Glossary of Terms

Academic Year
The enrollment period beginning on the first day of classes in the Fall Term and concluding on the last day of exams in the Spring Term.

Accruing Interest (on a loan)
The cost of the loan, represented by the interest which is added to the loan amount prior to the repayment period or prior to a payment installment.

Adjusted Gross Income (AGI)
All taxable income as reported on a United States income tax return.

Advanced Placement (AP)
Credit and/or advanced standing in certain course sequences that postsecondary institutions may offer to high school students who have taken high-level courses and passed certain examinations.

A formal request to have a financial aid administrator review your aid eligibility and possibly use Professional Judgment to adjust the figures. For example, if you believe the financial information on your financial aid application does not reflect your family's current ability to pay (e.g., because of death of a parent, unemployment or other unusual circumstances), you should definitely make an appeal. The financial aid administrator may require documentation of the special circumstances or of other information listed on your financial aid application.

Cash on hand in checking and savings accounts; trusts, stocks, bonds, other securities; real estate (excluding the home), income-producing property, business equipment, and business inventory. Assets are considered in calculating the EFC.

Associate Degree
A degree given for successful completion of some courses of study at a two-year institution.

Award Letter
A method of notifying financial aid applicants of the assistance being offered by an institution. The award letter usually provides information on the types and amounts of aid offered, as well as specific program information, student responsibilities, and the conditions which govern the award. It generally provides students with the opportunity to accept or decline the aid offered.

Bachelor’s Degree
The degree given for successful completion of the undergraduate curriculum at a four-year college or a university. It is also called a baccalaureate degree.

Bureau of Indian Affairs (BIA) Grant
A federal grant program administered by the Bureau of Indian Education for needy students who are members of an Indian, Eskimo, or Aleut tribe and enrolled in accredited institutions in pursuit of an undergraduate or a graduate degree.

Business Assets
Property that is used in the operation of a trade or business, including real estate, inventories, buildings, machinery and other equipment, patents, franchise rights, and copyrights. Business assets are considered in the calculation of the EFC under the regular formula.

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

Capitalization (of interest)
The arrangement between borrower and lender whereby interest payments are deferred as they come due and are added to the principal amount of the loan.

Central Processing System (CPS)
The computer system to which the student’s need analysis data is electronically transmitted by the Free Application for Federal Student Aid (FAFSA) processor. The Central Processing System performs database matches, calculates the student’s official EFC, and generates the Student Aid Report (SAR).

College-Level Examination Program (CLEP)
A series of examinations demonstrating a student’s proficiency in a subject area, for which some postsecondary institutions offer credit.

Commuter Student
A student who does not live on campus; typically, “commuter” refers to a student living at home with his or her parents, but can also mean any student who lives off campus.

Consolidation Loan
A loan made to enable a borrower with different types of loans or multiple loans to obtain a single loan with one interest rate and one repayment schedule. Federal Perkins Loans, Direct Subsidized and Direct Unsubsidized Loans, Health Education Assistance Loans (HEAL), Health Professions Student Loans (HPSL), and Loans for Disadvantaged Students may be combined for purposes of consolidation, subject to certain eligibility requirements. A consolidation loan pays off the existing loans; the borrower then repays the consolidated loan.

Cost of Attendance (COA)
Generally, this includes the tuition and fees normally assessed a student, together with the institution’s estimate of the cost of room and board, transportation and commuting costs, books and supplies, the cost of a computer, and miscellaneous personal expenses. It is also referred to as “cost of education” or “budget.”

Credit (or Credit Hour)
The unit of measurement some institutions give for fulfilling course requirements.

Custodial Parent
The parent with whom a dependent student lives, and whose financial information is used in need analysis when parents are divorced or separated.

The loan repayment status for individuals who do not repay their loans. Severe legal and financial repercussions are involved for borrowers who go into default, such as garnishment of wages, repayment of all principal demanded within a month’s time, and adverse credit ratings. 

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

Department of Education, U.S. (ED)
The federal government agency that administers assistance to students enrolled in postsecondary educational programs under the following programs: Federal Pell Grant, Federal Perkins Loan, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and William D. Ford Federal Direct Loan (Direct Loan) Program.

Departmental Scholarship
An award of gift assistance that is specifically designated for a recipient in a particular academic department within the institution.

Dependent Student
A student who does not qualify as an independent student and whose parental income and asset information is used in calculating the EFC (see Independent Student).

Direct PLUS Loan
Long-term loans made available to parents of dependent students and graduate/professional students. Interest rates are fixed at 7.9 %. May be used to replace EFC; amount borrowed is limited to the cost of attendance minus estimated financial assistance.

Direct Subsidized and Direct Unsubsidized Loans
Long term, low-interest loans administered by the Department of Education and institutions. Loans carry a fixed interest rate. Direct Unsubsidized Loans can be used to replace EFC.

Educational Benefits
Funds, primarily federal, awarded to certain categories of students (veterans, children of deceased veterans or other deceased wage earners, and students with physical disabilities) to help finance their postsecondary education regardless of their ability to demonstrate need in the traditional sense.

With reference to financial aid, the opportunity for students to earn money to help pay for their education. FWS is one program by which needy students can work to help pay their educational expenses.

Expected Family Contribution (EFC)
The amount a student and his or her family is expected to contribute toward the student’s cost of attendance as calculated by a Congressionally-mandated formula known as Federal Methodology. The EFC is used to determine a student’s eligibility for the student financial assistance programs.

Allows students and families to input financial information and receive an estimate of their federal aid eligibility before filing the FAFSA.

Federal Direct Student Loan (Direct Loan) Program
The collective name for the Direct Subsidized, Direct Unsubsidized, Direct PLUS, and Direct Consolidation Loan Programs. Loan funds for these programs are provided by the federal government to students and parents through postsecondary institutions.

Federal Methodology (FM)
A standardized method for determining a student’s (and family’s) ability to pay for postsecondary education expenses. The single formula for determining an EFC for Federal Pell Grants, campus-based programs, and Direct Loan programs; the formula is defined by law.

Federal Pell Grant
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.

Federal Perkins Loan
One of the campus-based programs; a long term, low interest loan program for both undergraduate and graduate students at a current interest rate of 5%. At one time it was known as the Carl D. Perkins National Direct Student Loan Program (NDSL).

Federal Supplemental Educational Opportunity Grant (FSEOG)
One of the campus-based programs; grants to undergraduate students of exceptional financial need who have not completed their first baccalaureate degree and who are financially in need of this grant to enable them to pursue their education. Priority for FSEOG awards must be given to Federal Pell Grant recipients with the lowest EFCs.

Federal Work-Study (FWS) Program
One of the campus-based programs; a part-time employment program which provides jobs for students who are in need of earnings to meet a portion of their educational expenses. FWS is awarded based on availability of funding.

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

Financial Aid Administrator
An individual who is responsible for preparing and communicating information pertaining to student loans, grants or scholarships, and employment programs, and for advising, awarding, reporting, counseling, and supervising office functions related to student financial aid. A financial aid administrator is accountable to the various federal, state, and institutional entities that provide aid and interprets and implements federal, state, and institutional policies and regulations, and is capable of analyzing student and employee needs and making changes where necessary.

Financial Aid Offer
The total amount of financial aid (federal and nonfederal) a student is offered by a college or career school. The school's financial aid staff combines various forms of aid into a “package” to help meet a student’s education costs.

Financial Need
The difference between the institution’s cost of attendance and the family’s ability to pay (i.e., EFC). Ability to pay is represented by the EFC for federal need-based aid and for many state and institutional programs.

Financial Need Equation
Cost of attendance minus expected family contribution equals financial need (COA - EFC = Need).

First-Time Borrower
Any student who is borrowing through the Direct loan programs for the first time. An entrance loan counseling session is required, and should be completed online at

Permits the temporary cessation of repayments 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 household and financial information. The FAFSA is the foundation document for all federal need analysis computations and database matches performed for a student. Complete the FAFSA at

Gift Aid
Educational funds such as grants or scholarships that do not require repayment from present or future earnings. See Grant.

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.

A type of financial aid that does not have to be repaid; usually awarded on the basis of need, possibly combined with some skills or characteristics the student possesses. Also see Gift Aid.

Amount of money received from any or all of the following: wages, interest, dividends, sales or rental of property or services, business or farm profits, and subsistence allowances such as taxable Social Security benefits and child support.

An independent student is at least 24 years old as of January 1 of the academic year, is married, is a graduate or professional student, has a legal dependent other than a spouse, is a veteran of the US Armed Forces, or is an orphan or ward of the court (or was a ward of the court until age 18). A parent refusing to provide support for their child's education is not sufficient for the child to be declared independent.

Institutional Student Information Report (ISIR)
The electronic version of SARs delivered to schools by the Central Processor

Investment Plans
State 529 plans are examples of educational investment plans that can be used to assist with higher education expenses, usually sponsored by commercial banking institutions.

Legal Dependent (of Applicant)
A biological or adopted child, or a person for whom the applicant has been appointed legal guardian, and for whom the applicant provides more than half support. In addition, a legal dependent is a person who lives with and receives at least half support from the applicant and will continue to receive that support during the award year. For purposes of determining dependency status, a spouse is not considered a legal dependent.

An advance of funds evidenced by a promissory note and requiring the recipient to repay the specified amount(s) under prescribed conditions. 

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

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

Need Analysis
A system by which an applicant’s ability to pay for educational expenses is evaluated and calculated. Need analysis consists of two primary components: (a) determination of an estimate of the applicant’s and/or family’s ability to contribute to educational expenses; and (b) determination of an accurate estimate of the educational expenses themselves.

Need Analysis Formula
Defines the data elements used to calculate the EFC; there are two distinct formulas: regular and simplified. The formula determines the EFC under the Federal Methodology.

Need-based Aid
Student assistance awarded based on demonstrated financial need.

Non-need-based Aid
Aid based on criteria other than need, such as academic, musical, or athletic ability. 

Origination Fee
A charge for processing a Direct Loan to partially help offset administrative costs. It can be either a flat rate or a percentage of the amount borrowed. 

Outside Scholarship
A scholarship that comes from sources other than the school and the federal or state government.

The process of combining various types of student aid (grants, loans, scholarships, and employment) to attempt to meet the full amount of a student’s need. 

Principal (of a loan)
The amount of money borrowed through a loan; does not include interest or other charges, unless they are capitalized. 

Private Loans
Education loan programs established by private lenders to supplement the student and parent education loan programs available from federal and state governments

Professional Judgment (PJ)
The financial aid administrator’s discretion, based on the special circumstances of the student, to change the data elements used in determining eligibility for federal student aid or adjust a student’s costs. 

Promissory Note (MPN)
The legal document which binds a borrower to the repayment obligations and other terms and conditions which govern a loan program. 

Renewable Scholarships
A scholarship that is awarded for more than one year. Usually the student must maintain certain academic standards to be eligible for subsequent years of the award. Some renewable scholarships will require the student to reapply for the scholarship each year; others will just require a report on the student's progress to a degree. 

Repayment Schedule
A plan that is provided to the borrower at the time he or she ceases at least half-time enrollment. The plan sets forth the principal and interest due on each installment and the number of payments required to pay the loan in full. Additionally, it includes the interest rate, the due date of the first payment, and the frequency of payments.

Return to Title IV (R2T4)
Federal and State aid is based on a student’s full-time attendance for a complete semester. Students who fail to complete the semester may have to have some Federal and State funds returned.

Satisfactory Academic Progress (SAP)
A student must demonstrate satisfactory academic progress toward graduation to continue receiving financial aid. If a student fails to maintain an academic standing consistent with the school's SAP policy, they are unlikely to meet the school's graduation requirements.

A form of financial assistance that does not require repayment or employment and is usually made to students who demonstrate or show potential for distinction, usually in academic performance. 

Selective Service
Registration for the military draft. Male students who are US citizens and have reached the age of 18 and were born after December 31, 1959 must be registered with Selective Service to be eligible for federal financial aid. If the student did not register and is past the age of doing so (18-25), and the school determines that the failure to register was knowing and willful, the student is ineligible for all federal student financial aid programs. The school's decision as to whether the failure to register was willful is not subject to appeal. Students needing help resolving problems concerning their Selective Service registration should call 1-847-688-6888

Student Aid Report (SAR)
The official notification sent to a student as a result of the CPS receiving an applicant record (FAFSA) for a student. The SAR summarizes applicant information, provides the EFC for a student, and displays other special messages related to the student’s application. In some instances the SAR may need to be submitted to the financial aid office at the school the student plans to attend, but only if the school requests it. Depending on how the student submits the FAFSA, the SAR is either a paper or electronic document.

Subsidized Direct Loan
A need-based loan on which the interest is paid by the federal government during the in-school, grace, and deferment periods 

Taxable Income
Income earned from wages, salaries, and tips, as well as interest income, dividend income, business or farm profits, and rental or property income. 

Title IV Programs
Those federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended. Includes the: Federal Pell Grant, Iraq and Afghanistan Service Grant (IASG), Teacher Education Assistance for College and Higher Education (TEACH) Grant, Federal Supplemental Educational Opportunity Grant, Federal Work-Study, Federal Perkins Loan, Direct Loan, and Direct PLUS. 

Title IV School Code
When you fill out the FAFSA you need to supply the Title IV Code for each school to which you are applying. You may include up to 10 school codes on your FAFSA. The LMC school code is 002939.

Tuition Payment Plans
A strategy by which payment for present costs of postsecondary education is extended into a future period of time. 

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

Unsubsidized Direct Loan
A non-need-based loan on which the interest is not paid by the federal government. Borrowers are responsible for the interest on all unsubsidized loans from the date the loan is disbursed. Students may choose to pay the interest while they are in school or they may allow the interest to accrue and be capitalized on the principal when they begin repayment.

Untaxed Income
All income received that is not reported to the Internal Revenue Service (IRS) or is reported but excluded from taxation. Such income would include but not be limited to untaxed capital gains, interest on tax-free bonds, dividend exclusion, and military and other subsistence and living allowances.

Veterans Educational Benefits
Assistance programs for eligible veterans and/or their dependents for education or training. 

Vocational Rehabilitation
Programs administered by state departments of vocational rehabilitation services to assist individuals who have a physical or mental disability which is a substantial handicap to employment.

Abbreviations Commonly Used in Financial Aid Administration

ACT: American College Testing Program
AGI: Adjusted Gross Income
BA: Baccalaureate Degree
CLEP: College-Level Examination Program 
COA: Cost of Attendance
CPS: Central Processing System
ED: Department of Education
EFC: Expected Family Contribution (also FC, Family Contribution)
FAFSA: Free Application for Federal Student Aid
FM: Federal Methodology
FOTW: FAFSA on the Web
FSEOG: Federal Supplemental Educational Opportunity Grant
FWS: Federal Work-Study
GPA: Grade Point Average
IPA: Income Protection Allowance
IRS: Internal Revenue Service
SAP: Satisfactory Academic Progress
SAR: Student Aid Report
SAT: Scholastic Aptitude Test