Financial Aid Terminology in Plain English

One of the first steps in higher education is building a financial plan. To do that, you need to understand the terminology used by financial aid and admissions officers.

What’s a CSS Profile—and how is it different than the standard FAFSA form? Do you have to pay back grants? And what’s actually included in a college’s sticker price? You have questions, we have answers. Get started below with our categorized list of financial aid terms.

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General

• Cost of attendance (COA) or Sticker Price: The total amount it costs to go to school, including direct fees like college tuition as well as indirect, general living expenses like books and supplies. Keep in mind that COA/sticker price does not factor in financial aid, including scholarships, grants, or student loans.
• Direct costs: The total amount of direct expenses that the school will bill you for, including tuition, fees, and room and board (if you're living on campus).
• Net price: The school's cost of attendance minus any grants or scholarships you may receive.
• Net price calculator: An online tool that determines your net price at a specific school. Keep in mind that not all net price calculators are personalized, many are based on averages. Here at Meadow, we’ve created our own detailed and accurate net price calculator that is easy to use and reliable for every school.
• Financial need: The school's Cost of Attendance minus your Expected Family Contribution. Financial need determines your eligibility for financial aid and the amount you could receive.

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Applying for Financial Aid

• Appeal: Sometimes, a family’s financial circumstances change after they’ve filed their FAFSA. In these cases, they can file an appeal at a college’s financial aid office to ask for additional assistance.
• Application fee: Most colleges charge between $30 and $90 to process an application.
• Award letter: A letter sent to admitted students that breaks down the net price for attendance. Many also include college grants, scholarships, work-study programs, and loan options that a student is eligible to pursue.
• Independent student: Students who are financially independent of their parents. This applies to all students over the age of 24 and/or in graduate programs. Common undergraduate independent students: veterans or active in the military, were in foster care before the age of 13, were legally considered homeless, are an emancipated minor, or have a legal guardian other than a parent or a stepparent.
• Satisfactory Academic Progress A standard of academic performance a student must maintain to keep financial aid like scholarships and grants. The most common factors are grades and attendance.

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FAFSA

(Free Application for Federal Student Aid)

• Federal Student Aid: Branch of the US Department of Education that is responsible for processing FAFSA forms and assigning EFC numbers to each application.
• Expected Family Contribution (EFC): The amount of money that a family and student will contribute towards college expenses. The Federal Student Aid Office determines this number based on each FAFSA
• CSS profile: An additional form added to FAFSA applications that some colleges require. A CSS profile provides more financial information to schools, which helps them finalize their award letters. They are mostly used by highly selective private schools.
• Custodial account: An account that is opened and managed on behalf of someone else. Many parents open a 529 plan on behalf of their children to help them save for college, which is a type of custodial account.
• Student Aid Report (SAR): A summary of the information on a FAFSA form that colleges receive and use to determine a student’s financial aid

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Student Loan Information

• College loan: A rare type of loan that a college offers to a student. They vary greatly in terms of interest and repayment conditions.
• Direct loan: A federal loan from the Department of Education to students who complete a FAFSA
• Subsidized direct loan: A type of direct loan that doesn’t accrue interest until six months after a student graduates. Interest rates are lower on subsidized direct loans. These are only available to undergraduate students who demonstrate financial need.
• Unsubsidized direct loan: A type of direct loan that starts accruing interest immediately.
• PLUS loan (Parent Loan to Undergraduate Students): A common type of federal loan that parents take out instead of students. The PLUS Loan is not based on financial need. Interest accrues immediately and repayment starts immediately. A PLUS loan will not lower a college’s net price like a grant or scholarship would.
• Perkins loan: A federally funded loan given to a student from a college. Colleges tend to offer them to the first students that demonstrate great financial need. Students begin repayment nine months after graduating.
• Private education loan: A student loan from a non-federal institution, like a bank. These have higher rates of interest and require a co-signer.
• Interest rate (Fixed vs. Variable): The monthly rate of interest charged on a loan. Fixed rates do not change, while a variable interest rate will change over time.

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Student Loan Repayment

• Extended repayment: A way to pay a direct loan over a large period of time. Students with debts higher than $30,000 can opt to pay them off over a ten to thirty-year period, which means they pay less each month. This is one of the lowest repayment methods.
• Graduated repayment: A way to pay a direct loan that starts low and then scales up after two-year periods.
• Income-based repayment: A way to pay a direct loan that factors in a student’s monthly income. This is one of the lowest repayment methods.
• Standard repayment: A way to pay a direct loan over the course of ten years. This is the most common type of repayment plan.
• Annual Percentage Rate (APR): The total sum you pay for borrowing money each year, including interest and student loan
• Consolidation (or Refinancing): Combining multiple debts so they are payable to a single bank or institution. Consolidation is considered refinancing if the loan’s interest rate lowers.
• Default: Being unable to pay back a student loan. Defaults are triggered after missing payments for over 270 days for direct loans.
• Principle: The sum of money borrowed for a student loan. Principle does not include the APR.

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College Scholarships

• Local scholarships: Offered to students from a private local entity. These are some of the least competitive scholarships due to the small pool of applicants.
• Regional Scholarships: Offered to students from a private regional entity, which could be a city, state, or region.
• National Scholarships: Offered to students from private institutions nationwide. These scholarships are highly competitive because of the large pool of applicants.
• Merit scholarships: Offered to students from colleges based on special academic and athletic talents.
• Military scholarships: Offered to military personnel. Military scholarships cover direct costs like tuition, fees, books, and certain supplies, along with a monthly allowance. Some college scholarships are only available for military institutions, such as West Point Academy.
• Private scholarships: Offered to students from private institutions based on a wide range of criteria. These criteria may be based on religion, ethnicity, community service pledges, and more.
• Workplace scholarships: Offered to students from a parent’s employer.

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College Grants & Work Study Programs

• College grant: Money awarded from the federal government, a college, or a private institution to help cover college tuition costs. Grants do not need to be repaid.
• State grant: Money awarded to a student from their state of residence. State grants are given based on financial need. They may require students to attend a specific type of college, whether private or public.
• Need-based grants: Money awarded to a student based on their financial need.
• Pell Grant: A common federal grant that is determined by a student’s EFC number. Eligibility for Pell Grants is reevaluated each year, which means students must re-file their FAFSA
• Gift aid: Money awarded to a student from a college that reduces the cost of attendance. Like a grant, it does not need to be repaid.
• Work-study or Campus Employment: A type of financial assistance offered by the federal government, colleges, and/or private organizations that lowers the cost of attendance for a student. In exchange, students are expected to perform a job on campus or nearby.

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