Student Loan Terminology – GradPlan

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Student Loan Terminology

Borrowing money to pay for college? Learn the vocabulary behind the process.

What do All These Financial Terms Mean??

There are A LOT of new words and phrases which are associated only with the financial aid application process. Don’t panic if you don’t know what some of them are, just use our handy glossary here and get the clarity you need!

OneGoal’s Financial Aid Glossary:

  • Anticipated Total Cost: This is when you take the cost of tuition and housing and meal plans (if living on campus) which the school can tell you, and add it to your best guess at how much you might spend on textbooks, schools supplies, transportation to-and-from college, and money you will want for entertainment, clothes, etc. for a full school year. Add all of those things together and you’ll have the “anticipated total cost” of one year of college.
  • Deferment: When you postpone repayment by demonstrating financial hardship.
  • Entrance Loan Counseling: An online class that you are required to view in order to receive your loan.
  • Expected Family Contribution (EFC): Your EFC is calculated according to a formula established by law and considers your family’s taxed and untaxed income, assets, and benefits (such as unemployment or Social Security). Schools use the EFC to determine your federal aid eligibility and financial aid award.Your EFC is not the amount of money your family will have to pay for college, nor is it the amount of federal student aid you will receive.
  • Fixed Interest: Interest rates that don’t change with the market or increase with inflation.
  • Grace Period: The time period after graduating that you don’t have to pay your loan back (typically 6 months for Direct Subsidized / Unsubsidized Loans).
  • Interest Rate: This is an additional charge for using borrowed money. It’s calculated as a percentage of the amount of money you still owe (the unpaid principal of the loan).
  • Loans: Money that you borrow, that you eventually have to pay back.
  • Loan Term: How long you need to pay the loan back (typically 10 years for Direct Subsidized / Unsubsidized Loans, but can vary)
  • Principal: This is the original amount of money that you borrowed that you have to pay back (before any interest charges).
  • Promissory Note: A signed, legal document promising to pay your loan back to the lender in a specified amount of time.
  • Subsidized: The government is paying for the interest on your loan while you are in school half-time, for the first six months after you leave school (grace period), and during a period of deferment.
  • Student Aid Report (SAR): Once you file the FAFSA and it has been processed, you will receive your SAR from the Federal Student Aid office. This report shows your EFC.
Recommended Resources


Financial Aid
Student Loans

"Education is the passport to the future, for tomorrow belongs to those who prepare for it today."

Malcolm X, human rights activist