Student Financial Aid and Scholarships

College Level Examination Program; a College Board program that offers standardize tests in various subjects as an opportunity to earn college course credits.

Campus-based 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 Perkins Loan, Supplemental Education Opportunity Grant, and 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 the key difference between the campus-based loan programs and the Federal Direct Loan Program. Do not confuse the two, even though both loans are issued through the schools.

Some loan programs provide for cancellation of the loan under certain circumstances, such as death or permanent disability of the borrower. Some of the Federal student loan programs have additional cancellation provisions. For example, if the student becomes a teacher in certain national shortage areas, they may be eligible for cancellation of all or part of the balance of their educational loans. Repayment assistance is available if you serve in the military. The military pays off a portion of your loans for every year of service.

A capital gain is an increase in the value of an asset such as stocks, bonds, mutual funds, and real estate between the time the asset was purchased and the time the asset was sold.

The practice of adding unpaid interest charges to the principal balance of an educational loan, thereby increasing the size of the loan. Interest is then charged on the new balance, including both the unpaid principal and the accrued interest. Capitalizing the interest increases the monthly payment and the amount of money that will eventually have to be repaid. If it is not affordable to pay the interest as it accrues, students are better off not capitalizing it. Capitalization is sometimes called compounding.

Collateral is property that is used to secure a loan. If the borrower defaults on the loan, the lender can seize the collateral. For example, the house purchased with the loan usually secures a mortgage.

A collection agency is often hired by the lender or guarantee agency to recover defaulted loans.

The College Board is a nonprofit educational association of colleges, universities, educational systems, and other educational institutions.

See Federal Work-Study

A student who lives at home and commutes to school every day.

Compounded interest is interest that is paid on both the principal balance of the loan and on any accrued (unpaid) interest. Capitalizing the interest on an unsubsidized Stafford loan is a form of compounding.

A consolidation loan combines several student loans into one bigger loan from a single lender. The consolidation loan is used to pay off the balances on the other loans. Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with Direct loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. Of course, extending the term of a loan increases the total amount of interest paid.

Consolidation loans also simplify the repayment process by allowing a single payment to one lender instead of several payments to different lenders. In certain circumstances - when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements - a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years.

In effect, the shorter term loan is being extended to 10 years. Of course, this means that the total amount of interest paid will increase. On the other hand, if you consolidate and opt to pay the same monthly payment as before, the total amount of interest paid will decrease. Some graduate students have found it necessary to consolidate their educational loans when applying for a mortgage on a house. Consolidation loans can sometimes result in a lower interest rate, as when a consumer loan is used to pay off credit card balances. With educational loans, however, consolidation usually results in the same or higher interest rate. The interest rate on a consolidation loan is a weighted average of the interest rates on the consolidated loans, rounded up to the nearest whole percentage. Aside from the simplification of the repayment process, consolidation is usually not in the student's best interest. Instead, students who are having trouble making their payments should consider some of the alternative repayment terms provided for Direct loans by the Higher Education Act of 1992. Income contingent payments, for example, are adjusted to compensate for a lower monthly income. Graduated repayment provides lower payments during the first two years after graduation. Extended repayment allows you to extend the term of the loan without consolidation. Although each of these options increases the total amount of interest paid, the increase is less than that caused by consolidation.

In a cooperative education program, the student spends some time engaged in employment related to their major in addition to regular classroom study.

A cosigner on a loan assumes responsibility for the loan if the borrower should fail to repay it.

The cost of attendance (COA), also known as the cost of education or "budget," is the total amount it should cost the student to go to school. This amount includes tuition and fees, room and board, and allowances for books and supplies, transportation, and personal and incidental expenses. Loan fees, if applicable, may also be included in the COA. Child care and expenses for disabilities may also be included at the discretion of the financial aid administrator. Schools establish different standard budget amounts for students living on-campus and off-campus, and in-state and out-of-state students.

A credit rating is an evaluation of the likelihood of a borrower to default on a loan. Credit Bureaus and Credit Reporting Agencies provide credit information to creditors, such as banks and businesses, to help them decide whether to issue a loan or extend credit. This information 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 negatively impact your credit rating. A good credit rating is not required for most educational loans, with the exception of the PLUS Loan. However, students who have defaulted on previous educational loans may be required to agree to repay the loan and begin making payments before they can become eligible for further Federal aid.

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.