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Financial Literacy


Glossary of Financial Terms

The following are general terms related to student loans and some are specific to your account serviced by MOHELA. They are adapted from the 2017 Common Manual.

Academic Attendance: Is synonymous with "attendance at an academically-related activity." See the separate glossary definition of "attendance at an academically-related activity".

Academic Period: A measured period of enrollment (e.g., a semester, trimester, quarter, or clock hours).

Academic Year: For the purposes of determining a borrower’s Title IV aid eligibility, a period during which an undergraduate, full-time student is expected to complete either of the following:

  • At least 30 weeks of instructional time and 24 semester or trimester hours, or 36 quarter hours in an educational program that measures program length in credit hours.
  • At least 26 weeks of instructional time and 900 clock hours in an educational program that measures program length in clock hours.

Upon written request from a school, the Department may reduce the minimum number of weeks in an academic year to between 26 and 29 weeks of instructional time for a credit-hour program that leads to an associate degree or a bachelor’s degree.

For a graduate or professional program, an academic year is a period of at least 30 weeks of instructional time. There is no statutory minimum number of hours that a student must complete within the academic year for a graduate or professional program.

Accredited School: Any school that meets standards established by a nationally recognized accrediting agency, and for which that agency has provided documented acknowledgment of the school’s compliance. (See also Preaccredited School.)

Accrediting Agency: An agency that sets educational standards for schools, evaluates schools, and certifies that schools have met these standards. A “nationally recognized accrediting agency” is one that the U.S. Department of Education has recognized to accredit or preaccredit a particular category of school or educational program according to 34 CFR Parts §602 and §603. The agency grants accreditation status to schools.

The Department publishes a list of nationally recognized accrediting agencies that the Department has determined to be reliable authorities as to the quality of education or training offered. If the Department determines that there is no nationally recognized accrediting agency qualified to accredit schools in a particular category, the Secretary of Education will appoint an advisory committee, composed of persons specially qualified to evaluate training provided by schools in such category, to prescribe the standards a school must meet in order to participate in the Title IV programs and to determine whether an individual school meets those standards.

Act, the: The Higher Education Act of 1965, as amended. Title IV, Part B of the Act addresses FFELP loans.

Actual Interest Rate: The annual interest rate a lender charges on a loan, which may be equal to or less than the “applicable”—or statutory—interest rate on that loan.

Additional Unsubsidized Stafford Loan: The amount of a student’s eligibility for an unsubsidized Stafford loan that is in addition to the student’s base Stafford loan eligibility.

Administrative Forbearance: A temporary suspension of, a reduction of, or an extension of time for making principal and/or interest payments on a Stafford, SLS, PLUS, or Consolidation loan that is granted by the holder or lender, upon notice to the borrower or endorser, and that does not require a written request from the borrower or an agreement signed by the borrower before the forbearance is granted.

Administrative Wage Garnishment: Process by which a guarantor, under federal law, may intercept a portion of the wages of a borrower with a defaulted FFELP loan.

Agent: An officer or employee of a school or an institution-affiliated organization. This definition is applicable to the disclosure and reporting requirements for schools, institution-affiliated organizations, and lenders that issue, recommend, promote, endorse, or provide information relating to FFELP and private education loans.

Aggregate Loan Limit: The borrower’s maximum allowable unpaid principal amount throughout the student’s academic career. Principal outstanding is calculated by adding the total outstanding amount guaranteed, after subtracting any refunds, payments to comply with the requirements for the return of Title IV funds, prepayments, payments, cancellations, funds discharged, or any other reductions to the principal. Capitalized interest or any collection costs that may have been added to the principal balance are not included in the borrower’s aggregate loan limit.

Agreement: Any written contract, agreement, or letter of understanding between the guarantor and another entity that specifies the rights and duties of each party with respect to participation in the guarantor’s programs and/or utilization of the guarantor’s services.

ALAS: See Auxiliary Loans to Assist Students (ALAS)

AmeriCorps: A national and community service program created by the National and Community Service Trust Act of 1993 and administered by the Corporation for National Service. For each year of full-time service in the program, participants will receive education awards to help finance their postsecondary education or pay back their student loans.

Annual Loan Limit: The maximum Stafford loan amount a student may borrow for each academic year of study.

Anticipated Graduation Date: The date on which a student is expected to complete an academic program. This date is provided by a school official when certifying the borrower’s loan, and in subsequent enrollment status updates.

Application: The form the borrower uses to apply for a Stafford, PLUS, or Consolidation loan.

Applicable Interest Rate: The maximum annual interest rate (under the Higher Education Act of 1965, as amended) that a lender may charge on a loan. Sometimes referred to as the Statutory Interest Rate.

Assignment: Language placed on or attached to the promissory note indicating a change or transfer of loan ownership.

Assignment of a Loan: Any change in the ownership interest of a loan, including a pledge of such an ownership interest as security.

Attendance at an Academically-Related Activity: Attendance at an academically-related activity includes, but is not limited to:

  • Physically attending a class.
  • Submitting an academic assignment.
  • Taking an exam.
  • Participating in an interactive tutorial.
  • Engaging in computer-assisted instruction.
  • Attending a student group that is assigned by the school.
  • Participating in an online discussion about academic matters.
  • Initiating contact with a faculty member to ask a question about the academic subject studied in the course.

Attendance at an academically-related activity does not include an activity in which a student may be present but not academically engaged, including, but not limited to:

  • Living in school housing.
  • Participating in the school's meal plans.
  • Logging into an online class without active participation.
  • Participating in academic counseling or advisement. [§668.22(l)(7)(i)(B)]

Authority: Any private nonprofit or public entity that may issue tax-exempt obligations to obtain funds to be used for the making or purchasing of FFELP loans. “Authority” also includes any agency, including a state postsecondary institution or any other instrumentality of a state or local government unit, regardless of the designation or primary purpose of that agency, that may issue tax-exempt obligations, any party authorized to issue those obligations on behalf of a governmental agency, and any nonprofit organization authorized by law to issue tax-exempt obligations.

Auxiliary Loans to Assist Students (ALAS): A previous name for what became the SLS loan. The Omnibus Reconciliation Act of 1981 extended the Parent Loans for Undergraduate Students (PLUS) program to include loans for independent undergraduate students and graduate and professional students. These loans were called Auxiliary Loans to Assist Students or ALAS. The Higher Education Amendments of 1986 repealed the ALAS program and authorized two separate loan programs in its place— Supplemental Loans for Students, or SLS loans, for graduate students, professional students, and independent undergraduates, and PLUS loans for parents of dependent students.

Award Year: The period from July 1 of a given calendar year to June 30 of the following calendar year.

Bankruptcy: Judicial action to stay the normal collection of debts against the petitioner, and cause those debts to be satisfied at the direction of the court. Bankruptcies are classified under the U.S. Code by “chapters,” which refer to parts of a larger volume—the U.S. Bankruptcy Act. Types of bankruptcies include:

  • Chapter 7. This is the most common form of bankruptcy, often referred to as “liquidation.” In a Chapter 7 bankruptcy, the eligible assets of the borrower are liquidated and distributed among the creditors by a trustee, with preference given to secured creditors. This type of bankruptcy is frequently used by borrowers who are unemployed or have few or no assets.

  • Chapter 11. A bankruptcy in which the borrower’s debts are reorganized. This type of bankruptcy is seldom used by a student borrower and is most often used by a financially troubled business.

  • Chapter 12. Chapter 12 bankruptcy, which is similar to a Chapter 13 bankruptcy, applies only to certain farms and family farm operations with specific debt ceilings.

  • Chapter 13. This is commonly referred to as the “wage earner” plan. A Chapter 13 bankruptcy allows an individual with regular incomes to satisfy his or her debts through a court-directed payment plan. Usually, the Chapter 13 debtor(s) has significant debts, but sufficient income to eventually pay the debts.

Base Stafford Loan Amount: The base amount of a student’s eligibility for a subsidized and/or unsubsidized Federal Stafford loan(s). The base amount equals the loan limit applicable to a dependent undergraduate student.

Base Year: For need analysis purposes, the calendar year preceding the award year.

BBAY (and BBAY1, BBAY2, BBAY3): See Borrower-Based Academic Year (BBAY)

Borrower: An individual to whom a FFELP loan is made. See Chapters 5 and 15 for more information about borrower eligibility requirements and types and amounts of FFELP loans.

Borrower-Based Academic Year (BBAY): An academic year that is individualized per borrower and generally “floats” with the student’s attendance and progress of a student, or a group of students, in a program of study for the purpose of determining Stafford annual loan limit frequency. There are three different types of BBAY, as follows:

  • BBAY1: This type of BBAY may be used as an alternative to a scheduled academic year (SAY) for either of the following program types, provided the program is offered in a traditional academic year calendar, i.e., a fixed period of time that generally begins and ends at about the same time each calendar year:

    • A standard term-based credit-hour program.
    • A credit-hour program with nonstandard terms that are substantially equal and at least nine weeks of instructional time in length (SE9W). Nonstandard terms are considered substantially equal in length if no term in the loan period is more than two weeks of instructional time longer than any other term in the loan period.

    BBAY1 must include the same number of consecutive terms as in the program’s SAY, excluding a summer term the school designates as a “header” or “trailer” to the SAY. A BBAY that is used as an alternative to a program with an SAY and that includes a summer term may include fewer than 30 weeks of instructional time or fewer credit hours than the minimum number required for an SAY.

  • BBAY2: This type of BBAY must be used for a standard term-based credit-hour program or a credit-hour program with nonstandard terms that are SE9W that is not offered in a traditional academic year calendar (i.e., one that corresponds to an SAY). BBAY2 must always include enough consecutive terms to meet the program’s Title IV academic year requirements for credit hours and weeks of instructional time.

  • BBAY3: This type of BBAY must be used for a clock-hour program, a non-term-based credit-hour program, and a credit-hour program with nonstandard terms that are not SE9W, (i.e., the terms are not substantially equal, or each term is not at least nine weeks of instructional time in length). BBAY3 must also be used for a credit-hour program with a combination of standard and nonstandard terms that does not qualify to use an SAY. BBAY3 begins when the student enrolls and does not end until the student successfully completes (i.e., passes) the clock or credit hours and completes the instructional weeks in the program’s Title IV academic year.

Borrower-Specific Deferment: Refers to the federal requirement that eligibility for a deferment be applied to all of a borrower’s loans, rather than to each separate loan. For example, a borrower who has used the maximum 24 months of internship deferment is not entitled to an additional internship deferment.

Branch Campus: A permanent location of a school that is geographically apart from and independent of the main campus; offers courses leading to a degree, certificate, or other recognized educational credential; that has its own faculty and administration or supervision; and that has its own budgetary and hiring authority. A branch campus is one type of “additional location” at which schools may offer instruction to students. A school must establish Title IV eligibility for each of its locations.

Campus-Based Programs: The Federal Perkins Loan, Federal Work-Study, and Federal Supplemental Educational Opportunity Grant programs. These programs and their related funds are administered directly by a school’s financial aid office. In return, the school is allowed to retain a percentage of each program’s funds for its administrative costs. The budgets for these programs are limited by the annual federal appropriation awarded to each school; matching funds from the school; and, for the Perkins program, the school’s revolving loan fund. Each participating school is allowed to determine its own selection criteria and award levels for these programs within federal guidelines. A student’s financial aid package may contain aid from one or more of these programs depending on whether the school participates in any of these programs, the amount of funds available for a program in which the school participates, and the school’s packaging policies.

Cancellation (of a Guarantee): The revocation of a loan guarantee, which occurs if any of the following conditions exists:

  • No loan proceeds were disbursed or delivered to the borrower.
  • The lender check(s) was never cashed.
  • None of the loan proceeds were negotiated within 120 days of the date on which they were disbursed.
  • Electronic funds transfer (EFT) or master check loan proceeds in the school’s account were not delivered to the borrower within 120 days after being transferred to the account.
  • The loan was repaid in full within 120 days of final disbursement.

The guarantee is not revoked on the remainder of the loan if one disbursement is canceled.

Capitalization: An increase in the principal balance of a Stafford, SLS, PLUS, or Consolidation loan that occurs when a lender adds the accrued interest on the loan to the outstanding principal balance.

Capitalized Interest: Accrued interest added to the borrower’s outstanding principal. Subsequent interest accrues on the new total principal balance, which includes any capitalized interest.

Certification: The act of attesting that something is true or meets a certain standard. For example, the school certifies the borrower’s eligibility for a loan and, if applicable, interest benefits. The borrower completes an application, promissory note, or deferment form, certifying that certain eligibility criteria have been met.

CFR: See Code of Federal Regulations (CFR)

Change of Control: An occurrence that signifies that a different person, partnership, or corporation has obtained authority to control the actions of a school, or that the school has changed from a for-profit entity to a nonprofit entity, or vice versa. For example, a change of control can occur when stock is transferred to the parent corporation; when schools merge or divide; when a company is retained to manage a school; or when a school transfers assets or liabilities to the parent corporation.

Check: A draft (drawn on a financial institution) that is payable on demand and that requires the personal endorsement or other written approval of the borrower to be cashed.

Citizen/Eligible Noncitizen: An eligibility requirement that must be met by Stafford, PLUS, and SLS loan borrowers and recipients.

Claim: The process by which the lender (or lender’s servicer) requests reimbursement from the guarantor for its losses on a Stafford, SLS, PLUS, or Consolidation loan due to the borrower’s default or eligibility for loan discharge or forgiveness.

Clock Hour: A time period consisting of one of the following:

  • 50–60 minutes of class, lecture, or recitation in a 60-minute period.
  • 50–60 minutes of faculty-supervised laboratory, shop training, or internship in a 60-minute period.
  • 60 minutes of preparation in a correspondence course.

COA: See Cost of Attendance (COA)

Code of Federal Regulations (CFR): The collection of federal regulations promulgated by the U.S. government.

Cohort Default Rate: The percentage of Stafford and SLS loan borrowers who default before the end of the fiscal year following the fiscal year in which they entered repayment on their loans. This includes borrowers whose underlying Stafford and SLS loans have been included in a Consolidation loan. The Department calculates this rate annually to determine the default experience of students who attended a particular school during a particular period of time. Unless otherwise noted, the cohort default rate pertains to the FFELP cohort default rate or the dual-program cohort default rate.

Collection Costs: Costs incurred in the collection of the loan by the loan holder and charged to the borrower. These costs may include, but are not limited to, attorney’s fees, court costs, and telegrams; they may not include routine costs associated with preparing letters or notices or making telephone calls to the borrower.

Comaker: One of two spouses who jointly borrowed a Consolidation loan made from an application received by the consolidating lender prior to July 1, 2006, each of whom was eligible and is jointly and severally liable for the loan’s repayment, regardless of future marital status. The term also refers to one of two parents who jointly borrowed a PLUS loan made prior to April 16, 1999.

Commercial Paper Rate: Commercial paper includes short-term, unsecured promissory notes issued primarily by large, well-known corporations and finance companies. The average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in the quarter is a factor in determining the amount of special allowance paid to a lender by the Department for eligible Stafford and PLUS loans first disbursed on or after January 1, 2000, and eligible Consolidation loans made from applications received by lenders on or after January 1, 2000.

Common Form: A standardized form for the administration of the FFELP that is developed and maintained by FFELP participants and approved by the Department.

Confirmation (as it relates to the MPN): A process by which the school or lender, prior to disbursing a loan, advises the borrower of the proposed loan types and amounts. The borrower may accept the loan(s) passively (by taking no action) or affirmatively (by notifying the school in writing or electronically of his or her acceptance of the loan(s) or any changes he or she wishes to make to the loan types or amounts).

Consummated Loan: A loan for which a disbursement check has been negotiated or electronic funds transfer (EFT) or master check funds have been delivered to the borrower. For example, a loan is considered consummated if the borrower has cashed the check, if an individual check, or the school has applied the proceeds to the student’s account, if included in a master check or EFT transmission before the school returned the proceeds to the lender.

Correspondence Course: A typically self-paced course in which the school provides instructional materials, including examination of those materials, by mail or electronic transmission, to students who are separated from the instructor. Interaction between the instructor and student is limited, is not regular and substantive, and is primarily initiated by the student. If a course is a combination of correspondence work and residential training, the course is considered to be a correspondence course. A correspondence course is not distance education.

Cosigner: A signer of a promissory note who is secondarily liable for a loan obligation. This term is no longer used in federal regulations.

Cost of Attendance (COA): An estimate of the student’s educational expenses for the period of enrollment.

Cost of Education: See Cost of Attendance (COA)

Cure: Reinstatement of a loan’s guarantee upon completion of a prescribed series of loan collection activities; also the process by which the loan’s guarantee is reinstated.

Curing Instrument: Documentation the lender must obtain and retain to substantiate a cure. Examples of a curing instrument include, but are not limited to, a signed repayment agreement, evidence of one full payment received from or on behalf of the borrower, or documentation of the activities performed in an Intensive Collection Activities (ICA) cure.

DAA: See Default Aversion Assistance (DAA)

DCL: See Dear Colleague Letter (DCL)

Deactivation: Loss of eligibility for a lender to participate in the FFELP. The Department will notify lenders that have failed to submit a Lender’s Interest and Special Allowance Request and Report (LaRS report) for two consecutive quarters that they are candidates for deactivation.

Dear Colleague Letter (DCL): A communication from the Department that explains and clarifies the Department’s guidance regarding federal regulations and statutes.

Dear Partner Letter (DPL): A communication from the Department that explains and clarifies the Department’s guidance regarding federal regulations and statutes.

Default: The failure of a borrower (or endorser or comaker, if any) to make installment payments when due, provided that this failure persists for the most recent period of 270 days (for a loan repayable in monthly installments) or the most recent 330-day period (for a loan repayable in less frequent installments). A loan also may be considered in default if the borrower (or endorser or comaker, if any) fails to meet other terms of the promissory note or other written agreement(s) with the lender under circumstances where the Department or guarantor of the loan reasonably concludes that the borrower no longer intends to honor the borrower’s obligation to repay the loan.

Default Aversion Assistance (DAA): The help provided to a lender by the guarantor in order to prevent a delinquent loan from defaulting.

Default Aversion Assistance Request Period: The period during which a lender must submit a request for default aversion assistance from a guarantor. This period begins no earlier than the 60th day and ends no later than the 120th day of the borrower’s delinquency.

Defense Manpower Data Center (DMDC): The Department of Defense–maintained data collection site for the Servicemembers Civil Relief Act (SCRA). Loan holders are required to access the DMDC database at least monthly to determine all borrowers in their portfolios who are performing eligible military service and automatically apply an interest rate reduction to 6% on eligible borrower’s accounts.

Deferment: A period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make payments of loan principal.

Delayed Delivery: The federally mandated delay in the school’s delivery of the first disbursement of loan funds for first-year, first-time undergraduate Stafford loan borrowers. Schools subject to delayed delivery must delay the delivery of the first disbursement until the student completes the first 30 days of his or her program of study.

Delayed Disbursement: The federally mandated delay of the first disbursement of loan funds for first-year, first-time undergraduate Stafford loan borrowers. The school is prohibited from scheduling the first disbursement of a loan to these students earlier than:

  • The 28th day of the first payment period if the loan is disbursed by EFT or master check.
  • The first day of the first payment period if the loan is disbursed by individual check.

Delinquency: A period that begins on the day after the due date of a payment when the borrower fails to make the equivalent of one full payment.

Department, the: The U.S. Department of Education or an official or employee of the Department acting for the Department under a delegation of authority.

Dependent Student: A student who does not meet the eligibility requirements for an “Independent Student,” under the Higher Education Act of 1965, as amended. See Independent Student.

Diligent Effort: An attempt to perform a required activity in a matter that complies with federally mandated procedures and requirements.

Disbursement: The transfer of loan proceeds by individual check, master check, or electronic funds transfer (EFT) by a lender to a borrower, a school, or an escrow agent. For a Consolidation loan, disbursement is the transfer of borrower loan proceeds from the consolidating lender to the current holder of the loan being consolidated.

Disbursement Date: For a loan disbursed by check or draft, the date the check or draft is issued. For a loan disbursed by electronic funds transfer (EFT), the date the funds are transferred from the lender to the school or escrow agent.

Discharge: The release of a borrower or any comaker from all or a portion of his or her loan obligation, as applicable, due to bankruptcy; school closure; death; being a spouse or parent of a victim of the September 11, 2001, terrorist attacks; total and permanent disability; an unpaid refund by the school; the school’s false certification of a FFELP loan; or false certification due to a crime of identity theft..

Distance Education: Education that uses one or more technologies to deliver instruction to a student who is separated from the instructor and to support regular and substantive interaction between the student and the instructor, either simultaneously or at different times. Any of the following are permissible distance education technologies:

  • The Internet.
  • One-way and two-way transmissions through open broadcast, closed circuit, cable, microwave, broadband lines, fiber optics, satellite, or wireless communications devices.
  • Audio conferencing.

Videocassettes, DVDs, and CD-ROMs may also be used in conjunction with any of the technologies listed above.

Documentation: A written or printed paper, a supporting reference, or a record that can be used to furnish evidence, proof, or information.

DPL: See Dear Partner Letter (DPL)

Dual-Program Cohort Default Rate: For a school that has former students entering repayment in a fiscal year on both FFELP and FDLP loans, the Department calculates a dual-program cohort default rate.

Due Diligence: The procedures required for attempting to satisfactorily resolve a delinquency and prevent a default in accordance with federal regulations. The lender must document the performance of these attempts, and the attempts must be at least as forceful as those generally used for consumer loans.

Economic Hardship: A period during which the borrower is experiencing financial difficulty in making his or her student loan payments due to a qualifying condition that is recognized in federal regulations.

EFA: See Estimated Financial Assistance (EFA)

EFC: See Expected Family Contribution (EFC)

Effective Commercial Skip Tracing: Techniques used to locate a person whose address is unknown. Examples of these techniques may include contacting an endorser (e.g., to locate a borrower), a borrower (e.g., to locate an endorser or comaker), a relative, a reference, individuals, entity identified in a borrower’s loan file, Directory Assistance or a comparable service; attempting to contact the person by calling the last known telephone number; performing a Social Security number search via a credit report; reviewing city directories; processing information contained on the current credit report; or checking with a state licensing agency, a trade association, or a motor vehicle bureau. See also Skip Tracing.

EFT: See Electronic Funds Transfer (EFT)

Electronic Cohort Default Rate (eCDR) Notification Package: The electronic process the Department uses to notify a domestic school of its cohort default rates. A school will receive a loan record detail report in the eCDR package if the school had one or more borrowers entering repayment in the applicable fiscal year or is subject to sanctions or the Department believes that the school will have an official cohort default rate calculated as an average rate. Beginning with the official FY 2008 cohort default rate cycle in September 2010, the Department will exclusively transmit the CDR notifications to foreign schools electronically through the eCDR process.

Electronic Funds Transfer (EFT): The electronic transfer of Stafford or PLUS loan proceeds from the lender to an account at the school or the school’s financial institution.

Electronic Signature: Information in electronic format that is attached to or logically associated with an electronic record and used by a person with the intent to sign the electronic record.

Eligible Borrower: A borrower who meets federal eligibility criteria for a Stafford or PLUS loan.

Eligible Not-For-Profit Holder: As it relates to special allowance payments on loans first disbursed on or after October 1, 2007, a holder of a loan that is:


Eligible Student: A student who meets federal student eligibility criteria.

Emergency Action: A special action taken by the guarantor or the Department to temporarily immediately suspend a school, lender, or servicer from participation in the guarantor’s programs prior to the initiation of formal Limitation, Suspension, and Termination procedures.

Endorser: A signer of a promissory note who is secondarily liable for a loan obligation, i.e., who agrees to pay if the borrower does not. A lender may require a PLUS applicant with adverse credit to obtain an endorser without adverse credit in order to receive the loan.

Enrolled: The status of a student who has met either of the following requirements:


Enrollment Reporting: The method by which schools confirm and report to the National Student Loan Data System (NSLDS) the enrollment status of attending students who receive Title IV loans. This process was formerly known as the Student Status Confirmation Report (SSCR).

Entity: For purposes of this Manual, any organization, institution, government agency, nonprofit corporation, or other group that participates in federal student financial aid programs.

Entrance Counseling: Required counseling that must be provided to a first-time Stafford borrower or a first-time Grad PLUS borrower. The school must conduct counseling in person, by audiovisual presentation, or by interactive electronic means.

Escrow Agent: A guarantor or other eligible lender that receives the proceeds of a FFELP loan as an agent of an eligible lender for the purpose of transmitting those proceeds to the borrower or the borrower’s school.

Estimated Financial Assistance (EFA): The school’s estimate of the amount of financial assistance from federal, state, institutional, or other sources that a student (or parent on behalf of a student) will receive for a period of enrollment. This may include national service awards and benefits (except when determining eligibility for a subsidized Stafford Loan), scholarships, grants, financial need-based employment, or loans. EFA does not include Federal Perkins loans or Federal Work-Study funds that the student has declined or certain loans used to replace the expected family contribution, or federal veterans’ education benefits.

Excess Interest Rebate: See Windfall Profits

Exit Counseling: Required counseling that must be provided to Stafford and Grad PLUS loan borrowers shortly before graduating or ceasing at least half-time enrollment. The school must conduct counseling in person, by audiovisual presentation, or by interactive electronic means.

Expected Family Contribution (EFC): The amount a student and the student’s spouse or family are expected to pay toward the student’s cost of attendance.

Expedited-Standard: The repayment schedule available to a borrower who chooses to leave the income-based repayment (IBR) plan. The payment amount is calculated on the basis of both of the following:


Extended Repayment Schedule: A repayment schedule available to a “new borrower” on or after October 7, 1998, with outstanding principal and interest in FFELP loans totaling more than $30,000. An extended repayment schedule may provide for standard or graduated installments over a period not to exceed 25 years.

FAA: See Financial Aid Administrator (FAA)

FAFSA: See Free Application for Federal Student Aid (FAFSA)

FAT: See Financial Aid Transcript (FAT)

FDLP: See Federal Direct Loan Program (FDLP)

Federal Consolidation Loan Application and Promissory Note: A common form that a borrower—or, as applicable, spouses as comakers—must complete to apply for a Federal Consolidation loan.

Federal Default Fee: A fee collected by the guarantor either by deduction from the proceeds of the loan or from other nonfederal sources. The Higher Education Act requires that this fee equal 1% of the loan principal. This fee replaced the guarantee fee.

Federal Direct Loan Program (FDLP): A student loan program authorized on July 23, 1992, by Title IV, Part D, of the Higher Education Act of 1965, as amended. The FDLP offers Federal Direct (Subsidized) Stafford loans, Federal Direct Unsubsidized Stafford loans, Federal Direct PLUS loans, and Federal Direct Consolidation loans. The FDLP is similar to the FFELP, except that loans are made by the Department rather than by private lending institutions.

Federal Family Education Loan Program (FFELP): A student loan program authorized by Part B of Title IV of the Higher Education Act of 1965, as amended. The FFELP includes the Stafford, PLUS, SLS, and Consolidation Loans. These loans are funded by lenders, guaranteed by guarantors, and reinsured by the Department.

Federal Interest Benefits: The federal government’s payment of accrued interest on subsidized Stafford loans to the lender on behalf of the borrower during in-school, grace, and deferment periods Some Consolidation loans also may qualify for interest benefits. For more detailed information regarding the collection of federal interest benefits.

Federal Perkins Loan: A low-interest, long-term loan intended for undergraduate or graduate and professional students with financial need. The Federal Perkins Loan Program is one of the campus-based programs administered by a school’s financial aid office. For more information, see the FSA Handbook.

Federal PLUS Loan Application and Master Promissory Note (PLUS MPN): A common form that allows a parent or graduate or professional student borrower to receive loans for either a single academic year or multiple academic years. A parent borrower must complete a separate PLUS MPN for each dependent student for whom he or she wishes to borrow.

Federal Register: A federal government publication, published each weekday (except federal holidays), that lists regulations, regulatory amendments, notices, and proposed regulatory changes for all federal executive agencies.

Federal Stafford Loan Master Promissory Note (Stafford MPN): A common form that allows a student borrower to receive loans for either a single academic year or multiple academic years.

Federal Supplemental Educational Opportunity Grant (FSEOG): A grant intended for undergraduate students with exceptional financial need. The FSEOG is one of the campus-based programs administered by a school’s financial aid office. For more information, see the FSA Handbook.

Federal Work-Study (FWS): An employment program intended for undergraduate or graduate and professional students with financial need that allows students to work part time to help pay for their educational costs. The FWS program is one of the campus-based programs administered by a school’s financial aid office. For more information, see the FSA Handbook.

FFELP: See Federal Family Education Loan Program (FFELP)

File Transfer Protocol (FTP): A standard Internet protocol that allows the transmission of data files.

Final Demand: A letter that the lender mails to the borrower demanding full payment of a delinquent or ineligible account. The letter is required as part of the due diligence procedures for collecting a loan that is seriously delinquent or ineligible. The final demand letter is mailed on or after the 241st day of delinquency for loans payable in monthly installments. The letter must be mailed at least 30 days before the lender files a default claim.

Final Regulations: Federal program rules, which are published in the Federal Register. Final regulations usually take effect 45 days after the date of publication.

Financial Aid Administrator (FAA): A staff member at an eligible school who is charged with the administration of financial aid programs.

Financial Aid Package: The total amount of financial aid that a school awards a student. Federal and nonfederal aid such as loans, grants, or work-study are combined into a “package” to help meet the student’s cost of attendance. Using available resources to give each student the best possible aid package is one of the major responsibilities of a school’s financial aid administrator.

Financial Aid Transcript (FAT): An official record of the federal financial aid a student has received at schools the student previously attended. The record is used to assess the amount of federal financial aid the student has received and to prevent the award of federal funds for which the student or the parent of a dependent student is not eligible. The record may be obtained from the National Student Loan Data System (NSLDS) or may be a paper report received from the previous schools.

Financial Need: The student’s cost of attendance less the expected family contribution. In determining a student’s eligibility for a subsidized Stafford loan and a FFELP borrower’s total loan amount, the student’s estimated financial assistance is also subtracted from the cost of attendance.

Forbearance: A period of time during which the borrower is permitted to temporarily cease making payments or reduce the amount of the payments. The borrower is liable for the interest that accrues on the loan during the forbearance period. Some forbearances are entitlements for eligible borrowers; others are granted at the discretion of the lender.

Foreign School: An eligible school located outside the United States and its territories.

Forgiveness: The release of a borrower or any comaker, as applicable, from all or a portion of his or her loan obligation as a result of public service provided by the borrower or comaker, as authorized by Title IV, Part B of the Higher Education Act, as amended.

Free Application for Federal Student Aid (FAFSA): The form the student must complete to apply for federal Title IV financial assistance, including Stafford loans. The student must include financial information on the student’s household so that the expected family contribution can be calculated.

Freely Associated States: The Republic of the Marshall Islands, the Federal States of Micronesia, and the Republic of Palau. See also State.

FTP: See File Transfer Protocol (FTP)

Full-Time Student: An enrolled student (other than a student enrolled in a program of study by correspondence) who is carrying a full academic workload as determined by the school under standards applicable to all students enrolled in the same program of study. The student’s workload may include any combination of courses, work, research, or special studies that the school considers sufficient to classify the student as a full-time student. For a term-based program (using standard or nonstandard terms), previously-failed coursework that is repeated may be counted toward the student’s Title IV enrollment status. Previously-passed coursework that is repeated (for example, to obtain a better grade) may be counted only once toward the student’s Title IV enrollment status. Previously-passed coursework that the school requires the student to repeat due to the student failing other coursework may not be counted toward the student’s Title IV enrollment status. Non-credit and reduced-credit remedial courses must be included when determining enrollment status if the student qualifies for Title IV aid for those courses. See Section 6.9 for a detailed definition of a full-time student that includes credit- and clock-hour requirements.

Funds: Any monies (including checks, drafts, or other instruments); any commitment to provide money; or any commitment of insurance that has been, or may be, provided under the guarantor’s programs to a borrower enrolled at and attending a participating school, or a borrower accepted for enrollment at a participating school.

Gap: A period during the servicing of a loan in repayment when due diligence activities are required by regulations but no due diligence activities (collection activities) are performed. For a loan serviced under regulations published December 18, 1992, a gap greater than 45 days (greater than 60 days in the case of a transfer) results in the loss of the loan’s guarantee.

Previously, the term “gap” was defined in Appendix D of 34 CFR 682, and was applicable to loans serviced under due diligence provisions published November 10, 1986. For loans serviced under these “old” due diligence provisions, a gap in due diligence activities did not result in a loss of the loan’s guarantee unless the lender had committed a violation of at least one due diligence requirement.

Grace Period: The period that begins the day after a Stafford loan borrower ceases to be enrolled at least half time at an eligible school, ends the day before the repayment period begins, and during which payments of principal are not required. For a borrower with a Stafford loan that has not yet entered repayment who also has an SLS loan, the grace period for the SLS loan is the equivalent of the grace period for the Stafford loan if the borrower requests grace on his or her SLS loan(s)

Grad PLUS Loan: A PLUS loan made to a graduate or professional student.

Grade Level: A student’s academic class level, as certified by a school official. Undergraduate students are 01 (first-year) through 05 (fifth-year/other undergraduate); graduate and professional students are A (first-year) through D (fourth-year and beyond). A school must provide the appropriate grade level code (e.g., 01 through 05) on the Federal Stafford Loan School Certification.

Graduate or Professional Student: A student who:


Graduated Repayment Schedule: A repayment schedule under which the amount of the borrower’s installment payment is scheduled to change (usually by increasing in two or more increments) during the course of the repayment period. The graduated repayment schedule cannot exceed 10 years (or 25 years for borrowers eligible for an extended repayment schedule), excluding in-school, grace, deferment, or forbearance periods.

Guarantee: A conditional legal obligation, as defined in an agreement by and between a guarantor and a lender, for the guarantor to reimburse the lender for some portion of a loan that is not repaid by the borrower due to default, death, disability, bankruptcy, borrower ineligibility, false certification of borrower eligibility, or school closure.

Guarantee Disclosure: The form used by the guarantor that serves as evidence that the loan identified on the form has been insured (guaranteed) under the guarantor’s program (see also Guarantee). The form also provides relevant loan data, which may include the loan amount, interest rate, guarantee and origination fees (if applicable), and projected maturity date.

Guarantee Fee: A fee the guarantor was permitted to charge on a loan disbursed on or after July 1, 1994, and for which the date of guarantee of principal was before July 1, 2006. The Higher Education Act limited this fee to no more than 1% of the principal. This fee was replaced by the federal default fee.

Guarantor (or Guaranty Agency): A state or private nonprofit organization that has an agreement with the Department to administer a loan guarantee program under the Higher Education Act.

Guaranty Agency: See Guarantor (or Guaranty Agency)

Half-Time Student: A student enrolled in an undergraduate program who is carrying an academic workload that includes at least half of the academic workload of the applicable regulatory minimum full-time enrollment standard for that program. Half-time enrollment for a graduate or professional program must include at least half of the full-time academic workload defined by the school for the graduate or professional students enrolled in that program. A student enrolled solely in an eligible program of study by correspondence is never considered more than a half-time student, even if the student is enrolled in enough correspondence coursework to be considered full time.

HEA: The Higher Education Act of 1965, as amended.

Hearing: The orderly presentation of arguments and evidence before a Hearing Officer.

Hearing Officer: A person with no prior involvement in a dispute under the Limitation, Suspension, and Termination procedures outlined in Chapter 18 of this Manual. The Hearing Officer for any hearing will be selected by the guarantor.

Holder: An eligible lender owning a FFELP loan. A federal or state agency or an organization or corporation acting on behalf of such an agency and acting as a conservator, liquidator, or receiver of an eligible lender may also be considered a holder.

ICA/Location Cure Procedure: See Intensive Collection Activities (ICA)

Incarcerated: The status of a student or borrower who is serving a criminal sentence in a federal, state, or local penitentiary, prison, jail, reformatory, work farm, or other similar correctional institution. A student or borrower who is living in a halfway house or in home detention or who has been sentenced to serve only weekends is not considered to be incarcerated.

Income-Based Repayment (IBR) Schedule: A repayment plan available to a borrower who has a partial financial hardship (PFH) or is paying a permanent-standard payment amount after qualifying for PFH. If a lender determines that a borrower has a PFH, the borrower’s monthly payment amount on eligible loans is limited to 15% of the amount by which the borrower’s annual adjusted gross income exceeds 150% of the U.S. Department of Health and Human Services poverty guideline for the borrower’s family size. Eligible FFELP and Direct loans include the outstanding balances on all loans except a defaulted loan, a FFELP or Direct parent PLUS loan, and a FFELP or Direct Consolidation loan that repaid a FFELP or Direct parent PLUS loan. The Department repays the outstanding balance and accrued interest on eligible FFELP and Direct loans after 25 years and a combination of 300 months covered by qualifying payments and/or economic hardship deferments, beginning no earlier than July 1, 2009.

See Partial Financial Hardship (PFH).

Income-Contingent Repayment Schedule: A repayment schedule for some FDLP loans under which the borrower’s monthly payment amount is adjusted annually, based on the total amount of the borrower’s Direct loans, the borrower’s family size, and the Adjusted Gross Income reported on the borrower’s most recent income tax return. In the case of a married borrower, who files a joint income tax, the AGI includes the spouse’s income.

Income-Sensitive Repayment Schedule: A repayment schedule for some FFELP loans under which the borrower’s monthly payment amount is adjusted annually, based solely on the borrower’s expected total monthly gross income received from employment and other sources during the course of the repayment period.

Independent Student: A student who meets one or more of the criteria listed on the Free Application for Federal Student Aid (FAFSA) that classify a student as independent for Title IV purposes. A student also may be classified as independent if a financial aid administrator determines and documents that the student is independent based on his or her professional judgment of the student’s unusual circumstances.

Ineligible Borrower: A borrower who does not meet federal eligibility criteria for a Federal Stafford loan or, in the case of a parent borrower, a Federal PLUS loan.

In-School Period: The time during which a student is enrolled on at least a half-time basis at a participating school.

Institution of Higher Education: A public or private nonprofit school that:

Also see Proprietary Institution and Postsecondary Vocational Institution. For more general definitions, see Participating School and School.

Institution-Affiliated Organization: Any organization directly or indirectly related to a school that is engaged in the practice of recommending, promoting, or endorsing education loans for students attending that school or their families. Such an organization may include an alumni organization; athletic organization; foundation; or social, academic, or professional organization of a school. An institution-affiliated organization does not include a lender with respect to any education loan the lender secures, makes, or otherwise extends to the school’s students or their families.

Institutional Student Information Record (ISIR): The electronic output record provided to the school by the Department’s Central Processing System that includes information provided by the student on the Free Application for Federal Student Aid (FAFSA). The ISIR also contains the student’s expected family contribution (EFC) and the results of federal database matches. The paper version that is sent to the student is called a Student Aid Report (SAR).

Insurance Premium: See Federal Default Fee and Guarantee Fee

Intensive Collection Activities (ICA): A series of collection activities performed within an abbreviated time frame. Performance of the activities within the time frames prescribed reestablishes the guarantee on loans on which the lender’s noncompliance with due diligence requirements has resulted in the cancellation of the guarantee.

Interest: The charge made to a borrower for use of a lender’s money. Past and present applicable interest rates for FFELP loans are included in Section 7.4.

Interest Benefits: See Federal Interest Benefits

Interim Period: The period during which a Stafford loan borrower is in the in-school or grace period. If the borrower returns to school before the grace period is fully used, the borrower continues to qualify for in-school status and to be considered in the interim period.

Invalid Telephone Number: For purposes of lender due diligence requirements in the collection of loans, a functioning telephone number that has been assigned to someone who has no knowledge of or relationship with the borrower.

IRS Offset: See Treasury Offset

ISIR: See Institutional Student Information Record (ISIR)

LaRS: See Lender’s Interest and Special Allowance Request and Report (LaRS Report)

Late Charges: Charges that the lender may require the borrower to pay if the borrower fails to pay all or a portion of a required installment payment within 15 days after it is due. This charge may not exceed 6 cents for each dollar of each late installment.

Late Conversion: The scheduling of a Stafford, SLS, PLUS, or Consolidation loan borrower’s first payment due date beyond the normal regulatory time limits for establishing that date.

Late Disbursement or Delivery: A disbursement made by a lender or delivered by a school after the end of the loan period or the date on which the student ceased to be enrolled on at least a half-time basis.

Leader, Summer Term: A summer term that comes at the beginning of a school’s Scheduled Academic Year.

Leave of Absence: For purposes of the Common Manual, a leave of absence is a status in which the student is considered to be continuously enrolled for Title IV program purposes, as approved by the school. An approved leave of absence is a break in enrollment, not including a semester or spring break, that is requested by the student and approved by the school based upon the school’s published leave of absence policy. The student’s request must be in writing and must include the reason for the leave. In an approved leave of absence, the student does not incur any additional charges. The total number of days of all approved leaves of absence may never exceed 180 days in any 12-month period.

Lender: For purposes of the Federal Family Education Loan Program (FFELP), a lender is an entity that has entered into an agreement to participate in the FFELP. A lender may be a national or state chartered bank, a mutual savings bank, a savings and loan association, a stock savings bank, a credit union, a pension fund, an insurance company, a single state agency, the Student Loan Marketing Association (SLMA), a Rural Rehabilitation Corporation, a nonprofit private agency functioning in a state as a secondary market, a consumer finance company subsidiary of a national bank, a guarantor, or a school. Each entity must meet the specific eligibility qualifications, as applicable, outlined in Sections 3.1 and 3.2.

Lender Fee: A fee that the holder of the loan must pay to the Department. For any loan first disbursed on or after October 1, 1993, and prior to October 1, 2007, the fee is equal to 0.5% of the principal amount of the loan. For loans first disbursed on or after October 1, 2007, the fee is equal to 1.0% of the principal amount of the loan. This fee is deducted from interest and special allowance due the lender. The lender remits the fee by making an entry on the Lender’s Interest and Special Allowance Request and Report (LaRS report) that results in an offset of the amount of quarterly interest and special allowance benefits due to the lender. The lender may not pass this fee on to the borrower.

Lender of Last Resort (LLR): A lender or guarantor that agrees to make Stafford and/or PLUS loans to each of the following:


Lender Participation Questionnaire for New Lenders: The application form that a lender must complete and return to the Department before receiving approval to participate in the FFELP.

Lender’s Interest and Special Allowance Request and Report (LaRS Report): An accounting mechanism that a lender uses to report to the Department the loans that it has made and to request from the Department interest benefits and special allowance that it has earned. The federal origination and lender fees that the lender must pay to the Department are usually deducted from the amount that the Department owes the lender for interest benefits and special allowance. The lender may submit the report using the automated Lender Reporting System or the paper form.

Limitation: The continuation of a school’s eligibility to participate in the guarantor’s programs, subject to compliance with special conditions or restrictions established by agreement with the Department or the guarantor.

LLR: See Lender of Last Resort (LLR)

Loan Assignment: See Assignment

Loan Period: The period of time for which a loan is certified.

Loan Proceeds: The amount of loan funds that have been guaranteed.

Loan Record Detail Report (LRDR): The report issued by the Department that contains the detailed data used to calculate a school’s draft or official cohort default rate.

Loan Sale: The change in ownership of a loan from one eligible FFELP lender or holder to another lender or holder.

Loan Transfer: Any action that results in a change of the system used to monitor or conduct collection activities on the loan, such as a change in servicer.

Location Cure Procedure: See Intensive Collection Activities (ICA)

Mandatory Administrative Forbearance: Forbearance that a lender is required to grant in certain cases. See Section 11.23 and Figure 11-2 for comprehensive information about cases in which mandatory administrative forbearance is applicable, and a description of a lender’s responsibilities in each case.

Mandatory Forbearance: Forbearance that a lender is required to grant in certain cases. See Section 11.24 and Figure 11-2 for comprehensive information about cases in which mandatory forbearance is applicable, and a description of a lender’s responsibilities in each case.

Master Check: A single check issued from a lender or disbursing agent to a school that includes loan disbursements for two or more borrowers; a non-electronic process for transferring funds that mirrors electronic funds transfer (EFT).

Master Promissory Note (MPN): See Federal Stafford Loan Master Promissory Note (Stafford MPN) and Federal PLUS Loan Application and Master Promissory Note (PLUS MPN)

Module: A course or group of courses that does not span the entire length of the payment period or period of enrollment in a program including, for example, an intersession that the school combines with a standard term, or mini-sessions that the school combines to form a summer term.

MPN: See Master Promissory Note (MPN)

Multiple Disbursements: Disbursement at predesignated times of a Federal Stafford or PLUS loan—usually in two or more installments of approximately equal increments.

National and Community Service Trust Act: The federal legislation that created a national and community service program, including AmeriCorps. The program is administered by the Corporation for National Service

National Council of Higher Education Resources (NCHER): A nationwide network of guarantors, secondary markets, lenders, loan servicers, collectors, and other organizations involved in the administration of the Federal Family Education Loan Program. NCHER represents its members on public policy and regulatory issues with the legislative and executive branches of the federal government.

National Credit Bureau: A credit reporting agency with a service area encompassing more than a single region of the country.

National of the United States: A citizen of the United States or, as defined in the Immigration and Nationality Act, a noncitizen who owes permanent allegiance to the United States.

National Student Loan Data System (NSLDS): A database comprised of information from guarantors, schools, lenders, and the Department of Education which contains information on Title IV aid received by students.

Nationwide Consumer Reporting Agency: An agency that regularly engages in the practice of assembling or evaluating, and maintaining, for purposes of furnishing consumer reports to third parties bearing on a consumer’s creditworthiness, credit standing, or credit capacity, each of the following regarding consumers residing nationwide: public record information, and credit account information from persons who furnish that information regularly and in the ordinary course of business.

Need Analysis: A standardized assessment of the ability of a student or of a student’s family to contribute toward educational expenses.

New Borrower: A borrower who has no outstanding balance on a FFELP loan at the time he or she signs a promissory note for a FFELP loan.

Nonsubsidized Loan: A loan that is not eligible for federal interest benefits. The borrower is responsible for paying the interest on the outstanding principal balance of a nonsubsidized loan throughout the life of the loan. During in-school, grace, and deferment periods, these interest payments are normally made on a monthly or quarterly basis, or are capitalized. Nonsubsidized loans were guaranteed by some guarantors before the introduction of unsubsidized Stafford loans.

Non-Term-Based Institution: A school that measures its academic year in credit or clock hours rather than academic terms (e.g., semesters, trimesters, or quarters).

Notification (as it relates to the Stafford MPN): A process by which the school, lender, or guarantor notifies the borrower of the proposed loan types and amounts. The borrower is required to take action only to reject or adjust the type or amount of the loan.

NSLDS: See National Student Loan Data System (NSLDS) NSLDS

Official: The person at the guarantor with the responsibility for initiating an Action under the Limitation, Suspension, or Termination procedures outlined in Chapter 18 of this Manual.

One-Academic-Year Training Program: A program that includes:


Opportunity Pool Loan: A private education loan made by a lender to a student (or the student’s family) that involves a payment by the school of points, premiums, additional interest, or financial support to the lender for extending credit to the student (or the student’s family).

Origination Fee: A fee charged to offset the cost of interest, special allowance, and reinsurance payments by the federal government on a FFELP loan. This fee, if charged to the borrower, may be subtracted from the borrower’s loan proceeds.

Out-of-School Date: The date the student ceases to be enrolled on at least a half-time basis at an eligible school.

Overaward: The amount of a student’s need-based aid that exceeds the student’s financial need, or the amount of the student’s estimated financial assistance (EFA), including any need-based aid, that exceeds the student’s COA.

Parent: For purposes of PLUS loan eligibility, a student’s natural or adoptive mother, father, or the spouse of a parent who remarried if the spouse’s income and assets would have been taken into account when calculating a dependent student’s expected family contribution.

Parent PLUS Loan: A PLUS loan made to the parent of a dependent undergraduate student.

Partial Cancellation: Cancellation of a disbursement or a portion of a disbursement rather than of an entire loan.

Partial Financial Hardship (PFH): A borrower has a partial financial hardship if the annual payment amount on all eligible FFELP and Direct Loans exceeds 15% of the difference between the borrower’s adjusted gross income and 150% of the U.S. Department of Health and Human Services poverty guideline applicable to the borrower’s family size and state of residence. Eligible FFELP and Direct loans include the outstanding balances on all loans except a defaulted loan, a FFELP or Direct parent PLUS loan, and a FFELP or Direct Consolidation loan that repaid a FFELP or Direct parent PLUS loan.

See Income-Based Repayment (IBR) Schedule.

Participating School: An eligible school that meets the standards for participation in Title IV programs in subpart B, has a current Program Participation Agreement with the Department, and is eligible to receive funds under these programs.

Payment Period: The basis on which a school must schedule and deliver disbursements for a particular loan period. The payment period begins on the first day of regularly scheduled classes. A payment period is determined based on the structure of the school’s academic program. At a school that does not use standard terms, a payment period is measured in credit or clock hours completed by the student in relation to the length of the student’s program of study. The payment period requirement does not eliminate the multiple disbursement requirement for a school to deliver loan proceeds in substantially equal installments, with no installment exceeding one-half of the loan amount.

Pell Grant: A federal need-based grant. For more information about this program, see the FSA Handbook.

Period of Enrollment: As defined by federal regulation, the period for which a Stafford or PLUS loan is intended. The period of enrollment must coincide with a bona fide academic term established by the school for which the school’s charges are generally assessed, i.e., semester, trimester, quarter, length of the student’s program or the school’s academic year. The period of enrollment is also referred to as the loan period (see Section 6.2). In addition, the term “period of enrollment” is commonly used by the financial aid community to refer to the period of time during an academic year when a student is enrolled at the school.

Permanent Resident of the United States: A person who meets certain requirements of the Department of Homeland Security, United States Citizenship and Immigration Service (USCIS). Valid documentation of permanent residency includes the following: I-551, I-151, I-181, I-94, or a passport stamped processed for I-551, "Temporary evidence of lawful admission for permanent residence."

Permanent-Standard: A repayment schedule available to a borrower under the income-based repayment plan. The payment amount is calculated on the basis of both of the following:


PLUS MPN: See Federal PLUS Loan Application and Master Promissory Note

Post-Deferment Grace Period: A 6-month period following a deferment during which payments are not required. The 6-month post-deferment grace period applies only to loans disbursed before October 1, 1981, and, in some cases, to loans for borrowers who participated on active-duty status in certain emergency military mobilizations, such as Operations Desert Shield/Desert Storm.

Postsecondary Vocational Institution: A public or nonprofit private educational institution that:

Also see Institution of Higher Education and Proprietary Institution. For more general definitions, see Participating School and School.

Post-Withdrawal Disbursement: A disbursement made when the calculations for the school’s return of Title IV funds result in the student being eligible to receive more Title IV aid than was disbursed or delivered prior to his or her withdrawal. A post-withdrawal disbursement must meet certain conditions for late disbursement.

PPA: See Program Participation Agreement (PPA)

Preaccredited School: A public or private nonprofit school that is progressing towards accreditation within a reasonable period of time, as certified by an accrediting agency. The status must be recognized by the Department for purposes of Title IV program eligibility. See also Accrediting Agency

Preclaim Assistance: See Default Aversion Assistance (DAA)

Preferred Lender Arrangement: An arrangement or agreement between a lender and a school or an institution-affiliated organization, under which the lender provides or otherwise issues FFELP or private education loans to students attending the school (or the students’ families) and under which involves the school or institution-affiliated organization recommends, promotes, or endorses the lender’s education loan products. Such an arrangement does not apply to a school participating in the Federal Direct Loan Program.

Prehearing Conference (as used in Chapter 18): Contact by any method, including telephone, between the parties for the purpose of settling or narrowing a dispute related to limitation, suspension, and termination proceedings.

Prepayment: A payment received when the borrower is not required to make either principal or interest payments; when a borrower is required to make interest payments, but previously authorized the lender to capitalize accruing interest; or when the borrower makes a payment that is greater than the amount of the borrower’s regular installment or the amount due.

Principal Balance: The outstanding amount of the loan, on which the lender charges interest. As the loan is repaid, a portion of each payment is used to satisfy interest that has accrued, and the remainder of the payment is used to reduce the outstanding principal balance.

Professional Degree: A degree that signifies both completion of the academic requirements for beginning practice in a given profession and a level of professional skill beyond that normally required for a bachelor’s degree. Professional licensure is also generally required. Examples of a professional degree include, but are not limited to: Pharmacy (Pharm. D.), Dentistry (D.D.S. or D.M.D.), Veterinary Medicine (D.V.M.), Chiropractic (D.C. or D.C.M.), Law (L.L.B. or J.D.), Medicine (M.D.), Optometry (O.D.), Osteopathic Medicine (D.O.), Podiatry (D.P.M., D.P., or Pod. D.), and Theology (M. Div. or M.H.L.).

Professional Judgment: The flexibility given to a financial aid administrator (FAA) under the Higher Education Act to make adjustments to student eligibility for federal aid on a case-by-case basis.

Professional Student: See Graduate or Professional Student, and Professional Degree.

Program of Study: A Department-authorized postsecondary educational program that leads to a degree, certificate, or other educational credential.

Program Participation Agreement (PPA): An agreement that a school and the U.S. Department of Education must sign, permitting participation in one or more of the Title IV federal student aid programs. This agreement also states that the initial and continued eligibility to participate in the Title IV federal student aid programs is conditional upon compliance with the provisions of applicable laws and program regulations. The agreement includes a school’s participation in the following federal programs: Federal Pell, Federal Supplemental Educational Opportunity Grant, Federal Work-Study, Federal Family Education Loans, and Direct Loans.

Program Review: A comprehensive review of a lender’s, school’s, or servicer’s administrative procedures for handling Federal Stafford, PLUS, SLS, and Consolidation loans. The review is conducted to ensure that those procedures are in compliance with federal regulations and with the guarantor’ policies and procedures. Chapter 17 addresses several aspects of program reviews

Promissory Note: A legally binding agreement the borrower signs to obtain a loan under the FFELP, in which the borrower promises to repay the loan, with interest, in periodic installments. The agreement also includes information about any grace period, deferment, or cancellation provisions and the student’s rights and responsibilities with respect to the loan.

Proprietary Institution (of Higher Education): A for-profit educational institution that:


Also see Institution of Higher Education and Postsecondary Vocational Institution. For more general definitions, see Participating School and School.

Proration: A reduction of the standard annual loan limit for an undergraduate student. Proration of the loan amount is required if the student’s program or the remainder of the student’s program is less than a full academic year in length.

Proportional Proration: A required calculation performed to determine the applicable annual Stafford loan limit for an undergraduate student whose program of study is less than an academic year, or whose remaining program of study is less than an academic year.

Public Service Loan Forgiveness Program: A program intended to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their Direct loan(s) after they satisfy the public service and loan payment requirements of the program.

Qualified Education Benefit: Refers to qualified tuition programs (e.g., 529 prepaid tuition plans and savings plans), prepaid tuition plans offered by a state, and Coverdell education savings accounts.

Reaffirmation: A borrower’s acknowledgment of a loan repayment obligation—including all principal, interest, collection costs, court costs, attorney fees, and late charges—in a legally binding manner

Reauthorization: Refers to the legislative process—generally carried out every 5 years in the case of the Higher Education Act—whereby Congress reviews and either renews, terminates, or amends existing programs.

Recall (of a claim): A lender request that the guarantor return a default claim that has already been filed before claim reimbursement because the claim no longer qualifies for default.

Recognized Equivalent of a High School Diploma: A recognized equivalent of a high school diploma is any one of the following:


Record: With respect to recordkeeping requirements for lenders and schools, official information or data relating to a borrower’s loan account or file that can be used as evidence.

Refund: The difference between the amount the student paid toward institutional charges and the amount the school can retain under the appropriate (e.g., institutional, state, or accrediting agency) refund policy.

Regular Student: A person enrolled or accepted for enrollment for the purpose of obtaining a degree, certificate, or other recognized educational credential.

Regulation B: The section of the Equal Credit Opportunity Act (12 CFR 202) that prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, or age.

Rehabilitation (of a defaulted loan): A process by which a borrower may bring a FFELP loan out of default by adhering to specified repayment requirements

Reinstatement (of borrower Title IV eligibility): A process by which a borrower with a defaulted FFELP loan may regain eligibility for Title IV aid by adhering to strict repayment requirements.

Reinstatement (of institutional eligibility): Formal permission by the guarantor for a school, lender, or servicer whose eligibility to participate in the guarantor’s programs has been terminated to resume participation after meeting specific conditions.

Release of Proceeds: Delivery of loan proceeds by the school to the borrower. Release of proceeds is not disbursement of proceeds by the lender.

Repayment Period: The period during which payments of principal and interest are required. The repayment period follows any applicable in-school or grace period and excludes any period of authorized deferment or forbearance.

Repayment Schedule: The legal addendum to the Promissory Note stating the terms of loan repayment and fulfilling disclosure requirements. The Repayment Schedule is a plan that indicates the total principal and interest due, an installment amount, and the number of installments required to pay the loan in full. The Repayment Schedule also contains the interest rate for the loan(s) included on the schedule, the due date of the first and subsequent installments, and the frequency of installments.

Repayment Start Date: The date the repayment period begins. For Stafford loans, repayment begins on the day following the last day of the grace period. For PLUS and SLS loans, repayment begins on the date the loan is fully disbursed. For Consolidation loans, repayment begins on the date the loan is disbursed.

Repurchase (of a Claim): A lender’s purchase back from the guarantor of a loan on which a claim was filed and paid, if that purchase occurs more than 30 days after the lender receives the claim payment

Return of Title IV Funds: The federally mandated process by which a school calculates the amount of federal funds to be returned for a Title IV aid recipient who withdraws or who ceases attendance during a payment period or period of enrollment. The calculations may result in a reduction of the student’s Title IV loan and grant aid to reflect the percentage of the payment period or period of enrollment that the student attended, if he or she attended 60% or less of the period. Based on these calculations, the school and the student may be required to return “unearned” federal assistance.

Rolling Delinquency: A delinquency that occurs whenever the delinquent status of a loan is increased or reduced but not completely eliminated as result of a payment, the reversal of a payment, a deferment or forbearance, or the receipt of a new out-of-school date.

Rule of 78s: A procedure for calculating the outstanding principal balance of a loan that is prohibited for loans made to a borrower who entered repayment on or after June 26, 1987. Seventy-eight is the sum of the digits from one to twelve (the number of months in a one-year installment contract).

SAP: See Satisfactory Academic Progress (SAP)

SAR: See Student Aid Report (SAR)

Satisfactory Academic Progress (SAP): The qualitative (grade point average) and quantitative (time limit) measures of a student’s progress toward completing a program of study. To maintain eligibility for Title IV aid, the student must show adequate progress. A school must establish policies regarding satisfactory academic progress, and must check the progress of Title IV aid recipients at least once each academic year, or at the end of each payment period if the educational program is either one academic year in length or shorter than an academic year.

Satisfactory Repayment Arrangement: A specified number of consecutive, on-time, voluntary, reasonable and affordable full monthly payments made by a borrower to the holder of any loan or loans in default. Satisfactory repayment arrangements may be established by a borrower either to regain eligibility for Title IV funds or to consolidate a defaulted loan. The loan holder’s determination of a "reasonable and affordable" payment amount is based on the borrower’s total financial circumstances. “Voluntary” payments are payments made directly by the borrower, and do not include payments obtained by state offsets or federal Treasury offset, garnishment, or income or asset execution. An “on-time” payment is a payment received by the guarantor within 15 days before or after the scheduled due date.

SAY: See Scheduled Academic Year (SAY)

Scheduled Academic Year (SAY): An academic year that corresponds to a traditional academic year calendar, i.e., a fixed period of time, as published in a school’s printed materials, that generally begins and ends at the same time each year according to an established schedule. The SAY is the academic period to which the program’s definition of Title IV academic year must be applied and must meet the minimum statutory requirements of an academic year for weeks of instructional time. A standard term-based credit-hour program or a credit-hour program with nonstandard terms that are substantially equal and at least nine weeks of instructional time in length (SE9W) may use an SAY if the program is offered in a traditional academic year calendar. The summer term may be treated as an add-on at the beginning (header) or end (trailer) of the SAY.

School: An institution of higher education, a proprietary institution of higher education, or a postsecondary vocational school declared eligible by the U.S. Department of Education to participate in one or more Title IV programs. Some guarantors may require schools to complete a separate agency-specific participation agreement.

School-Affiliated Organization: Any organization that is directly or indirectly related to a school, and includes, but is not limited to, alumni organizations, foundations, athletic organizations, and social, academic, and professional organizations

School Lender: A school, other than a correspondence school, that has been approved as a lender under the FFELP and has entered into a contract of guarantee with the Department or a similar agreement with a guarantor.

SE9W: In a nonstandard term-based credit-hour program, the terms are referred to as “SE9W” if they are substantially equal in length and each term is at least nine weeks of instructional time in length. Nonstandard terms are considered substantially equal in length if no term in the loan period is more than two weeks of instructional time longer than any other term in the loan period. If a nonstandard term-based credit-hour program has terms that are not substantially equal in length, or if each term is not at least nine weeks of instructional time in length, the terms are not SE9W. For example, a nonstandard term-based, credit-hour program has terms that are 8 weeks of instructional time in length. While the nonstandard terms in this program are substantially equal in length (i.e., no term is more than 2 weeks longer than any other term), the terms are not at least 9 weeks of instructional time in length. Therefore, the nonstandard terms in this program are not SE9W.

Secondary Market: An entity that purchases education loans from eligible lenders in order to increase the amount of funds available for education loans. The secondary market obtains funds from investors and uses those funds to purchase existing education loans from lenders. The lenders then use the proceeds of those sales to make new education loans.

Self-Paced: A flexible course structure in an educational program without terms that permits a student to complete courses without a defined schedule for completing the courses, or, at the student’s discretion, to begin courses either on specific dates set by the school or at any time without a defined schedule for completing the program.

Servicer (or Third-Party Servicer): An entity that enters into a contract with a program participant to administer any aspect of its participation in a Title IV program.

Shortage Area: See Teacher Shortage Area

Skip Tracing: Diligent efforts to locate a borrower’s telephone number or address when such information is unknown.

Social Security Number (SSN): The 9-digit number assigned to the borrower by the Social Security Administration. The SSN is used as an identifier for tracking the borrower’s loan account(s), skip tracing, and reporting to the Department. A borrower must have an SSN in order to apply for a FFELP loan.

Special Allowance: A percentage of the daily average unpaid principal balance, paid to a lender by the Department on an eligible Stafford, PLUS, SLS, or Federal Consolidation loan. Special allowance payments act as an incentive for lenders to make education loans by, in effect, making up the difference between the interest rate charged to a FFELP borrower and market interest rates. The special allowance rate is set by statutory formula.

Special Occurrence: An event—such as the lender’s receipt of a borrower’s valid address and/or valid telephone number—that affects the lender’s due diligence requirements but does not change the payment due date of the loan.

SSN: See Social Security Number (SSN)

Stafford MPN: See Federal Stafford Loan Master Promissory Note

Standard Repayment Schedule: A repayment schedule under which the borrower pays the same amount for each installment payment throughout the entire repayment period or pays an amount that is adjusted to reflect annual changes in the loan’s variable interest rate. The standard repayment schedule cannot exceed 10 years, excluding in-school, grace, deferment, and forbearance periods.

Standard-Standard: A repayment schedule available to a borrower under the Income-Based Repayment plan. The payment amount is calculated on the basis of both of the following:


State: A state of the Union, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, and the Freely Associated States (the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau).

State Authorization: A state charter, statute, constitutional provision, or other action issued by an appropriate state agency or entity that establishes a school by name as a postsecondary educational entity, and the school otherwise meets the requirements established for that authorization in 34 CFR 600.9.

State Lender: In any state, a single state agency or private not-for-profit agency designated by the state that has been approved as a lender and that has entered into a contract of guarantee with the Department or a similar agreement with a guarantor.

Statement of Educational Purpose: The borrower’s signed statement that any Title IV aid received will be used only for education-related expenses at the school at which the student is enrolled or accepted for enrollment.

Statutory Interest Rate: The maximum annual interest rate (under the Higher Education Act) that a lender may charge on a loan.

Student Aid Report (SAR): The paper output record provided to the student by the Department’s Central Processing System that includes information provided by the student on the Free Application for Federal Student Aid (FAFSA). The SAR also contains student’s expected family contribution (EFC), and the results of federal database matches. The electronic version that is sent to the school is called an Institutional Student Information Record (ISIR).

Student Status Confirmation Report (SSCR): See Enrollment Reporting

Subrogation: A transfer in the ownership of a defaulted FFELP loan from a guarantor to the Department. Loans to be subrogated must meet criteria established and revised annually by the Department.

Subsidized Loan: A loan eligible for interest benefits paid by the federal government. The federal government pays the interest that accrues on subsidized loans during the student’s in-school, grace, authorized deferment, and (if applicable) post-deferment grace periods, if the loan meets certain eligibility requirements.

Substantial Gainful Activity: A level of work performed for pay or profit that involves doing significant physical or mental activities, or a combination of both. "For profit" covers a self-employed individual who is not paid by an employer and does not refer to income from sources other than employment. Non-employment income will not be considered when determining whether a borrower is capable of substantial gainful activity.

Suspension: Suspension of the eligibility of a school, lender, or servicer to participate in a guarantor’s programs for a specified period of time until specified requirements are met.

T-bill: See Treasury Bill (T-bill).

TEACH Grant: See Teacher Education Assistance for College and Higher Education (TEACH) Grant.

Teacher Education Assistance for College and Higher Education (TEACH) Grant: A non-need-based grant intended for undergraduate, certain post-baccalaureate, and graduate students enrolled at TEACH grant-eligible schools who plan to become teachers. In exchange for the grant, a student must agree to serve as a full-time teacher in a high-need field, in a low-income school for at least four academic years within eight years of completing the program of study for which the student received the grant. If a TEACH grant recipient does not satisfy the service obligation, the TEACH grant funds that the student received convert to an unsubsidized Direct Stafford loan that must be repaid with interest accruing from the date of disbursement. See the FSA Handbook for more information about the TEACH grant.

Teacher Shortage Area: A federally designated geographic area, grade level, or academic, instructional, subject matter, or discipline that has been classified as a shortage area as defined by the Department.

Teach-Out Program: A program of study offered by a school that is substantially similar to a borrower’s program of study at a school that closed and ceased to provide educational services during the borrower’s loan period.

Temporarily Totally Disabled: The condition of an individual who, though not totally and permanently disabled, is unable to work and earn money or attend school during a period of at least 60 days needed to recover from injury or illness. With regard to a disabled dependent of a borrower, this term means a spouse or other dependent who, during a period of injury or illness, requires continuous nursing or similar services for a period of at least 90 days.

Term-Based School: A school that uses standard academic terms, such as semesters, trimesters, or quarters.

Termination: Withdrawal of the eligibility of a school, lender, or servicer to participate in the guarantor’s programs.

Third-Party Servicer: In the case of a lender or guarantor, a state or private for-profit or nonprofit organization or an individual that enters into a contract with the lender or guarantor to administer any aspect of the lender’s or guarantor’s FFELP as required by statutory or regulatory provisions related to part B of Title IV of the Higher Education Act. In the case of a school, a state or private for-profit or nonprofit organization or an individual that enters into a contract with the school to administer any aspect of the school’s participation in any Title IV program.

Three-Times Rule: The federal requirement that no single installment of a graduated or income-sensitive repayment schedule may be more than three times greater than any other installment.

Title IV: A section of the Higher Education Act of 1965, as amended, that authorizes federal loan, work, and grant education financial assistance programs.

Totally and Permanently Disabled – Regular: The condition of an individual who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death, has lasted for a continuous period of not less than 60 months; or can be expected to last for a continuous period of not less than 60 months.

Totally and Permanently Disabled – VA: The condition of an individual who has been determined by the U.S. Department of Veterans Affairs (VA) to be unemployable due to a service-connected condition

Trailer, Summer Term: A summer term that comes at the end of a school’s Scheduled Academic Year.

Transfer: For purposes of defining due diligence time frames, a transfer is any action (such as the sale of a loan) that results in a change of the system used to monitor or conduct collection activities on the loan.

Treasury Bill (T-bill): A note or bill issued by the U.S. Treasury as legal tender for all debts.

Treasury Offset: An interception by the United States Treasury Department’s Financial Management Service or a state agency of any payment of applicable federal funds (tax refunds, Social Security benefits, federal retirement benefits, etc.) or state funds otherwise due a borrower who has defaulted on a FFELP loan.

Unconsummated Loan: Loan proceeds that the school returned to the lender prior to the borrower’s having cashed the check, if an individual check, or the school having applied the proceeds to the student’s account, if included in a master check or EFT transmission. This includes checks that may have been released by the school but remain uncashed by the 120th day following disbursement and EFT and master check transactions that have not been completed by the 120th day following disbursement

Undergraduate Student: A student enrolled at an eligible school who:


Undue Hardship (Adversary Complaint) Petition: A motion to have a loan discharged in a bankruptcy case on the grounds of undue hardship.

Unknown Telephone Number: The lack of any telephone number assigned to a particular borrower, endorser, or reference.

Unsubsidized Loan: A non-need-based loan such as an unsubsidized Federal Stafford loan or a Federal PLUS loan. The borrower is responsible for paying the interest on an unsubsidized loan during in-school, grace, and deferment periods, in addition to repayment periods.

U.S. Citizen or National: The term “citizen” includes all native or naturalized persons who owe allegiance to the United States and are entitled to protection by it. The U.S. includes the fifty states, the District of Columbia, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin Islands. The term "national" includes all U.S. citizens and citizens of American Samoa and Swain’s Island.

Variable Interest Rate: An interest rate that changes, usually annually, according to prescribed methods

Variable Interest Rate Conversion: The conversion of a fixed interest rate to an annually variable interest rate, which carries a federally mandated cap.

Verbal Request: A request that is made orally, as opposed to in writing.

Verification: A school’s procedure for checking the accuracy of information reported by the student on the FAFSA. Verification may include requesting a copy of the tax returns filed by the student and, if applicable, the student’s parents

Week of Instruction: Any period of 7 consecutive days in which the school provides at least one day of regularly scheduled instruction or examinations, or, after the last scheduled day of classes for a term or payment period, at least one day of study for final examinations. Instructional time does not include periods of orientation, counseling, vacation, or homework.

Windfall Profits: Rebate of excess interest for Stafford loans first disbursed before July 1, 1992, or first disbursed to a “new borrower” on or after July 23, 1992, and before October 1, 1992, as required by the Technical Amendments of 1993. If a loan’s fixed interest rate exceeds the current average of bond equivalent rates of 91-day Treasury bills plus a factor (3.25% or 3.10%) for a particular quarter, the lender must calculate an adjustment to excess interest and rebate the difference to the borrower’s account based on a federally prescribed formula.

Withdrawal Date: The date the student withdraws, as determined by the school. The requirements that the school must follow for determining the student’s withdrawal date depend upon whether the school is required to take attendance.

Write-Off: A loan amount for which there has been a total cessation of collection activity.