Financial Aid Jargon Handbook

Whether you are a student or parent, browse these terms to get a better understanding of financial aid.

Academic Year: A period of time schools use to measure a quantity of study. For example, a school’s academic year may consist of a fall and spring semester during which a full-time undergraduate student must complete 24 semester hours. Academic years vary from school to school and even from educational program to educational program at the same school.

Account Username and Password (FSA ID): The username and password combination that serves as an identifier to allow access to personal information in various U.S. Department of Education (ED) systems and acts as a digital signature on some online forms.

Borrower: The individual who signed and agreed to the terms in the loan’s promissory note and is responsible for repaying the loan.

Budget: See Cost of Attendance.

Campus Based Programs: The term commonly applied to federal student aid programs administered directly by participating postsecondary institutions. Campus-based programs include the Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS).

Capitalization (of interest): A process in which interest that has accrued but has not been paid is added to the loan principal. By increasing the amount of the principal, capitalization increases the total amount that must be repaid over time.

Contributor: Any individual required to provide consent and approval for federal tax information (FTI) and signature on the FAFSA. A contributor includes the student, the independent student’s spouse, or the dependent student’s biological or adoptive parents, or stepparent.

Cost of Attendance: The sum of educational costs payable to the school (also referred to as direct or billable costs) and costs paid to others (or indirect, non-billable or discretionary) costs. The COA represents the highest dollar amount of financial aid a student can receive during an award year. See our Cost of Attendance page for more details.

Default: Failure to repay a loan according to the terms agreed to when the borrower signed a promissory note, resulting in loss of eligibility for further Title IV aid and possible legal consequences. For federal student loans, default occurs after 270 days of unpaid scheduled loan payments.

Deferment (of a loan): A period of time during which payments of the principal balance are not required, and for Federal Direct Subsidized Loans, interest does not accrue. The repayment period is extended by the length of the deferment period.

Departmental Scholarship: Gift assistance that is specifically designated for a recipient in a particular academic department within the institution.

Dependency Override: A financial aid administrator’s documented determination based on unusual circumstances that a dependent student’s student aid index (SAI) should be calculated upon only student income, asset, and household information, based on the student’s individual circumstances and despite the student not meeting the statutory definition of an independent student. 

Dependent Student: A student who does not qualify as an independent student for Title IV purposes and whose parental income and asset information is used in calculating the student aid index (SAI). Also see Independent Student.

Disbursement: Crediting student financial aid funds to a student’s institutional account or paying these funds directly to a student or dependent student’s parent.

Entrance Counseling: A group or individual session during which Direct Loan borrowers receive important information about their loan obligations. Entrance counseling is required before receiving the first disbursement of loan funds.

Exit Counseling: A group or individual session during which Direct Loan borrowers who are leaving school or dropping below half-time enrollment receive important information about their repayment obligations and update information about themselves. 

FAFSA Processing System (FPS): The system used by the U.S. Department of Education (ED) to process the FAFSA, match applicant information against several federal databases, calculate the student aid index (SAI), and notify the student and the school of the processing results.

FAFSA Submission Summary (FSS): Students can review the information they submitted to the processing agency by logging into StudentAid.gov. This summary should be reviewed for accuracy. This was previously called the Student Aid Report (SAR).

Family size: The number of individuals in the student’s family, which includes the student, independent student’s spouse, dependent student’s parent(s), dependent children, and other qualified individuals. The number of dependents is typically based on the number of individuals claimed as dependents on either the student’s (if independent) or the parents’ (if dependent) federal tax return and is transferred from the Internal Revenue Service (IRS) to the FAFSA.

Federal Direct Student Loan (Direct Loan) Program: The William D. Ford Federal Direct Loan Program, also referred to as the Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education.

Federal Direct Subsidized Loan: Formerly the GSL (Guaranteed Student Loan) Program; a federally financed and subsidized student loan made on the basis of the student's financial need and other specific eligibility requirements. The federal government does not charge interest on these subsidized loans while borrowers are enrolled at least half-time, during the six-month period, or during authorized periods of deferment. When repayment does begin, the interest rate of the loan depends on when the student first borrowed in the program.

Federal Direct Unsubsidized Loan: A federally financed student loan made to students meeting eligibility requirements. Students need not demonstrate financial need. Interest is charged throughout the life of the loan. The borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized (added to the principal) when the loan enters repayment.

Federal Methodology (FM): A standardized method for determining a student’s (and family’s) ability to pay for postsecondary education expenses. It is the formula for determining a student aid index (SAI) which is used when determining eligibility for the Title IV programs.

Federal Pell Grant Program: A federal grant program for needy postsecondary students who have not yet received a baccalaureate or first professional degree; administered by the U.S. Department of Education (ED).

Federal Supplemental Educational Opportunity Grant (FSEOG): Grants to undergraduate students with exceptional financial need who have not completed their first baccalaureate degree.

Federal Tax Information (FTI): The data and information related to federal tax paying. FTI includes a tax return or tax return information received directly from the IRS or obtained through an authorized secondary source, such as the U.S. Department of Education (ED). FTI includes any information derived from a federal tax return or tax return information received from the IRS and obtained by ED. FTI also includes the taxpayer’s name, mailing address, SSN, ETIN, and names of dependents.

Federal Work-Study (FWS) Program: Funding for part-time jobs for undergraduate and graduate students with financial need. Unlike grants and loans, FWS is paid to students as they earn the funds by working.

Financial Aid: General term that describes any source of student assistance outside of the student or the student’s family. Funds provided to a student to help meet postsecondary educational expenses. These funds are generally based on financial need and include scholarships, grants, student employment, and loans.

Financial Aid Notification: A method of informing financial aid applicants of the financial assistance offered by an institution. The paper or electronic financial aid offer usually provides information on the types and amounts of financial aid available, as well as specific program information, student responsibilities, and the conditions which govern the financial aid offer. It generally provides students with the opportunity to accept or decline the aid offered. State agencies and private organizations may send students aid notifications separately from the postsecondary institution.

Financial Aid Offer: A document sent by a postsecondary institution to a student that outlines the amounts and details of the financial aid being offered to the student, which may include scholarships, grants, loans, employment, or other forms of financial assistance to pay for college expenses. Sometimes schools refer to these as financial aid “awards,” although this term is outdated. Schools should refer to these as financial aid offers.

Financial Need: The difference between the institution’s cost of attendance (COA) and the family’s ability to pay. Ability to pay is represented by the student aid index (SAI) for federal need-based aid and for many state and institutional programs.

Forbearance: Permits the temporary cessation of repayment of loans, allowing an extension of time for making loan payments, or accepting smaller loan payments than were previously scheduled.

Free Application for Federal Student Aid (FAFSA®): The financial aid application completed by the student, and the student’s parents if applicable, that collects family and financial information. The FAFSA is the foundation document for all federal need analysis computations and database matches performed for a student. 

FUTURE Act Direct Data Exchange (FA-DDX): System that allows the U.S. Department of Education (ED) to request and the IRS to transfer federal tax information (FTI) to the FAFSA for use in determining a student’s federal financial aid eligibility.

Grace Period: The period of time that begins when a loan recipient ceases to be enrolled at least half time and ends when the repayment period starts. Loan principal need not be paid and, depending on the loan, interest does not accrue during this period.

Grant: A type of financial aid that does not have to be repaid; usually provided on the basis of need, possibly combined with some skills or characteristics the student possesses.

Independent Student: A student who:
     (a) Will be 24 years of age by December 31 of the award year;
     (b) Is an orphan, in foster care, or a ward of the court, at any time when the student was 13 years
           of age or older;
     (c) Is an emancipated minor or is in legal guardianship as determined by a court in the student’s
           state of legal residence;
     (d) Is an unaccompanied youth who is homeless or who is at risk of homelessness and is self-
           supporting, as documented during the school year;
     (e) Is a veteran;
     (f) Is serving on active duty in the U.S. Armed Forces for purposes other than training;
     (g) Is married and not separated;
     (h) Is a graduate or professional student;
     (i) Has legal dependents other than a spouse who receive more than half of their support from the
          student;
     (j) Has dependent children who receive more than half of their support from the student; or
     (k) Presents documentation of other unusual circumstances demonstrating independence to the
           financial aid administrator.

Interest: A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the unpaid principal amount (loan amount) borrowed.

Lifetime Eligibility Used (LEU): According to federal law, the amount of Federal Pell Grant funds that a student may receive is limited to the equivalent of six years of Federal Pell Grant funding.

Loan: Money borrowed that must be repaid.

Master Promissory Note (MPN): A promissory note for the Federal Direct Loan Program that allows borrowers to apply for multiple loans during a student’s attendance at a postsecondary institution.

Merit-Based Aid: Financial aid provided because of a student’s achievement or talent in a particular area, such as academics, athletics, music, etc.

Need Analysis: A system used to analyze the household and financial information and calculate an estimated family contribution.

Need-Based Aid: Financial assistance provided to students based on their financial situation, determined by completing the FAFSA. Need-based financial aid can take different forms, including grants, scholarships, work-study programs, and low-interest loans, like the Federal Direct Subsidized Loan.

Net Price: The difference between the cost of attendance and all grants and scholarships. Net price reflects what the student is expected to pay for their education on their own and can be covered through a variety of sources, including savings, student employment, institutional payment plans, or education loans.

Non-Need-Based Aid: Student financial assistance offered based on criteria other than need, such as academic, musical, or athletic ability. Also, refers to federal student aid programs where the student aid index (SAI) is not part of the need equation.

Overpayment: When a student receives more federal student aid than that for which there is demonstrated eligibility, the excess amount must be repaid for a student to receive additional federal student aid funds. 

Parent Contribution (PC): A quantitative estimate of the parents’ ability to contribute to the postsecondary educational expenses of a dependent student.

Professional Judgment (PJ): The financial aid administrator’s discretion, based on the special or unusual circumstances of the student, to change the data elements used in determining eligibility for federal student aid, adjust a student’s cost of attendance, change a student’s status from dependent to independent (i.e., dependency override), or deny or reduce Direct Loan eligibility.

Satisfactory Academic Progress (SAP): Maintaining successful progress towards completing a degree based on GPA, PACE, and maximum hours.  

Scholarships: Sums of money that are given or “gifted” to students for the purpose of paying for college tuition and other college-related expenses. Scholarships do not have to be paid back and, therefore, are a very valuable type of financial aid. 

Student Aid Index (SAI): An eligibility index that college financial aid staff use to determine how much financial aid you would receive if you were to attend their school. The SAI is calculated according to a formula specified in law and is based upon the information provided by the student and their family on the Free Application for Federal Student Aid (FAFSA). This was previously called the Expected Family Contribution (EFC).

Student Contribution (SC): A quantitative estimate of the student’s ability to contribute to postsecondary expenses for a given year.

USDOE, USED, ED or US Dept. of Ed: Terms used to denote the United States Department of Education.

Unmet Need: The difference between a student’s total cost of attendance (COA) at a specific institution and the student’s total available resources.

Verification: A federally mandated process to confirm the accuracy of data provided by selected applicants on the FAFSA. To complete the verification process, the student, their parent(s), or spouse, if applicable, are required to provide certain documents to the school for review. If the documentation the student provides the institution does not match what was reported on the FAFSA, verification can result in changes to the student’s financial aid eligibility, and/or financial aid offers.

Source: 2025 NASFAA Financial Aid Glossary