Glossary of Terms

We realize that technical terminology can often be a source of confusion when trying to understand financial documents. To prevent complicated language from becoming an obstacle, we've explained many of the words and terms you'll encounter during the financial aid process below:

Academic Year: The period in which school is in session - typically September through May.

Accrual Date: The date on which interest charges on an educational loan begin to accrue.

Adjusted Available Income: The remaining income after taxes and a basic living allowance have been subtracted (in the Federal Methodology).

Assets: Cash in checking and savings accounts, trusts, stocks, bonds, other securities, real estate (excluding home), income-producing property, business equipment, and business inventory. Considered in determining expected family contribution (EFC).

Asset Protection Allowance: The portion of parents' assets that are not included in the calculation of the parent contribution (calculated by Federal Methodology formula).

Assistantship: A type of student employment; usually refers to a student teaching or research position.

Associate Degree: A two-year college degree.

Award Letter: Official letter from the college financial aid office that lists all the financial aid awarded to the student.


Bachelor's Degree: A four-year college degree.

Budget: The estimated cost of attendance for a student at an institution: typically includes tuition, fees, books, supplies, room, board, personal expenses and transportation.

Bursar's Office: The university office responsible for the billing and collection of university charges.


Campus-Based Programs: U.S. Department of Education federal student aid programs administered by colleges and universities. Includes: Federal Supplemental Educational Opportunity Grant (FSEOG) and Federal Work-Study (FWS).

Central Processing System (CPS): The computer system that receives the student's need analysis data. The Central Processing System performs database matches and calculates the official Expected Family Contribution (EFC) and sends out the Student Aid Report (SAR).

Collateral: Property used to secure a loan which can be seized if the borrower defaults on a loan.

Commercial Lender: A commercial bank, savings and loan association, credit union, stock savings bank, trust company or mutual savings bank.

Commuter Student: A student who lives at home and travels to school.

Consolidation Loan: Loan that allows borrowers to lower their monthly payments by replacing their original loans with one loan. Consolidation loans typically have longer repayment periods and greater interest.

Cosigner: Individual who assumes responsibility for a loan if the borrower fails to repay.

Cost of Attendance: Also known as the budget, it includes tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses.

CPS: Central Processing System (see entry above)

Custodial Parent: In cases where a student's parents are divorced or separated, the custodial parent is the parent with whom the student lived the most during the past 12 months.


Default: Failure to repay or otherwise meet the terms and condition of a loan. Default typically occurs after six months of delinquent payments. Penalties include a bad credit rating, loss of future financial aid eligibility, withholding of tax refunds, garnishing wages and loss of monthly payment options.

Deferment of Loan: Period during which the repayment of the loan is suspended because the borrower meets certain eligibility requirements (e.g., enrolled in college at least half time).

Delinquency: Failure to make a scheduled loan payment.

Dependency Status: A student's dependency status determines the degree to which the student has access to parent financial resources. An independent student is at least 24 years old as of January 1, is married, is a graduate or professional student, has a legal dependent other than a spouse, is a U.S. Armed Forces veteran or is/was an orphan or ward of the court.

Disbursement: The process by which financial aid funds are made available to students for use in meeting educational and related living expenses. Funds may be disbursed directly to the student, or applied to the student's account.


ED: United States Department of Education. You can reach their website at

Enrollment Status: Indication of whether student attends full or part time. Typically students must be enrolled at least half time (and in some cases full time) to qualify for financial aid.

Expected (or Estimated) Family Contribution (EFC): The dollar amount that a family is expected to pay toward a student's educational costs. EFC is based on family earnings, assets, students in college and family size.


FAFSA: Look under Free Application for Federal Student Aid.

Federal Methodology: The need analysis formula used to determine a family's expected family contribution. The Federal Methodology considers family size, the number of family members in college, taxable and nontaxable income and assets.

Federal Processor: The Federal Processor is the organization that processes the information submitted on the Free Application for Federal Student Aid (FAFSA) and uses it to compute eligibility for federal student aid.

Federal Stafford Loan: Federally-guaranteed, low-interest rate for students. There are two types of Federal Stafford loans: subsidized (need-based) and unsubsidized (non-need-based). Both types allow deferment of payments until a student leaves school.

Federal Supplemental Educational Opportunity Grant (FSEOG): These are federal grants for students with exceptional financial need (as determined by the college). Approximately five percent of undergraduates are recipients of FSEOG.

Federal Work-Study: Federally sponsored Work-Study (FWS) Program provides undergraduate and graduate students with school-year part-time employment. The Federal Government pays some of the student's salary, which helps departments and businesses pay for and ultimately hire students. Eligibility is based on financial need.

Fellowship: Financial aid for graduate students that does not need to be repaid. (Typically includes tuition and living expenses.)

Financial Aid Officer: University employee responsible for preparing and communicating information about student loans, grants, scholarships and employment programs, and for advising, awarding, reporting, counseling and supervising student financial aid office functions.

Financial Aid Package: The total amount of financial aid a student receives, including grants, loans, and federal work-study. Unsubsidized Stafford loans and PLUS loans are not considered part of the package.

Financial Aid Transcript: A record of all financial aid awards a student received at other educational institutions.

Financial Aid Year: The financial aid year begins in the summer of each year and runs through the spring of the following year. This is likely different than the academic year you are used to, so please keep in mind that summer financial aid is evaluated on the next/new year's FAFSA!

Financial Need: The difference between the student's educational costs and the Expected Family Contribution.

Fixed Interest Loans: Interest rate stays the same for the life of the loan.

Forbearance: The approved temporary suspension of loan payments due to a financial hardship (interest continues to accrue).

Free Application for Federal Student Aid (FAFSA): The application students must first complete to apply for virtually all forms of financial aid. Available by calling 1-800-4-FED-AID, and on the web by following the links at

Full-Time Teacher: In order to complete the TEACH Grant service requirements, you must meet the state's definition of a full-time teacher and spend the majority (at least 51%) of your time teaching one of the high-need subject areas. Elementary school teachers who teach many subjects would not be able to fulfill their service agreement.


Gift Aid: Grants and scholarships that do not need to be repaid.

Grace Period: The period after a student either graduates or leaves school and before loan payments must begin (typically six to nine months).

Graduate PLUS Loans: Federal loans available to graduate students to help finance their education. Students may borrow up to the difference between education costs and financial aid received from a bank or other lending institution.

Grant: Financial aid that does not have to be paid back - typically based on financial need.

Guarantee Fee: A percentage of the loan that is paid to the guarantor to insure the loan against default. The fee is usually one percent of the loan amount.

Guarantor: A state agency or private, nonprofit organization that administers a student loan insurance program.


High-Need Subject Areas: A term used to describe fields of study in which educators may complete their TEACH Grant teaching obligation. These subject areas change year to year and can be found in the annual "Teacher Shortage Areas Nationwide Listing". Recent examples include disabilities (moderate and severe), English language acquisition, foreign language, mathematics, reading, sciences, and special education.

Highly-Qualified Teacher: A term used to describe educators who are eligible for the TEACH grant. The specific definition is maintained by the federal government and can be found here under SEC.9101, definition (23).

Home Equity: The current market value of the home minus the mortgage's unpaid principal (based on market value).


Income Contingent Repayment: The size of the monthly payments depends on the income earned by the borrower. As the borrower's income increases, so do payments.

Institutional Methodology: A formula some schools devise to determine financial need for allocating their own institutional financial aid funds. Please note that Simmons University does not use institutional methodology and only uses federal methodology in measuring a student's financial need.


Lender: A bank, credit union or other financial institution that provides funds to the student or parent for an educational loan.


Merit-based Aid: Financial aid based on academic, artistic, athletic or other merit-oriented criteria (not financial need).


National Student Loan Data System (NSLDS): This system contains your federal loan and grant history. You can reach the NSLDS website to review your federal aid history at

Need Analysis: The process used by a college to evaluate an applicant's financial resources and determine how much the student or family can pay toward the cost of the education.


Packaging: A financial aid administrator's attempt at combining various types of student aid (grants, loans, scholarship and employment) to work toward meeting a student's financial need.

Parent PLUS Loans (Parent Loans for Undergraduate Students): Federal loans available to parents of dependent undergraduate students to help finance their child's education. Parents may borrow up to the difference between education costs and financial aid received from a bank or other lending institution.

Parents' Contribution: A quantitative estimate - calculated by the federal government - of the parents' ability to contribute to postsecondary educational expenses.

Pell Grant: Federal grant program for undergraduate students who demonstrate financial need and have not yet completed a baccalaureate degree.

Preferred Lender List: A college's list of loan providers that they recommend to students.

Prepaid Tuition Plan: A college savings plan guaranteed to rise in value at the same rate as college tuition. Several states and institutions offer such programs.

Principal: The amount borrowed or owed on a loan.

Professional Judgement: For need-based federal aid programs, financial aid administrators can adjust the expected family contribution (EFC), or the cost of attendance (COA), or change the dependency status (with documentation) when extenuating circumstances exist (for example, if a parent becomes unemployed, disabled or deceased).

Promissory Note: A legally binding contract a student signs before receiving loan funds that details the terms of the loan and obligates the borrower to repay.


Satisfactory Academic Progress (SAP): A school's policy concerning the minimum number of courses that must be completed each semester, the maximum time frame, and the minimum GPA required to receive financial aid. Please see Simmons' policy for more information.

Scholarship: A form of financial assistance that does not require repayment or employment and which is usually offered to students who show potential for distinction, or who possess certain characteristics important to the scholarship provider (such as religious beliefs, hobbies, ethnicity, etc.).

Schools Serving Low-Income Students: Students who receive the TEACH Grant must teach at one of these schools to complete their teaching service obligation. These schools include any elementary or secondary school that is listed in the "Department of Education's Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits".

Servicer: An organization that is paid by a lender to administer their student loan portfolio.

Simplified Needs Test: An alternate method of calculating the expected family contribution for families with adjusted gross incomes less than $50,000, who have filed or are eligible to file an IRS Form 1040A or 1040EZ or who are not required to file an income tax return.

Student Aid Report (SAR): The official notification sent to students after submitting the FAFSA. Students may be required to submit this document to the college's financial aid office.

Student Contribution: A quantitative estimate of the student's ability to contribute to postsecondary education expenses.

Subsidized Loan: A loan that student borrowers do not have to pay interest on until after their grace period expires.

Supplemental Education Opportunity Grant (SEOG): Federal grant program for undergraduate students with exceptional need. SEOG grants up to $4,000 are awarded by the school's financial aid office.


Title IV Programs: Federal student aid programs authorized under Title IV of the Higher Education Act of 1965, as amended. Includes Federal Pell Grants, Federal Supplemental Educational Opportunity Grant, Federal Work Study, Federal Stafford Loan, Federal PLUS Loan, Direct Loan, Direct PLUS Loan and SSIG.

TEACH Grant Agreement to Serve (ATS): Each year you receive a TEACH Grant you must sign a TEACH Grant Agreement to Serve (ATS). The Agreement is a legally binding document that defines the teaching obligations you must meet and specifies your repayment obligation in the event that your TEACH Grant is converted to a Direct Unsubsidized Loan. When you sign the service agreement, you are agreeing to repay the grant as a Federal Direct Unsubsidized Loan, with interest accrued from the date that the grant funds were disbursed, if you do not complete the teaching obligation. Once the grant has been converted to a loan, it cannot be converted back to a grant.


Undergraduate Student: A student who has not yet received a bachelor's degree.

Unmet Need: Difference between a student's total cost of attendance at a specific institution and the student's total available resources, including financial aid.

Unsubsidized Loan: A loan that student borrowers must pay all the interest on, including while they are enrolled.


Verification: The review process in which the financial aid officer requests documentation from a financial aid applicant to verify the accuracy of the application.


Work-Study: See Federal Work-Study for a description of the federally subsidized work-study program.