Glossary of Financial Aid Terms

Term   Categories Index
1040 Form, 1040A Form, 1040EZ Form
The Federal Income Tax Return. Every person who has received income during the previous year must file a form 1040 with the IRS by April 15.
    1
1099 Form
Form used by businesses to report income paid to a non-employee. Banks use this form to report interest income.
    1
401(k)
A popular type of retirement fund. It is legal to borrow money from your 401(k) to help pay for your children's education.
    4
Academic Year
The period during which school is in session, consisting of at least 30 weeks of instructional time. The school year typically runs from the beginning of August through the end of May at most colleges and universities.
    A
Award Letter
An official document issued by a school's financial aid office that lists all of the financial aid awarded to the student. This letter provides details on their analysis of your financial need and the breakdown of your financial aid package according to amount, source and type of aid. The award letter will include the terms and conditions for the financial aid and information about the cost of attendance. You are not required to sign or return the letter; however if you wish to decline any source of aid, please e-mail us at finaid@southalabama.edu with that information. Some schools call the award letter the "Financial Aid Notification (FAN)".
    A
Award Year
The academic year for which financial aid is requested (or received).
    A
Campus-based Aid
Financial aid programs are administered by the University. The federal government provides the university with a fixed annual allocation, which is awarded by the financial aid administrator to deserving students. Such programs include the Federal Perkins Loan, Federal Supplemental Education Opportunity Grant and Federal Work-Study. Note that there is no guarantee that every eligible student will receive financial aid through these programs, because the awards are made from a fixed pool of money. This is a key difference between the campus-based loan programs and the Federal Direct Loan Programs.
    C
College Work-Study (CWS)
Federal College Work-Study is simply a part-time job. This term is sometimes erroneously used to refer to the Federal Work-Study Program.
    C
Cost of Attendance (COA)
(Also known as the cost of education or "budget") The total amount it should cost the student to go to school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses. Loan fees, if applicable, may also be included in the COA. Schools establish different standard budget amounts for students living on-campus, off-campus, in-state and out-of-state students.
    C
Credit Rating
An evaluation of the likelihood of a borrower to default on a loan. Credit bureaus and credit reporting agencies provide this information to banks and businesses to help them decide whether to issue a loan or extend credit. Your credit rating may include your payment history, a list of current and past credit accounts and their balances, employment and personal information and a history of past credit problems.

People who make all their payments on time are considered good credit risks. People who are frequently delinquent in making their payments are considered bad credit risks. Defaulting on a loan can hurt your credit rating.
    C
Custodial Parent
If a student's parents are divorced or separated, the custodial parent is the one with whom the student lived the most during the past 12 months. The student's need analysis is based on financial information supplied by the custodial parent.
    C
Default
A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 270 days) or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, the state government and the federal government can take legal action to recover the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect your credit rating.
    D
Deferment
Occurs when a borrower is allowed to postpone repaying the loan. If you have a Direct Subsidized loan, the federal government pays the interest charges during the deferment period. If you have a Direct Unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If you do not qualify for a deferment, you may be able to get a forbearance. You cannot get a deferment if your loan is in default.
    D
Delinquent
If the borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default.
    D
Direct Loans
A federal student loan, made through the William D. Ford Federal Direct Loan program, for which eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation loans are types of Direct Loans. 

    D
Electronic Funds Transfer (EFT)
Used by some schools and lenders to wire funds for Direct and PLUS loans directly to participating schools without requiring an intermediate check for the student to endorse. The money is transferred electronically instead of using paper, and hence is available to the student sooner. If you have a choice of funds transfer methods, use EFT.
    E
Eligible Non-Citizen
Someone who is not a US citizen but is nevertheless eligible for federal student aid. Eligible non-citizens include US permanent residents who are holders of valid green cards, US nationals, holders of form I-94 who have been granted refugee or asylum status and certain other non-citizens. Non-citizens who hold a student visa or an exchange visitor visa are not eligible for Federal student aid.
    E
Emancipated
To release a child from the control of a parent or guardian. Declaring a child to be legally emancipated is not sufficient to release the parents or legal guardians from being responsible for providing for the child's education. If this were the case, then every parent would "divorce" their children before sending them to college. The criteria for a child to be found independent are much stricter.
    E
Enrollment Status
An indication of whether you are a full-time or part-time student. Generally, you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.
    E
Expected Family Contribution (EFC)
The amount of money that the family is expected to be able to contribute to the student's education, as determined by the Federal Methodology need analysis formula approved by Congress. The EFC includes the parent contribution and the student contribution, and depends on the student's dependency status, family size, number of family members in school, taxable and nontaxable income and assets. The difference between the Cost of Attendance (COA) and the EFC is the student's financial need, and is used in determining the student's eligibility for need-based financial aid.
    E
Federal Methodology
The need analysis formula used to determine the EFC. The Federal Methodology takes family size, the number of family members in college, taxable and nontaxable income and assets into account. Unlike most Institutional Methodologies, however, the Federal Methodology does not consider the net value of the family residence.
    F
Federal Processor
The organization that processes the information submitted on the Free Application for Federal Student Aid (FAFSA) and uses it to compute eligibility for federal student aid. There are two different federal processors serving specific geographic regions.
    F
Federal Work-Study (FWS)
Program providing undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student's salary, making it cheaper for departments and businesses to hire the student. For this reason, work-study students often find it easier to get a part-time job. Eligibility for FWS is based on need. Money earned from a FWS job is not counted as income for the subsequent year's need analysis process.
    F
Financial Aid Package
The complete collection of grants, scholarships, loans and work-study employment from all sources (federal, state, institutional and private) offered to a student to enable them to attend the college or university. Note that unsubsidized Direct loans and PLUS loans are not considered part of the financial aid package, since these financing options are available to the family to help them meet the EFC.
    F
Free Application for Federal Student Aid (FAFSA)
Form used to apply for Pell Grants and all other need-based aid. As the name suggests, no fee is charged to file a FAFSA.
    F
Gift Aid
Financial aid, such as grants and scholarships, which does not need to be repaid.
    G
Grace Period
A short time period after graduation during which the borrower is not required to begin repaying his or her student loans. The grace period may also kick in if the borrower leaves school for a reason other than graduation or drops below half-time enrollment. Depending on the type of loan, you will have a grace period of six months (Direct Loans) or nine months (Perkins Loans) before you must start making payments on your student loans. PLUS Loans do not have a grace period.
    G
Grade Point Average (GPA)
An average of a student's grades, converted to a 4.0 scale (4.0 is an A, 3.0 is a B, and 2.0 is a C).
    G
Grant
A type of financial aid based on financial need that the student does not have to repay.
    G
Half-Time
Most financial aid programs require that the student be enrolled at least half-time (6 hours undergraduate and 3 hours graduate) in classes required for your eligible program. Some programs require the student to be enrolled full-time.
    H
Loan Servicer
A company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of a lender. 
    L
Need
The difference between the Cost of Attendance (COA) and the Expected Family Contribution (EFC) is the student's financial need, or the gap between the cost of attending the school and the student's resources. The financial aid package is based on the amount of financial need. The process of determining a student's need is known as need analysis.
Cost of Attendance (COA) - Expected Family Contribution (EFC) = Financial Need
    N
Need Analysis
The process of determining a student's financial need by analyzing the financial information provided by the student and his or her parents (and spouse, if any) on a financial aid form. The student must submit a need analysis form to apply for need-based aid. Need analysis forms include the Free Application for Federal Student Aid (FAFSA) and the Financial Aid PROFILE.
    N
Need-Based
Financial aid that is need-based depends on your financial situation. Most government sources of financial aid are need-based.
    N
Origination Fee
Fee paid to the bank to compensate them for the cost of administering the loan. The origination fees are charged as the loan is disbursed, and typically run to 4% of the amount disbursed. A portion of this fee is paid to federal government to offset the administrative costs of the loan.
    O
Out-of-State Student
A student who has not met the legal residency requirements for the state, and is often charged a higher tuition rate at public colleges and universities in the state.
    O
Outside Resource
Aid or benefits available because a student is in school and is counted after need is determined. Outside scholarships, prepaid tuition plans and Veterans Affairs (VA) educational benefits are examples of outside resources.
    O
Outside Scholarship
A scholarship that comes from sources other than the school and the federal or state government.
    O
Overaward
A student who receives federal support may not receive awards totaling more than $400 in excess of his or her financial need.
    O
Packaging
The process of assembling a financial aid award offer.
    P
Parent Contribution (PC)
An estimate of the portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university and other relevant factors. Students who qualify as independent are not expected to have a parent contribution.
    P
Parent Loans for Undergraduate Students (PLUS)
Federal loans available to parents of dependent undergraduate students to help finance the child's education. Parents may borrow up to the full cost of their children's education, less the amount of any other financial aid received. PLUS Loans may be used to pay the EFC. There is a minimal credit check required for the PLUS Loan, so a good credit history is required. If your application for a PLUS Loan is turned down, your child may be eligible to borrow additional money under the Direct Unsubsidized Loan program.
    P
Pell Grant
A federal grant that provides funds based on the student's financial need.
    P
Perkins Loan
Formerly the National Direct Student Loan Program, the Perkins Loan allows students to borrow up to $3,000/year (5 year max) for undergraduate school and $5,000/year for graduate school (6 year max). The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The student must have applied for a Pell Grant to be eligible. The interest on the Perkins Loan is subsidized while the student is in school.
    P
Promissory Note
The binding legal document that must be signed by the student borrower before loan funds are disbursed by the lender. The promissory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy and cancellations. The student should keep this document until the loan has been repaid.
    P
Satisfactory Academic Progress (SAP)
A student must meet this status in order to continue receiving federal aid. If a student fails to maintain an academic standing consistent with the school's SAP policy, they are unlikely to meet the school's graduation requirements.
    S
Scholarship
A form of financial aid given to undergraduate students to help pay for their education. Most scholarships are restricted to paying all or part of tuition expenses, though some scholarships also cover room and board. Scholarships are a form of gift aid and do not have to be repaid. Many scholarships are restricted to students in specific courses of study or with academic, athletic or artistic talent.
    S
Scholarship Search Service
A service that charges a fee to compare the student's profile against a database of scholarship programs. Few students who use a scholarship search service actually win a scholarship.
    S
Selective Service System
Registration for the military draft. Male students who are US citizens and are between the ages of 18 and 25 years old must be registered with Selective Service System to be eligible for federal financial aid. If the student did not register and is past the age of doing so (18-25 years old), and the school determines that the failure to register was knowing and willful, the student is ineligible for all federal student financial aid programs. The school's decision as to whether the failure to register was willful is not subject to appeal. Students needing help resolving problems concerning their Selective Service System registration should call 1-847-688-6888 or visit their website at www.sss.gov
    S
Statement of Educational Purpose
A legal document in which the student agrees to use the financial aid for educational expenses only. The student must sign this document before receiving federal need-based aid.
    S
Student Accounting, Office of
The University office that is responsible for the billing and collection of University charges and the disbursement of federal financial aid.
    S
Student Accounts
See PAWS.
    S
Student Aid Report (SAR)
Report that summarizes the information included in the FAFSA. The SAR will also indicate the amount of Pell Grant eligibility, if any, and the Expected Family Contribution (EFC). You should receive a copy of your SAR four to six weeks after you file your FAFSA. Review your SAR and correct any errors on part 2 of the SAR. Keep a photocopy of the SAR for your records. To request a duplicate copy of your SAR, call 1-800-433-3243.
    S
Student Contribution
The amount of money the federal government expects the student to contribute to his or her education and is included as part of the EFC. The SC depends on the student's income and assets, but can vary from school to school. Usually a student is expected to contribute about 35% of his or her savings and approximately one-half of his summer earnings above $1,750.
    S
Subsidized Loan
A loan based on financial need for which the federal government pays the interest that accrues while the borrower is in an in-school, grace, or deferment status. For Direct Subsidized Loans first disbursed between July 1, 2012 and July 1, 2014 the borrower will be responsible for paying any interest that accrues during the grace period. If the interest is not paid during the grace period, the interest will be added to the loan's principal balance. 
    S
Supplemental Education Opportunity Grant
Federal grant program for undergraduate students with exceptional need. To qualify, a student must also be a recipient of a Federal Pell Grant.
    S
Unmet Need
In an ideal world, the Financial Aid Office would be able to provide each student with the full difference between their ability to pay and the cost of education. Due to budget constraints the Financial Aid Office may provide the student with less than the student's need (as determined by the Financial Aid Office). This gap is known as the unmet need.
    U
Unsubsidized Loan
A federal loan for which the government does not pay the interest. The borrower is responsible for the interest on an Direct Unsubsidized Loan from the date the loan is disbursed, even while the student is still in school. Students may avoid paying the interest while they are in school by capitalizing the interest, which increases the loan amount. Direct Unsubsidized loans are not based on financial need and may be used to finance the family contribution. 
    U