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Higher Education and Financial Aid Terms

A bit confused about the all the financial aid jargon thrown around? We have you covered! Below is a list of commonly used terms you may want to become familiar with.

Academic Record: Academic information kept on file by the school. This record includes transcripts of grades, test scores, and related academic materials.

Academic Year: The student's enrollment period for which financial assistance/aid is awarded. The federal definition of an academic year is July 1 through June 30.

Accreditation: Confirms that the college or career school meets certain minimum academic standards, as defined by an accrediting body recognized by the U.S. Department of Education. Schools must be accredited to be eligible to participate in federal student aid programs.

Accrued Interest: The interest that accumulates on the unpaid principal balance of a loan.

Adjusted Gross Income (AGI): Your or your family’s income figure found on federal tax returns used to perform financial need analysis. 

Asset: An asset is property with a financial value, such as bank and brokerage accounts, cash, stocks, bonds, mutual funds, money market accounts, certificates of deposit, trusts, tax shelters, college savings plans, real estate, businesses, retirement plans, life insurance policies, and income-producing property. Some assets, such as qualified retirement plan accounts, are not reported on financial aid application forms.

Associate Degree: An undergraduate academic degree granted after completion of two years of study. Community colleges and career colleges generally award associate degrees.

Award Letter (see Also Financial Aid Offer): An offer from a college or career school that states the type and amount of financial aid the school is willing to provide if you accept admission and register to take classes at that school.

Award Year: The school year for which financial aid is used to fund your education.

Bachelor’s Degree: An undergraduate academic degree awarded for a course of study that generally lasts four years. Colleges or universities generally award bachelor’s degrees.

Borrower: A person who obtains a loan and who is responsible for repaying it.

Cancellation: When the federal government pays a student borrower’s loan debt due to the borrower’s death or total and permanent disability.

Capitalization: The addition of unpaid interest to the principal of a loan, which increases the total outstanding debt.

Certificate: Recognition provided to a student for completion of a short-term vocational or career training program, usually a year or less in length.

College: A postsecondary educational institution where students study to earn two- or four-year undergraduate degrees.

Community and Technical Colleges: Public educational institutions that offer certificate programs (one year or less) and associate degrees (two years). Students may transfer from a community college to a four-year school.

Consolidation: The process of combining one or more loans into a single new loan.

Cost of Attendance (COA): The cost of attendance is the full one-year cost of enrolling in college. It includes direct (required) costs, such as tuition and required fees, room and board, textbooks and supplies, as well as indirect (discretionary) costs, such as travel and transportation, personal expenses, computer, student health insurance, and dependent care. Contact the financial aid administrator at the school you’re planning to attend if you have any unusual expenses that might affect your COA.

Credit Hour: A unit of academic credit that often represents one hour of class time per week for a period of study (semester, quarter, etc.).

Default: Failure to repay a loan according to the terms agreed to in the promissory note. For most federal loans, you will default if you have not made a payment in more than 270 days.

Deferment: A postponement of payment on a loan that is allowed under certain conditions. Depending on the type of loan, interest may or may not accrue during deferment.

Delinquent: A loan is delinquent when loan payments are not received by the due dates. A loan remains delinquent until the borrower makes up the missed payment(s) through payment, deferment, or forbearance.

Dependency Status: The determination of a Free Application for Federal Student Aid (FAFSA) applicant as dependent or independent.

Dependent Student: A student whose parent’s information is required on the FAFSA.  Dependent students do NOT meet any of the following criteria:


  • Is at least 24 years old by December 31 of the school year
  • Is a graduate or professional student
  • Is a married person
  • Has legal dependents other than a spouse
  • Is a veteran of the U.S. Armed Forces
  • Is an orphan or ward of the court
  • An emancipated minor or someone who is homeless or at risk of becoming homeless


Diploma: A document issued by a school, college, or university to students who have met coursework and graduation requirements for a degree.

Disbursement: A transaction in which the school releases financial aid funds to a student’s account.

Eligible Noncitizen: A U.S. national (includes natives of American Samoa or Swains Island), U.S. permanent resident (who has an I-151, I-551, or I-551C [Permanent Resident Card]), or an individual who has an Arrival-Departure Record (I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:


  • “Refugee”
  • “Asylum Granted”
  • “Cuban-Haitian Entrant (Status Pending)”
  • “Conditional Entrant” (valid only if issued before April 1, 1980)
  • Victims of human trafficking, T-visa (T-2, T-3, T-4, etc.) holder
  • “Parolee” (You must be paroled into the United States for at least one year and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose and that you intend to become a U.S. citizen or permanent resident.)


If you meet the noncitizen criteria above, you are eligible to receive federal and state student aid. If you are unsure of your eligibility, please check with your school’s financial aid office for more information.  Also, see “WASFA”.

Eligible Program: A program of organized instruction or study of a certain length that leads to an academic, professional, or vocational degree or certificate, or other recognized education credential.

Entrance Counseling: A mandatory information session which takes place before you receive your first federal student loan. This session explains your right and responsibilities as a student borrower.

Exit Counseling: A mandatory information session which takes place when you graduate or attend school less than half-time that explains your loan repayment responsibilities and when repayment begins.

Expected Family Contribution (EFC): The amount a family can reasonably expected to pay for a student’s education, based on the information contained in the Free Application for Federal Student Aid (FAFSA) and a federal need-analysis formula. Your EFC is reported to you on your Student Aid Report (SAR).

FAFSA: Federal Application for Federal Student Aid, the standard form students must complete to apply for federal and state need-based assistance/aid programs and, in some circumstances, campus-based assistance/aid. 

FAFSA4caster: An online tool that provides an early estimate of your federal student aid eligibility to help you financially plan for college. Go to FAFSA4caster 

Federal Aid: Student financial assistance/aid programs funded by the U.S. government and administered by the U.S. Department of Education.

Federal Student Aid Ombudsman Group: If you’ve completed the steps to resolve your loan dispute and you still are not satisfied, you may need to contact the Federal Student Aid (FSA) Ombudsman Group of the U.S. Department of Education (ED). The Ombudsman Group is a neutral, informal, and confidential resource to help resolve disputes about your federal student loans. The contact information is 1-877-557-2575 or

Fee Waiver: An application. Students may qualify to have fees for a college application and/or an SAT/ACT admission test deferred if they can show proof of financial need, such as eligibility for the school free- or reduced-price lunch program. See your high school counselor.

FERPA: Family Educational Rights and Privacy Act of 1974. The purpose of the law is to ensure educational records are kept private and guarantee access to these records by parents. FERPA states that educational records are private. In general, the only person who can authorize publication of educational records is the student’s parent(s) or an "eligible student."

Financial Aid: Financial aid is money to help families bridge the gap between the expected family contribution and the cost of attendance. It includes gift aid and self-help aid.

Financial Aid Offer: The total amount of financial aid (federal and non-federal) a student is offered by a college or career school. The school’s financial aid staff combines various forms of aid into a “package” to help meet a student’s educational costs. This offer is shown on the Award Letter.

Financial Aid Office: The office at a college or career school that is responsible for preparing and communicating information on financial aid. This office helps students apply for and receive student loans, grants, scholarships, and other types of financial assistance/aid.

Financial Need: The difference between a student’s total Cost of Attendance (COA) and the Expected Family Contribution (EFC) is a student’s financial need. A student must demonstrate financial need to be eligible for need-based financial assistance/aid programs.

Forbearance: Permission to postpone or reduce loan payments due to certain types of financial hardships. 

Forgiveness: A cancellation of a debt, usually for working in a particular occupation, such as a public service job, teaching in a national shortage area, or serving in the military.

Free Application for Federal Student Aid: See FAFSA.

General Educational Development (GED) Certificate: A certificate that students receive if they’ve passed a specific, approved high school equivalency test. Students with a GED certificate are eligible to receive federal and state student aid.

Gift Aid: Financial assistance/aid, such as scholarships, grants, and waivers, that do not have to be repaid. Gift aid will vary by college, depending on available funds.

Grace Period: A period of time after borrowers graduate, leave school, or drop below half-time enrollment where they are not required to make payments on certain federal student loans. Some loans will accrue interest during the grace period, and if the interest is unpaid, it will be added to the principal balance of the loan when the repayment period begins.

Graduate Student: Also known as a Professional Student; A student who is enrolled in a course of study that is beyond the bachelor's degree level or is enrolled in a program leading to a first professional degree

Grant: A grant is a form of gift aid, usually based on financial need. The Federal Pell Grant is the largest need-based college grant program. A grant does not need to be repaid, unless, for example, you withdraw from a school and owe a refund).

Income Based Repayment (IBR): A repayment plan for the major types of federal student loans that caps your required monthly payment at an amount intended to be affordable based on your income and family size.

Independent Student: An independent student is one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse, an emancipated minor, or someone who is homeless or at risk of becoming homeless.

Interest: A loan expense charged for the use of borrowed money. Interest is paid by a borrower to a lender. The expense is calculated as a percentage of the unpaid principal amount of the loan.

Interest Rate: The percentage at which interest is calculated on your loan(s).

Legal Guardianship: A relationship created by court order, through which the court appoints an individual other than a minor's parent to take care of the minor. A legal guardian is not considered a parent on the student's FAFSA. In fact, a student in legal guardianship does not need to report parent information on the FAFSA because he or she is considered an independent student.

Loan: A loan is borrowed money that must be repaid, usually with interest.

Loan Forgiveness: The cancellation of all or some portion of your remaining federal student loan balance. If your loan is forgiven, you are no longer responsible for repaying that remaining portion of the loan.

Loan Servicer: A company that collects payments on a loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a loan on behalf of a lender.  If you're unsure of who your federal student loan servicer is, you can look it up on

Master Promissory Note: A promissory note is a legal contract in which the borrower agrees to repay the loan. It specifies the terms of the loan, such as the interest rates and fees. The Master Promissory Note is a promissory note that is effective for a continuous period of enrollment up to 10 years.

Merit-Based Aid: Merit-based aid is based on academic, artistic or athletic talent or other student attributes or activities.

National Student Loan Data System (NSLDS): A centralized database, available at, which stores information on federal grants and loans. NSLDS contains information on how much aid you've received, your enrollment status, and your loan servicer(s). You can access NSLDS using your Federal Student Aid PIN.

Need-Based Aid: Aid based on a student's financial need. Example: A need-based grant might be awarded based on a student's low income.

Net Price: An estimate of the actual cost that a student and his family need to pay in a given year to cover education expenses for the student to attend a particular school.  Net price is determined by taking the institution's cost of attendance and subtracting any grants and scholarships for which the student may be eligible.

Net Price Calculator: A tool that allows current and prospective students, families, and other consumers to estimate the net price of attending a particular college or career school.

Parent Loans for Undergraduate Students (PLUS Loan): Federal Parent Loans for Undergraduate 

Students Loan Program: A loan program that is not need-based and is designed for parents with dependent students and graduate and professional students.

Passport to College: Washington’s scholarship available to eligible youth from foster care.

Postsecondary: After graduation from high school (secondary school). Colleges, universities, and other institutions of higher education are often referred to as “postsecondary institutions.”

Principal: The total sum of money borrowed plus any interest that has been capitalized.

Private Loan: A private student loan is made and funded by a private lender, such as a bank or other financial institution. Private student loans tend to be more expensive than federal loans and have less flexible repayment terms.

Professional Judgment (PJ): Professional judgment is a process by which the college financial aid administrator reviews unusual circumstances to determine a possible adjustment to the need-based financial aid package. Unusual circumstances include changes in the family’s financial situation from the previous year, such as job loss, salary reductions and death of a wage earner, as well as anything that distinguishes the family from typical families, such as high-unreimbursed medical expenses, high childcare or eldercare costs or private K-12 tuition. If the financial aid administrator decides that the unusual circumstances are worthy of consideration, the adjustments to the data elements on the FAFSA or cost of attendance will be based on the financial impact of the unusual circumstances on the family. This may then yield a new EFC which will lead to a new or revised financial aid package.

Promissory Note: The binding legal document that you must sign when you get a federal student loan. It lists the terms and conditions under which you agree to repay the loan and explains your rights and responsibilities as a borrower. It’s important to read and save this document because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.

Proprietary School: A private for-profit school that provides education and training.

Public Institution: A school that is tax supported. Tuition costs are less for students who live in the same state as the school.

Room and Board: An allowance for the cost of housing and food while attending college or career school.

Satisfactory Academic Progress (SAP): To remain eligible for most types of financial assistance/aid, students must maintain satisfactory academic progress as defined by the postsecondary institution.

Scheduled Award: The maximum grant amount you are eligible to receive for the award year if you are enrolled full-time for the full school year.  This amount is calculated from the information you (and your family) provided when you filed your FAFSA.

Scholarship: Money awarded to students based on academic or other achievements to help pay for education expenses.  Scholarships generally do not have to be repaid.

Self-Help: Self-help aid is financial aid that depends on the family’s resources. It includes student loans (which have to be repaid, usually with interest) and student employment.

State Aid: Financial assistance/aid programs funded and administered by the state.

State Need Grant: In 2019 Legislature established the Washington College Grant (WCG) program to replace the State Need Grant. See Washington College Grant below. 

Student Aid Report (SAR): A summary of the information you submitted on your Free Application for Federal Student Aid (FAFSA). You receive this report (often called the SAR) via e-mail a few days after your FAFSA has been processed or by mail within 7-10 days if you did not provide an e-mail address. If there are no corrections or additional information you must provide, the SAR will contain your EFC, which is the number that's used to determine your eligibility for federal student aid.

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.

Tuition: The cost of attending classes at a college, university, or vocational school. Tuition does not include room and board.

Undergraduate degrees: Two-year (Associate’s) or four-year (Bachelor’s) degrees.

Undergraduate student: A college student who has not yet received a Bachelor’s degree.

Unmet Need: The unmet need, sometimes called a gap, is the difference between the full demonstrated financial need and the student’s need-based financial aid package. (Unmet Need = Financial Need – Financial Aid)

Unsubsidized Loan: A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.

Verification: The process your school uses to confirm that the data reported on your FAFSA is accurate. Your school has the authority to contact you for documentation that supports income and other information that you reported.

Washington Application for State Financial Aid (WASFA): The application available to eligible non-citizens for the Washington College Grant (formerly State Need Grant) program.

Washington College Grant: Formerly known as the State Need Grant. Provides need-based financial aid to income-eligible students pursuing postsecondary education. Apply via FAFSA or WASFA

Work-Study: A financial aid program that allows a student to work on-campus or with approved off-campus employers to earn money to pay for college expenses. Federal Work-Study is funded by a federal grant to the school; State Work-Study is funded by Washington State; the school funds campus work-study programs.

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