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Glossary
Accrual date - the date
interest begins to accumulate on a loan.
Capitalization - unpaid accrued interest is added to
the outstanding principal balance of a loan. when interest is capitalized,
the loan balance increases as well as the subsequent interest charges
applied to the new balance.
Consolidation - when you consolidate, a lender pays
off al of your student loans and issues a new, single loan for the
total amount. This may give you a lower monthly payment, but can
extend your repayment term and increase your total cost.
Default - is failure to repay loans according to the
terms agreed upon in your promissory note. A federal education loan
is considered in default 270 days past due. If you default on your
loan, the school, lender, state and federal government can all take
action to recover the money.
Deferment - a temporary postponement of your repayment
obligations. The government pays the interest on Subsidized Stafford
and Perkins loans during deferment. For all other loans, interest
continues to accrue and will be added to the principal balance of
the loan and must be repaid by the borrower.
Delinquency - failure to make a payment on time. Delinquency
may result in late fees, negative credit reporting and could lead
to default if payment is more than 270 days overdue.
Disbursement - when the lender releases funds to the
school on your behalf.
Disclosure Statement - information about the actual
cost of the loan., including interest rate, origination, loan fees
and other types of finance charges. Lenders are required to issue
this statement before issuing the loan.
Forbearance - temporary reduction or postponement of
repayment obligations. Interest charges continue to accrue. Forbearances
are granted at the discretion of the lender, typically in cases
of financial hardship or other circumstances.
Grace Period - the time period between the date you
leave school or drop below half-time attendance and the date you
are required to begin repaying your loan.
Holder - the institution that owns title to your loan.
Interest - the fee charged to the borrower of a loan
for the privilege of using the lender's money. Interest is calculated
as a percentage of the principal balance.
Lender - the institution that provides the loan to
the borrower.
Loan - total amount of money borrowed.
Master Promissory Note (MPN) - the legally binding
document signed during application for educational loans. The MPN
is a contract between the borrower and lender stating the conditions
under which the loan was made and terms under which they must be
repaid.
Principal - total amount of money borrowed.
Repayment - the period during which interest accrues
on the loan and principal payments are required. For Federal Stafford,
PLUS and Perkins loans, the repayment period excludes any period
of authorized deferment or forbearance; however, interest will continue
to accrue during these periods for unsubsidized Stafford, PLUS loans.
Repayment Schedule - a statement provided by the holder
of your loans prior to the beginning of repayment which outlines
the total amount borrowed, scheduled monthly payments and required
due dates.
Servicer - an organization that collects payments and
tracks a loan on behalf of the holder.
Term - the number of years (or months) loans are to
be repaid.
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