Wednesday, December 3, 2008

A Student Loan Talk Of The Terms - Student Credit Cards

A Student Loan Talk Of The Terms - Student Credit Cards

Are you a student, relying on student loans to get you through college or university? Or are you just applying for a student loan, looking forward to a higher education? The process of applying for any loan, let alone a student loan, can be confusing if you don't understand the terms that are fired at you. The accounting sector sometimes forgets that you haven't got our education yet - that's why you're applying for a student loan.

So we've compiled this list of student loan terms and definitions to give you an education before your education. You need to know, just like the rest of your studies, exactly what's going on. So read on, and learn.

Accrued interest is the amount of interest, calculated daily, that's accumulated on the unpaid balance of your loan.

Amortization is the process that reduces your loan balance by making monthly payments.
Assets refer to your financial worth, including your home, business, savings and checking account, bonds, stocks, trust funds, real estate, etc.

An award letter is issued by a college's Financial Aid Office (FAO), listing all the financial assistance offered to a student.

A borrower is a person to whom a loan is given with the condition that he repay it. A promissory note is signed as a formal promise to repay the loan. Capitalization occurs when unpaid interest is added to the principal balance of the loan, thus increasing the amount of the loan, and increasing monthly payments.

A co-borrower, a second or additional party, may receive part of the loan proceeds and agrees to repay the loan.

A co-signer signs a promissory note, thus agreeing to pay the loan if the borrower defaults.
The cost of attendance is the total amount a student has to pay, determined by the college's FAO, to attend school for one academic year. It may include tuition, room and board, books, supplies, transportation and personal expenses.

Credit-based loans are based on your credit worthiness as opposed to the Federal Stafford Loans and grants, which are determined by a need analysis process, based mostly on the cost of education. And then Don't forget the Student Credit Card. Default occurs when you fail to pay your loan according to the terms on your promissory note.

Deferment refers to the period of time during your repayment in which you, after meeting certain criteria, aren't required to make your regular monthly payments. If a payment isn't received by the due date, it's considered delinquent.

Direct lending schools are colleges or universities which have chosen to place all their students' federally-insured student loans through the Federal Direct Lending Program.

A disbursement notification marks the successful completion of the loan application process. It informs you that your loan has been approved, and states when the money will be sent, as well as the amount of the loan, including any fees.

A disclosure statement informs the involved parties of the actual cost and terms of a loan, including the interest rate and any additional finance charges.

An emergency loan program provides for a student to get a short-term, low-interest loan, administered by the school's FAO. An exit interview is a counseling session conducted with the school's FAO before a student graduates or withdraws, to review the terms and obligations of a student loan.

The EFC refers to what a family is expected to pay toward the cost of the college loan. It's determined by the FAFSA need analysis formula established by the federal government, and is found on the Student Aid Report (SAR). The FAFSA or, Free Application for Federal Student Aid, is a standard federal form that determines your eligibility for most types of financial aid. Your eligibility is determined by your income, asset, and tax information from you and/or your parents.

The FFEL program is authorized by the federal government in the Higher Education Act of 1965. The loans in this program are funded by lenders, and guaranteed by guaranty agencies; but they're ultimately insured by the federal government.

Forbearance is temporary postponement of payments of the principal of a loan; interest only may be paid, or it may be added on to the end of the loan.

A financial aid package is the total amount of assistance available to the student, including all grants, scholarships, work-study and loans from school, state and federal programs, as listed in a college's financial aid award letter.

Financial need is the difference between the total cost of attendance and the EFC.
The grace period is the amount of time before the principal loan repayment begins after a student graduates, leaves school or drops below half-time status. Payments don't need to be paid during this time.

A guaranty agency is a state or non-profit organization, which insures student loans, pursuant to an agreement with the Secretary of Education under the Higher Education Act.
Interest is a fee charged to borrow money, usually expressed as a percentage of the outstanding amount, which accrues over the life of a loan. A late fee is charged by the lender if a student loan payment isn't received with 15 days of the due date.

An MPN is an agreement the borrower signs that legally binds him to pay the loan, with interest, in periodic installments. Multiple disbursements are paid in more than one transaction.
An origination fee is charged by the federal government on FFEL loans to cover the cost of processing the loan.

The payoff balance refers to the total amount you'd owe if you paid off your entire loan, including the outstanding principal plus interest. The principal is the amount of the loan that has to be repaid; the interest is added to the principal and included in your payment and the Status refers to the condition of a student loan.

An SAR is sent to a student by the government 4-6 weeks after submitting an FAFAS. It lets the student know what he's eligible for as far as the EFC and other financial federal student aid is concerned. The government pays the interest on a subsidized loan while the student is enrolled in school at least half-time and during grace periods and deferment.

With an unsubsidized loan, the borrower always has to pay the interest while he's in school, or during deferment, forbearance and grace periods.

So there you have a comprehensive list of relevant terms. Student loans don't have to be complicated. You have enough to learn once you start your studies. Make sure you understand these terms and you won't have to worry when you apply for a student loan.

Then, using that loan to get a good education, you can move out into the world and work towards your life goals.

By: Henry Mulligan

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2 comments:

Satria Sudeki said...

It is happy to see your posting. Yes really informative article. I will tell this information again to my friend, oh yes I suggest you to check my blog on Student Loan , I hope the article on my blog will be usefull for you… and we can share each other. thank you… ;-)

Loan Modification said...

Thanks for this good post. Borrowing money for college is a big responsibility but college remains a smart investment for obtaining a satisfying career that earns a competitive salary.

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