Glossary

Accrued Interest

Interest that accumulates on the unpaid principal balance of an educational loan.

Award letter

The official notification issued by the financial aid office that lists all of the financial aid awarded or recommended to the student. This letter provides details on the analysis of the student’s financial need and the breakdown of the 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.

Budget

The total estimated amount it should cost the student to attend Columbia University in an acadmic year. Also known as the cost of attendance, this ammount may include tuition, fees, room, board, allowances for books, supplies, transporation, personal and incidental expenses.

Capitalization

The process of adding unpaid interest charges to the principal balance of an educational loan, thereby increasing the amount of the loan. Capitalizing the interest increases the monthly payment and the amount of money the student will eventually have to repay.

Consolidation

The refinancing of multiple federal educational loans into one new loan with a new repayment term and interest rate. For example, the student can borrow a Federal Consolidation Loan (FCL) to pay off some or all of the student’s existing eligible federal student loans (such as Stafford Loans). The FCL has a fixed interest rate with a repayment term of up to 30 years, depending on the total student loan debt. Student borrowers typically consider an FCL either to reduce their monthly loan payments or to take advantage of the fixed interest rate structure, especially when interest rates are low. However, the FCL may result in a higher overall loan cost, due to the increased amount of interest paid over a repayment term longer than the standard 10 years.

Cosigner

An individual who assumes responsibility for the educational loan if the student borrower should fail to repay it.

Cost of attendance
The total estimated amount it should cost the student to attend Columbia University. Also known as the budget, this amount may include tuition and fees, room, board, allowances for books, supplies, transportation, personal and incidental expenses.
 
Credit rating

An evaluation of the likelihood of the student borrower to default on a loan. Borrowers who make all their payments on time are considered good credit risks. Borrowers who are frequently delinquent in making their payments are considered bad credit risks.

Credit score

Today most lenders may use a credit score to determine eligibility for a loan. This is a numerical score based on a statistical analysis of the data contained in a credit report. Lenders that use a credit score typically require applicants to meet a minimum score in order to qualify for their loan program.

Default

A loan is in default when the borrower fails to pay installments on time or otherwise fails to meet the terms and conditions of the loan. If the student defaults on a loan, the holder of the loan can take legal action to recover the money, including garnishing of wages and withholding income tax refunds.

Deferment

A period of time when a borrower is allowed to postpone repaying the principal and/or interest on a loan. Most federal loan programs allow borrowers to defer repaying their loans while they are in school at least half time.

Disbursement

The process of releasing and making available financial aid funds to cover the cost of attendance.

Expected Family Contribution (EFC)

The amount the student and/or their parents are expected to contribute towards the student’s educational expenses as determined by a federally-mandated formula, which uses the information provided on the Free Application for Federal Student Aid Application (FAFSA) or Renewal FAFSA.

Financial aid package

The collection of grants, scholarships, loans, and work-study employment from all sources (federal, state, institutional, and private) that may be offered to the student to enable him/her to attend Columbia University.

Forbearance

A temporary adjustment to the student loan repayment schedule for cases of financial hardship. During forbearance the lender allows the student borrower to temporarily postpone repaying the principal, but the interest continues to accrue. In some cases it may be postponed and in others it must be paid. Forbearance is granted at the lender’s discretion, usually in cases of extreme financial hardship or other unusual circumstances.

Free Application for Federal Student Aid (FAFSA)

The application filed annually by students who are US Citizens or eligible non-citizens to determine their eligibility for federal student aid.

Grace period

A specified period of time after the student graduates or leaves school during which loan payments are not required. The grace period will vary depending on the type of loan.

Guarantee fee

A small percentage of the student loan that is paid to the guarantee agency to insure the loan against default. It is payable by the borrower and deducted from the principal of a loan prior to disbursement of funds or assessed at the time of repayment. Also known as Federal Default fee.

Need-based aid

Grants and loans that are awarded to the student based on the expected family contribution (EFC) as calculated by FAFSA and/or by the school.

Overaward

The total amount of a student’s financial aid awards exceeds his or her financial need or cost of attendance.

Private loan

Education loan programs established by private lenders to supplement the programs available from federal and state governments. These loans typically have a variable interest rate.

Promissory note

The binding legal document that must be signed by the borrower before loan funds are disbursed by the lender. It includes all of the terms and conditions under which the borrower promises to repay the loan

Renewal Free Application for Federal Student Aid (FAFSA)

A Renewal FAFSA is designed for students who applied for aid the previous year.

Selective Service

If required by law, the student must register, or arrange to register, with the Selective Service to receive federal student aid. The requirement to register applies to males who were born on or after January 1, 1960, between the ages of 18 and 25 years old, and are not currently on active duty in the U.S. Armed Forces. (Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau are exempt from registering.)

Subsidized Federal Direct Loan

This loan is awarded based on financial need. The federal government will pay the interest on the Subsidized Federal Direct Loan while the student is in school at least half-time status or during the times when the student qualifies for authorized postponement of loan payments.

Unsubsidized Federal Direct Loan

This loan is not need-based; student borrowers are responsible for interest payments beginning immediately after disbursement, but interest payments may be postponed during the in-school period and added to the principal balance.

Variable interest

In a variable-interest loan, the interest rate changes periodically. For example, the interest rate might be linked to the cost of U.S. Treasury Bills (e.g., 91-day Treasury Bill rate plus 2.30%) and be updated monthly, quarterly, semiannually, or annually.

Verification

The process of confirming accuracy of the data provided on FAFSA. If selected for verification, the student will be required to submit additional documentation.