The amount of money borrowed (not including interest and fees). It is the amount that must be repaid upon maturity and the amount against which interest is charged.

Promissory Note:

A legally binding contract between a borrower and a lender. It defines the terms and conditions of the loan. The promissory note is signed by the borrower and the co-signer, if there is one.

R

Repayment:

The period during which the borrower must make payments on the loan.

S

Servicer:

Manages the customer service and billing associated with a loan. The servicer's duties may include distributing funds, collecting payments, and dealing with deferments. The servicer and lender are not necessarily the same.

Stafford Loans:

Loans guaranteed by the Federal government for undergraduate, graduate, vocational, and professional students. They have a relatively low, fixed APR. The Federal government establishes the loan maximums. Up to $2,500 in student loan interest is tax-deductible per year, depending on income. Subsidized Stafford loans are awarded based on financial need. The government pays the interest while the student is in school, during the 6-month grace period, and during periods of approved deferment. Student repayment begins 6 months after graduation or if the student's status falls below half-time enrollment. The student has up to 10 years to repay. Unsubsidized Stafford loans are awarded to qualified students, regardless of income. The student pays the interest, which begins accruing upon disbursement. Interest payments are due immediately, but can be deferred. Unpaid interest is rolled into the principal at the time of repayment. Repayment begins 6 months after graduation or if the student’s status falls below half-time enrollment (as established by the school). The student has up to 10 years to repay. To learn more, visit http://www.studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsp.

T

Total Cost of Loan:

An estimate of the sum of the total payments a borrower is responsible for making to repay a loan. Borrower rewards could have an impact on the total cost.

V

Variable Interest Rate:

The interest rate is the cost of borrowing money. Variable means it can change over time, based on changes in an underlying interest rate index (such as the Prime rate—which is what CompleteEd variable APRs are based on).

W

William D. Ford Direct Loans:

Stafford and PLUS loans funded directly by the Federal government through participating campus financial aid offices. No outside lenders such as banks or credit unions are involved. Students should ask whether theirs is a Direct Lending school. To learn more, go to http://www.ed.gov/programs/wdffdl/index.html.

Work-study:

Program through which the Federal government and the school provide funds for part-time employment for the student as part of the financial aid package. The employment may be on or off campus. The financial aid office can provide specific details. To learn more, visit http://www.studentaid.ed.gov/PORTALSWebApp/students/english/campusaid.jsp