Forbearance- The temporary postponement of student loan payments, however, interest accrues on both subsidized and unsubsidized loans
Subsidized- A need based student loan where interest is paid by the government on the principal loan balance during school and periods of deferment
Unsubsidized- A non-need based student loan where interest accrues in a separate account to be capitalized into the principal at the beginning of repayment.
Capitalization- The addition of any accrued interest to the outstanding principal amount. Interest then begins to accrue on the new principal amount.
Example: $10,000 (principal) + $5,000 (interest) = $15,000 (new principal)
Consolidation- The combining of multiple student loans into one loan, the new loan interest rate is calculated based on a weighted average.
Weighted Average- The calculation used to determine the new interest rate on a consolidation loan. Loans with higher interest rates carry more weight than loans with interest lower rates
Loan Forgiveness/Repayment Programs - A program that pays money toward student loan debt in exchange for a period of service. Typically they have a minimum contract period of two years.
Aggregate Maximum - The life time maximum that a student can borrow from the Federal student loan program. The life time maximum for medical students is $224,000.
FAFSA - The Free Application for Federal Student Aid, is the primary form that students applying for Federal financial aid must complete. This form helps to determine a students eligibility for the Federal Student Loan Programs.
Expected Family Contribution (EFC) - Is the amount that the Department of Education says that the student and family can contribute toward the student's education during the current academic year. It is listed on the Student Aid Report (SAR)
Student Aid Report (SAR) - Is the document returned to the student and family that details the information the student and family listed on the FAFSA form as well as the Expected Family Contribution (EFC)
Economic Hard Ship Deferment: Is a type of deferment that allows the borrower to defer interest accrual on subsidized portions of their student loans. Qualification for Economic Hardship is based upon the student's debt to income ratio. If the student has student loan debt that is 20% or more than the student's gross monthly income the student may qualify for Economic Hardship.
**As of July 1, 2009 the qualification for Economic Hardship will no longer be based upon the debt to income ratio rather it will be based upon the student's gross annual income and family household size. This may mean that the student does not qualify for deferment but rather an income based repayment plan.
Income Based Repayment Plan: A repayment plan where the minimum monthly payment amount is determined by the student's and spouse (if applicable) gross annual income and family size. Repayment amounts may be less than the total monthly accrued interest
Mandatory Residency Forbearance: Medical Residents are entitled to received a forbearance on their qualifying student loans for the duration of their residency period. As with all types of forbearance students must apply for forbearance on a annual basis.
Refund Is the available funds for student use after the student's account has been paid in-full. Typically students use these funds to cover living expenses such as: rent, utilities, food and transportation.
Disbursement Is when the student loan funds are sent from the lender to the school to be paid to the students account.
In-school Deferment Allows the student to defer repayment of student loans as long as they maintain at least halftime enrollment. There is no limit to the length of this type of deferment; to qualify the student may have to complete a deferment request form.
Economic Hardship Deferment is only available for up to three years.
Graduate Fellowship Deferment Allows the student to defer repayment of student loans as long as they are enrolled in a qualifying graduate fellowship program. There is no limit to the lengths of this type of deferment. Students should verify program eligibility with the program administrator. To apply students must complete a deferment request form.
Unemployment Deferment Allows the student to defer repayment of student loans while they are actively seeking employment. This type of deferment is generally granted in six month increments; students must apply and qualify.