Glossary of Financial Aid Terms

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Acronyms

Packaging: The process of assembling a financial aid package.

Parent Contribution (PC): An estimate of the portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university and other relevant factors. Students who qualify as independent are not expected to have a parent contribution.

Parent Loans for Undergraduate Students (PLUS): Federal loans available to parents of dependent undergraduate students to help finance the child's education. Parents may borrow up to the full cost of their children's education, less the amount of any other financial aid received. PLUS Loans may be used to pay the Expected Family Contribution (EFC). There is a minimal credit check required for the PLUS loan, so a good credit history is required. Check with your local bank to see if they participate in the PLUS loan program. If your application for a PLUS loan is turned down, your child may be eligible to borrow additional money under the Unsubsidized Stafford Loan program.

Pell Grant: A federal grant that provides funds of up to $2,340 based on the student's financial need.

Perkins Loan: The Perkins Loan allows students to borrow up to $3,000/year (5 year max) for undergraduate school and $5,000/year for graduate school (6 year max). The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The student must have applied for a Pell Grant to be eligible. The interest on the Perkins Loan is subsidized while the student is in school.

Prepayment: Paying off all or part of a loan before it is due.

Principal: The amount of money borrowed or remaining unpaid on a loan. Interest is charged as a percentage of the principal. Insurance and origination fees will be deducted from this amount before disbursement.

Private Loans: Education loan programs established by private lenders to supplement the student and parent education loan programs available from federal and state governments.

Professional Judgement (PJ): For need-based federal aid programs, the financial aid administrator can adjust the Expected Family Contribution (EFC), adjust the Cost of Attendance (COA), or change the dependency status (with documentation) when extenuating circumstances exist. For example, if a parent becomes unemployed, disabled or deceased, the Financial Aid Administrator (FAA) can decide to use estimated income information for the award year instead of the actual income figures from the base year. This delegation of authority from the federal government to the financial aid administrator is called Professional Judgement (PJ).

Promissory Note: The binding legal document that must be signed by the student borrower before loan funds are disbursed by the lender. The promissory note states the terms and conditions of the loan, including repayment schedule, interest rate, deferment policy and cancellations. The student should keep this document until the loan has been repaid.

Preliminary Scholastic Assessment Test (PSAT/NMSQT): The PSAT is taken during the junior year as practice for the SAT. Scores on the PSAT are used to select semi-finalists for the National Merit Scholarship program.