Glossary of Financial Aid Terms
Accrued interest The interest that a loan accumulates over time.
Alternative Loan These are private loans that are offered by financial institutions. Some students choose to or need to apply for private loans when the federal loans don’t cover their total educational costs. Interest rates and other policies vary by lender.
Capitalization of interest The process of adding unpaid interest (often at the end of the loan’s grace period) to the principal of the loan. The amount owed increases, and this larger figure, the original principal and unpaid interest, accrues interest itself. It is advisable, if possible, to make interest payments while in school so that capitalization does not occur.
Consolidation Loan Combining several loans from different lenders into one bigger loan from a single lender with the intention to simplify repayment and possibly get a lower interest rate.
Cost of Attendance (COA) The student “budget” determined by the financial aid office, which includes tuition, fees, and living expenses. The cost of attendance is used in calculating financial aid packages.
Cost of Attendance Adjustment Request Formerly known as the budget appeal. This is a process that allows students to ask for adjustments in the amount of financial aid they might be offered by increasing the individual student budget. For example, if a student is paying rent and utilities higher than the average posted on the standard cost of attendance. In most instances, students will be offered additional loans.
Default Failure to repay a loan according to the terms agreed to in the promissory note. Default varies by loan. When in default, the school, lender, and government may all take action to obtain the money owed. In addition, default can affect credit ratings for up to seven years. Default can be avoided by applying for deferment or forbearance before missing a payment.
Deferment (In School) A type of postponement of loan repayment granted to students who are in school and enrolled at least half-time. If you do not qualify for a deferment, you may still be able to get forbearance. Subsidized loans in deferment do not accrue interest, but unsubsidized loans in deferment do.
Deferment (Economic Hardship) A type of postponement of loan repayment granted to borrowers when loan repayment is not possible due to extreme financial hardship. Eligibility for economic hardship deferment is more restricted than forbearance and generally requires that the borrower be receiving some sort of government assistance. If you do not qualify for a deferment, you may still be given forbearance. Subsidized loans in deferment do not accrue interest, but unsubsidized loans do.
Expected family contribution (EFC) The amount of money that the family is expected to contribute to the student’s education as calculated by applying a formula to information submitted on the FAFSA. EFC consists of parent and student contributions, which are determined based on the student’s dependency status, family size, number of family members in school, and taxable and nontaxable income and assets. Note that the criteria for student dependency for FAFSA are NOT the same as the criteria for dependency for need-based aid at Berkeley Law.
Exit Counseling This is an opportunity to remind yourself of your rights and responsibilities as a student loan borrower. In turn, you must provide your lender with certain information about your plans after you leave school (for example, your current address, your expected employer, two personal references, etc.). If you graduate, withdraw or drop below half-time registration status, and you have borrowed a Federal Direct, Health Professions, or Perkins loan, you must complete the Exit Loan Counseling requirement. Completing the Exit requirement is only one step in keeping your loans in good standing. Remember that student loan indebtedness is reported to credit agencies. Until your loan is paid in full, you should continue to communicate with your lender regarding any changes in your address, school enrollment status or questions about making repayment.
Electronic Funds Transfer Also known as EFT, this is a safe and quick way to have your financial aid deposited directly into your savings or checking account. After your financial aid is applied to your balance in your account, if there is money remaining, you receive it as a “refund.” If you sign up for EFT you’ll have access to your refund quickly. If you choose not to sign up for EFT and youy are eligible for a refund you will be issued a check that you must pick up from the Billing an Payment Services Office in University Hall. They do not mail checks.
Federal Direct Student Loan Program The full name is William D. Ford Federal Direct Loan Program. The Direct Loan Program is offered by the Department of Education, and it provides students with a simple, inexpensive way to borrow money to pay for education after high school.
Financial Aid Refund If your financial aid payments exceed your charges, the extra funds may be issued to you as a refund, typically by the first week of instruction. The actual timing of your refund depends on when your financial aid was applied to your account.
Food Assistance Program UC Berkeley strives to ensure that all students have access to nutritious food. Currently enrolled students may be eligible for Cal 1 Card dollars or other food assistance. Click here for more information including eligibility criteria.
Forbearance A type of postponement of loan repayment. The borrower does not need to pay the principal during the forbearance period, but interest continues to accrue and must be paid, even on subsidized loans. Forbearances are usually granted by the lender in cases of financial hardship or other unusual circumstances when the borrower does not qualify for deferment.
Gift Aid: Financial aid, such as grants and scholarships, which does not need to be repaid.
Income-Driven Repayment Most federal student loans are eligible for at least one income-driven repayment plan. If your income is low enough, your payment could be as low as $0 per month. Click here for information about the different income-driven repayment plans available.
Independent student A student is considered to be financially independent based either on age or demonstrated financial independence from parents. Students who will be 30 years old by December 31 of the fall semester of their entering academic year, or who can demonstrate financial independence for the past five calendar years, are not required to provide parental information on either the CSS/Financial Aid Profile or the FAFSA. Note this is NOT the same criteria used for the FAFSA.
Origination fee Most federal student loans have loan fees that are a percentage of the total loan amount. The loan fee is deducted proportionately from each loan disbursement you receive. This means the money you receive will be less than the amount you actually borrow. You’re responsible for repaying the entire amount you borrowed and not just the amount you received.
Outside Resource Any type of financial assistance that you are receiving from a donor outside of the University. Outside scholarships, prepaid tuition plans, and VA educational benefits are examples of outside resources.
Overaward An overaward may exist when the student’s need-based aid exceeds the student’s financial need, the student’s total financial aid awards exceed the cost of attendance, or both. In some but not all cases, financial aid will be reduced to resolve the overaward.
Private loans Education loans from private lenders, typically used to supplement the education loans offered by the federal government.
Public Service Loan Forgiveness Program (PSLF) Under PSLF, full-time public service employees may qualify for forgiveness of the balance of their loan after 120 on-time monthly payments (10 years). PSLF only applies to federal loans made through the Direct loan program (Subsidized and Unsubsidized Stafford Loans, PLUS Loans, and Consolidation Loans).
Subsidized Loan The federal government pays the interest on subsidized loans, such as Subsidized Stafford Loans and Perkins Loans, while the student is in school. As of July 2012, the subsidized loan is no longer available to graduate level (including law) students.
Unsubsidized Student Loan Students who have unsubsidized loans are charged interest on the loan as soon as the loan is disbursed. Although students do not have to make payments while they are enrolled at least half-time in college, interest is being charged on the loan. All PLUS loans are unsubsidized.
Work-Study The Federal Work-Study program provides undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student’s salary, making it cheaper for departments and businesses to hire the student. For this reason, work-study students often find it easier to get a part-time job. Eligibility for Federal Work-Study is based on need.