Glossary of Financial Aid Terms

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Acronyms

Debt-Management Counseling: Counseling provided to a student about debt and accumulated indebtedness. Counseling is required both before the student receives the first disbursement of the student's first loan, often referred to as entrance counseling, and when the student is scheduled to complete an academic program, commonly referred to as exit counseling.

Default: A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 180 days) or otherwise fails to meet the terms and conditions of the loan. If you default on a loan, the university, the holder of the loan, the state government and the federal government can take legal action to recover the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect your credit rating.

Deferment: Occurs when a borrower is allowed to postpone repaying the loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If you don't qualify for a deferment, you may be able to get a forbearance. You can't get a deferment if your loan is in default.

Delinquent: If the borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default.

Dependency Status: Determines to what degree a student has access to parent financial resources. Dependent For a child or other person to be considered your dependent, they must live with you and you must provide them with more than half of their support. Spouses do not count as dependents in the Federal Methodology.

Disbursement: The release of loan funds to the school for delivery to the borrower. The payment will be made via EFT (Electronic Funds Transfer) to the school. Loan funds are first credited to the student's account for payment of tuition, fees, room and board and other school charges. Any excess funds are then paid to the student in form of a check, which is mailed to the student.

Discharge: To release the borrower from his or her obligation to repay the loan. See also Cancellation.

Disclosure Statement: Provides the borrower with information about the actual cost of the loan, including the interest rate, origination, insurance, loan fees and any other types of finance charges. Lenders are required to provide the borrower with a disclosure statement before issuing a loan.

Due Diligence: If a borrower fails to make payments on their loan according to the terms of the promissory note, the federal government requires the lender, holder or servicer of the loan to make frequent attempts to contact the borrower (via telephone and mail) to encourage him or her to repay the loan and make arrangements to resolve the delinquency. The lender must document the performance of these attempts, and the attempts must be at least as forceful as those generally used for consumer loans.