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- Account
A grouping of one or
more Direct Loans disbursed by the U.S. Department of Education.
Borrowers can have one or more accounts. Each account has a unique
number assigned to identify it. The format of an account number is
your Social Security Number (SSN) plus a one-digit identifier
added to the end (e.g., 123-45-6789-1). If you receive a notice
that affects all of your possible accounts, the account number on
the notice may be abbreviated to the Social Security Number only.
- Accrue
The process whereby
interest accumulates on your loan. When we speak of "interest
accruing on your loan," we mean that the interest due on your loan
is accumulating.
- Borrower
Individual who signed
and agreed to the terms in the promissory note and is responsible
for repaying a loan.
- Cancellation
Some student loan
programs allow for all or part of the total loan principal and
accrued interest to be canceled in certain circumstances. A
canceled loan may also be referred to as a "discharged loan."
- Capitalization
Adding unpaid
accrued interest to the principal balance. Capitalizing interest
increases the principal amount of the loan and the total cost of
the loan. This occurs at the end of a deferment,
forbearance,
or grace
period on Unsubsidized Loans, and at the end of a forbearance
period on a Subsidized Loan.
- Collection Costs
When a
defaulted Direct Loan or FFEL is included in a Direct
Consolidation Loan, collection costs of up to 18.5 percent of the
outstanding principal and interest are added to the outstanding
balance. When defaulted Perkins Loans and Health and Human Service
(HHS) loans are consolidated, collection costs are also added.
However, collection costs on these loans may exceed 18.5 percent
of the outstanding principal and interest.
- Consolidation
The process
of combining one or more eligible educational loans into a single
new loan. The Direct Loan Program offers a Direct Consolidation
Loan for those borrowers who are interested in consolidating their
eligible educational loans.
- Default
Failure to repay a loan
according to the terms agreed to when borrowers signed their promissory
notes. Default occurs when a Direct Loan borrower becomes 270
days delinquent
in making payments on their loan(s). The consequences of default
can be severe.
- Default Aversion
The
activities of a guaranty agency that are designed to prevent a
default by a borrower who is at least 60 days delinquent and that
are directly related to providing collection assistance to the
lender.
- Deferment
A deferment is a
temporary suspension of a borrower's monthly loan payment. There
are many different types of deferments available.
During deferment of subsidized loans, principal payments are
postponed and interest does not accrue.
During deferment of unsubsidized loans, principal payments are
postponed but interest continues to accrue. Accrued unpaid
interest will be added to the principal balance (capitalized) of
the loan(s) at the end of the deferment period. This will increase
the amounts borrowers owe.
- Delinquent
Delinquency status
indicates that borrowers' accounts have become past due on
payment. This occurs when borrowers' loan payments are not
received by the due dates. Accounts remain delinquent until
borrowers bring their accounts current with payments, deferments,
or forbearances. If borrowers' accounts have become delinquent and
the borrowers are unable to make payments, deferments or
forbearances should be considered.
- Dependent student(dependent
undergraduate student)
A student who does not meet any of
the criteria for an independent student. An independent student is
at least 24 years old, married, a graduate or professional
student, a veteran, a member of the armed forces, an orphan, a
ward of the court, or someone with legal dependents other than a
spouse.
- Direct Loan Servicing
Center
The U.S. Department of Education's agent contracted
to collect Direct Loans and handle deferments, forbearances, and
repayment options
- Direct PLUS Loan (PLUS
Loan)
Direct PLUS Loans are unsubsidized loans available to
parents of dependent
students, and to students enrolled in graduate or professional
programs. These loans are available regardless of financial need
and the amount of eligibility depends on the total cost of
education.
- Disbursement
Payment of
loan proceeds by the lender. During consolidation, this term
refers to sending payoffs to the loan holders of the underlying
loans being consolidated.
- Disclosure Statement
A
statement showing a borrower's loan term, payment schedules and
monthly payment amount for their loans.
- Eligible Loans
The
following federal education loans are eligible for consolidation
into a Direct Consolidation Loan:
- Direct Subsidized and Unsubsidized Loans
- Federal Subsidized and Unsubsidized Stafford Loans
- Direct PLUS Loans and Federal PLUS Loans
- Direct Consolidation Loans and Federal Consolidation Loans
- Guaranteed Student Loans
- Federal Insured Student Loans
- Supplemental Loans for Students
- Auxiliary Loans to Assist Students
- Federal Perkins Loans
- National Direct Student Loans
- National Defense Student Loans
- Health Education Assistance Loans
- Health Professions Student Loans
- Loans for Disadvantaged Students
- Nursing Student Loans
- Federal Family Education Loan Program(FFEL
Program)
A Federal program authorized under Title IV of the
Higher Education Act that provides loans to eligible student and
parent borrowers. The program consists of Subsidized and
Unsubsidized Federal Stafford Loans, Federal PLUS Loans, and
Subsidized and Unsubsidized Federal Consolidation Loans. Funds are
provided by private lenders such as banks, credit unions, and
other private financial institutions. The loans are backed by the
Federal government.
- Forbearance
A period during
which your monthly loan payments are temporarily suspended or
reduced. You may qualify for forbearance if you are willing but
unable to make loan payments due to certain types of financial
hardships.
- Grace Period
After borrowers
graduate, leave school, or drop below half-time enrollment, loans
that were made for that period of study have several months before
payments are due. This period is called the "grace period."
Grace periods extend from 6 to 12 months after borrowers
leave school:
- Most FFEL
and Direct Loans have 6-month grace periods.
- Perkins Loans have grace periods of either 6 or 9 months,
depending on when the loan was first disbursed.
- Health
professions loans have grace periods of 9-12 months.
During the grace period, no interest accrues
on Subsidized
loans. Interest accrues on Unsubsidized
loans during grace periods, and this interest is capitalized
when borrowers' loans enter repayment.
Borrower's repayment periods begins the day after the grace
period ends. First payments will be due within 60 days after the
repayment period begins.
Each loan has only one grace period. If borrowers return to
school after the grace periods has expired, the borrowers' loans
qualify for deferment while borrowers are enrolled but return to
repayment after borrowers leave school. There is no additional
grace period.
- Half-time
A student is
considered half-time when carrying at least one half the academic
workload of a full-time student as determined by the school.
- Health Professions Loans
Loan
programs authorized by the Public Health Services Act and
administered by the U.S. Department of Health and Human Services
(HHS) rather than the U.S. Department of Education. Although
health professions loans can be included in consolidation loans,
borrowers should be aware of the advantages and disadvantages of
consolidating these loan types because of the differences between
the programs. See the benefits
comparison chart for details.
HHS loans include:
- Health Professions Student Loans (HPSL)
- Loans for Disadvantaged Students (LDS)
- Health Education Assistance Loans (HEAL)
- Nursing Student Loans (NSL)
- Holder (also holder of loans/loan
holder)
A holder (loan holder) is an entity that holds a
loan promissory note and has the right to collect from the
borrower.
- Income Contingent Repayment(ICR)
Plan
A repayment plan that bases your monthly payment on your yearly
income, family size, and loan amount. As your income rises or
falls, so do your payments. After 25 years, any remaining balance
on the loan will be forgiven, but you may have to pay taxes on the
amount forgiven.
Each year your monthly payment will be based on your family
size, annual Adjusted Gross Income (AGI) as reported on your
federal tax return, and the total amount of your Direct Loan(s).
To participate in the ICR Plan you must authorize the U.S.
Internal Revenue Service (IRS) to inform the U.S. Department of
Education (Department) of the amount of your income. This
information will be used to calculate your repayment amount, which
will be adjusted annually to reflect changes in your AGI If you
select the ICR Plan, you will be billed for only the interest
amount that accrues on your loan each month until you complete and
return the required documentation. We cannot place you on ICR Plan
until we receive your completed forms.
- Independent Student
An
independent student is at least 24 years old, married, a graduate
or professional student, a veteran, a member of the armed forces,
an orphan, a ward of the court, or someone with legal dependents
other than a spouse.
- In-School Status
The status of
a loan prior to entering the grace or repayment period.
- 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.
- Loan(s)
Money borrowed from a
lending institution or the U.S. Department of Education that must
be repaid.
- NSLDS
The National Student Loans
Data System is a centralized database that stores information
on all U.S. Department of Education loans and grants. NSLDS also
contains borrowers' school enrollment information. Borrowers can
access this information online using their Department of Education
PIN.
- Out of School
Borrowers are
"out of school" if they are making scheduled payments on their
federal education loans (repayment)
or they are in a period of grace, deferment, or forbearance.
- Payment Amount
The total amount
of a borrower's most recent payment.
- Payment Date
The date
borrower's payments are received and applied to their loan
accounts.
- PIN
Your PIN serves as your
identifier to allow access to personal information in various U.S.
Department of Education systems.
Your PIN also acts as your digital signature with some online
forms. Use your PIN to electronically sign your online Loan
Consolidation Application and Promissory Note, Deferment, or
Forbearance forms.
If you do not already have a PIN, you can request one online by
selecting the Request a PIN button link located on the left menu
bar. The PIN you will receive will be your universal U.S.
Department of Education PIN.
- PLUS Loan
PLUS Loans are
available to parents of dependent
graduate students and to students enrolled in graduate and
professional programs. PLUS loans are unsubsidized
loans that accrue interest from the date of disbursement.
- Prepayment
A prepayment
is an amount in excess of the amount due on a loan. If borrowers
have more than one Direct Loan, they must specify which loan they
are prepaying. Like all other Direct Loan payments, a prepayment
first will be applied to any outstanding fees and charges, next to
outstanding interest, and then to the principal balance of the
loan(s). There is never a penalty for prepaying principal or
interest on Direct Loan Program loans.
- Principal Loan Balance Outstanding
(principal balance)
The total principal amount outstanding
on a borrower's Direct Loan(s). Principal balance will include the
original amount(s) disbursed for the loan(s), any adjustments made
to the loan disbursement amount, and any interest capitalized on
the account(s).
- Promissory Note
The binding
legal document that borrowers sign when they obtain loans.
Promissory notes define the conditions under which funds are
provided and the terms under which borrowers agree to pay back the
loan. Promissory notes include information about the interest rate
and about deferment and cancellation provisions.
- Reasonable and Affordable
Payments
Rehabilitating a defaulted loan or making
satisfactory payment arrangements requires borrowers to make
"reasonable and affordable" payments. The holder of a Direct Loan
or FFEL Program loan determines on a case-by-case basis what
constitutes a reasonable and affordable payment on defaulted
loans. Loan holders consider disposable income and such expenses
as housing, utilities, food, medical costs, work related expenses,
dependent care, and other Federal education loan debt. Borrowers
are then provided with a written statement of the payment and an
opportunity to object to those terms.
- Rebate (Direct Loan Up-Front Interest
Rebate Program)
The amount of the up-front interest rebate
given to Direct Subsidized Loan, Direct Unsubsidized Loan and
Direct Plus Loan borrowers beginning with loans made for the 2000
- 2001 program year. The rebate amount is equal to 1.5 percent of
the loan amount borrowed. Borrowers must make their first 12
required monthly payments on time or the rebate amount will be
added back to the principal balance on their loans.
- Refund
The total amount of funds
returned to the Direct Loan Program as unused for the student's
education.
- Rehabilitation
The
process of bringing a loan out of default and removing the default
notation on a borrower's credit report. To rehabilitate a Direct
or FFEL loan, a borrower must make at least nine (9) full payments
of an agreed amount within twenty (20) days of their monthly due
dates over a ten (10) month period. To rehabilitate a Perkins
Loan, a borrower must make twelve (12), on-time, monthly payments
of an agreed amount to the Department. Rehabilitation terms and
conditions vary for other loan types and can be obtained directly
from loan holders.
- Repayment (also repayment
period)
Making payments on a loan. The "repayment period"
is the period during which payments are required to be made.
- Repayment Plan(s)
The
Direct Loan Program offers a range of repayment plans:
- Standard Repayment plan - fixed payment for up to 10 years
to repay.
- Extended Repayment plan - fixed payment for 12 to 30 years
to repay, depending on loan balance.
- Graduated Repayment plan - smaller payments at first and
larger payments later for up to 30 years to repay, depending on
loan balance.
- Income Contingent Repayment (ICR) plan - payment amount is
based on your loan balance and your income (and your spouse's
income if you are married) and can vary year to year for up to
25 years. The Income Contingent Repayment plan is NOT available
to PLUS loan borrowers.
- Individualized payment plans can also be arranged with the
Direct Loan Servicing Center.
Changing repayment plans is a good way to manage your loan debt
when your financial circumstances change. For example, you can
usually lower your monthly payment by changing to another
repayment plan with a longer term to repay the loan. There are no
penalties for changing repayment plans.
- Satisfactory Repayment
Arrangements
Borrowers in default on Direct Loan and FFEL
Program loans who wish to consolidate their loans in a plan other
than the Income Contingent Repayment (ICR) plan must have made
satisfactory repayment arrangements with the loan holder(s). Three
consecutive, voluntary, on-time monthly payments on a defaulted
Direct Loan or FFEL Program loan constitute satisfactory repayment
arrangements. Borrowers must work with their current loan holders
to set up reasonable and affordable payments. Borrowers who wish
to consolidate defaulted Perkins or health
professions loans should contact their loan holders for
information on satisfactory repayment arrangements under those
programs.
- Separation Date
The actual
or anticipated date when the borrowers graduate, leave school, or
drop to a less than half-time
status. The separation date is used to determine the loan's graceperiod
and the date the first loan payment will be due.
- Servicer
An entity designated
to track and collect a loan on behalf of a loan holder.
- Simple Daily Interest
The method
used to calculate interest on student loans.
- Status (Loan status)
The present
state of your Subsidized, Unsubsidized, PLUS, or Consolidation
loan(s).
An account will be either:
- in-School
- in-Military
- grace
- repayment-current
- repayment-delinquent
- deferment
- forbearance
- paid-in-full
- suspended
- default
- Subsidized Loan
A loan for
which a borrower is not responsible for the interest while in an
in-school, grace, or deferment status. Subsidized loans include
Direct Subsidized , Direct Subsidized Consolidation Loans, Federal
Subsidized Stafford Loans and Federal Subsidized Consolidation
Loans.
- Unsubsidized Loan
A loan for which
a borrower is fully responsible for paying the interest regardless
of the loan status. Interest on unsubsidized loans accrues from
the date of disbursement and continues throughout the life of the
loan. Unsubsidized loans include: Direct Unsubsidized Loans,
Direct PLUS Loans, Direct Unsubsidized Consolidation Loans, and
Federal Unsubsidized Stafford Loans, Federal PLUS Loans, and
Federal Unsubsidized Consolidation Loans.
- Variable Interest
The rate of
interest charged on a loan that changes annually and fluctuates
with a stated index.
- Verification
Certification
The process by which a consolidation lender
requests that a loan holder certify a loan's payoff balance.
- William D. Ford Federal Direct Loan
Program (Direct Loan Program)
The Federal program that
provides loans to eligible student and parent borrowers under
Title IV of the Higher Education Act. The loan programs include
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS
Loans, and Direct Consolidation Loans. Funds are provided directly
by the federal government to eligible borrowers through
participating schools.
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