Terms you need to know to get the most out of your financial aid.
Written by: Lisa Phelps for Student Choice
Dictionaries are great when you’re learning something new, visiting a new place where the people speak a different language or double checking a word you’re just not sure of. When you’re visiting the world of college loans, this is a handy tool to have with you. It might just save you from making a costly mistake.
Learn the Student Loan Lingo
The following are some of the most common terms you’ll run across as you work through the loan process for college:
Free Application for Federal Student Aid. The form you must complete to apply for federal loans for college, graduate or technical school. You must complete a form each year you need loans. Remember, the key word here is free. Check out our previous articles on the FAFSAClick here to begin the FAFSA.
- Financial Aid Office
This is the office at your college or career school that prepares all your financial aid information. You can apply for grants, scholarships and other kinds of loans with the help of people in this office. It’s good to get to know these folks – their job is to help you pay for college, so definitely ask them lots of questions.
- Direct Student Loans
Formerly known as Stafford loans, these loans are made directly by the federal government (Department of Education) and are the most common kind of federal loan. The may be either subsidized or unsubsidized (see below) and are typically the most affordable option for students. We recommend pursuing your Direct loans before exploring private or alternative student loans.
- Direct Subsidized Loan
Given to undergrads with financial need. Your school determines how much you can borrow, and no interest accrues while you’re in school at least half time and during the grace period after you leave school. Subsidized means the government pays the interest on your loan for you until it enters repayment.
- Direct Unsubsidized Loan
You’re eligible if you’re either an undergrad or a grad student and you don’t have to prove financial need. You must pay the interest that starts accumulating right away or it gets added to the original loan amount. Where the government pays the interest on the subsidized program, you’re responsible for the interest in this program. Both may be deferred.For more information on Direct Subsidized and Unsubsized loans, visit the Student Aid website’s comparison section.
- Perkins Loans
These low-interest loans are given by individual schools to students with exceptional financial need. (Check to see if your school offers them.) You must apply for by filling out the FAFSA, but payments are made to your school. You’ll have 10 years to pay these back. These are the cheapest option but not everyone will qualify.For more information, visit the Student Aid website’s Perkins section.
- PLUS Loan
Available to grad students and parents of dependent undergrads, the PLUS loan is the government’s loan solution for filling the gap that often exists when paying for college. PLUS loans also carry different rates than Direct loans and come with an origination fee.For more information visit the Student Aid website. http://studentaid.ed.gov/types/loans/plus
Student Aid Report. You’ll get this back after you complete your FAFSA. It will give you your Expected Family Contribution (EFC) number so read this report carefully and ask questions if you don’t understand something.
For even more terms and helpful information, check out our Glossary of Key Financial Aid Terms, Federal Student Aid’s expansive glossary, and don’t be afraid to ask your financial aid counselor for more information. Stay tuned for more articles about helpful terms to save you money and make your financial aid process a little easier.
If you need assistance getting your finances in order – check out your local credit union – you can find one using our CU Select tool.