10-Day Payoff: An information field on the Account Summary screen of PPSLC's Online Account Access. The 10-Day Payoff amount is equal to the current principal balance of your loans plus the current accrued interest and 10 days of daily interest. (The 10 days of daily interest takes into account the interest which accrues during the time the payoff check is in transit between the borrower and PPSLC.)

Academic Year: A period of at least 30 weeks of instructional time that begins on the first day of classes and ends on the last day of classes or examinations. During this time a full-time student is expected to complete at least 24 semester hours, 36 quarter hours or 900 clock hours.

Automatic Draft (or Direct Repay): Method of repayment in which the borrower authorizes the automatic transfer of funds from a checking or savings account to cover monthly education loan payments.

Capitalization: Adding unpaid accrued interest charges to the principal balance of a loan, thereby increasing the loan's principal balance. Capitalization also increases the amount of the monthly payments and the total amount repaid over the life of the loan. Borrowers can choose to pay the interest as it accrues, rather than having it capitalized.

Consolidation: Consolidation loans allow you to combine some or all of your outstanding education loans into one new loan with a new promissory note. The original loans are paid in full. Consolidating multiple educational loans has both advantages and disadvantages.

Advantages: Consolidation allows you to extend your repayment period and lower your monthly payments.

Disadvantages: Consolidation may result in fewer deferment options as well as a higher interest rate. In addition, you will pay more interest on your debt over the life of the loan since a consolidated loan has a longer repayment period.

Cost of Education or Cost of Attendance (COA): The total estimated amount it will cost a student to go to school for the academic year. COA includes tuition and fees, room and board (or housing and food for off-campus students), and allowances for books, supplies, transportation, child care, and miscellaneous expenses. The financial aid administrator at the school can increase the COA to allow for certain unusual expenses, such as medical expenses, child care costs, etc., if the situation warrants. Documentation of these unusual expenses is usually required.

Current Accrued Interest: An information field on the Account Summary screen of PPSLC's Online Account Access. This field shows the amount of interest that has accumulated on the unpaid principal balance of your loans (as of the close of business the previous day).

Daily Interest Amount: An information field on the Account Summary screen of PPSLC's Online Account Access. This field shows the amount of interest which accrues on the unpaid balance of your student loans each day.

Default: The failure of a borrower to make monthly installment payments when due for a period of 270 days. The borrower can avoid default by making special arrangements with the lender to suspend payment (see deferments and forbearances). Click here for more information on the consequences of default.

Deferment: A period of time during repayment in which the borrower, upon meeting certain conditions, is not required to make payments on the principal of a guaranteed student loan. The interest payments on subsidized Stafford loans are made by the federal government during these authorized periods. The borrower is responsible for the interest payments on unsubsidized Stafford loans and PLUS loans. Borrowers must request a deferment either verbally or on a form provided by the lender or servicer, and must provide documentation to the lender in support of the request. A borrower’s eligibility for a deferment depends on when the loan was made, as well as individual deferment requirements. Click here for more information about deferments.

Delinquent: A borrower who fails to make a loan payment on time is considered to be delinquent. Lenders are required to follow due diligence procedures when payments are late. Any loan that is 59 days or less delinquent is reported to the credit bureaus as current. Any loan that is 60 or more days delinquent is reported as delinquent. Loans that are 270 days (or more) delinquent are considered to be in default.

Dependent Student: A student who does not meet the eligibility requirements for an independent student under the Higher Education Act of 1965. Dependent students are determined to be dependent on their parents for financial support. A dependent student must provide parent information when completing the FASFA.

Disbursement: The transfer of loan proceeds from a lender to a school. The school then releases the loan funds to the students. Schools may release these funds in check form, or the funds may be applied directly to the students’ university charges through Electronic Funds Transfer (EFT). If the charges are less than the financial aid, the school will release the balance to the student to use toward other educational expenses.

Due Diligence: Documented collection procedures used by lenders and servicers to resolve a delinquent account and prevent a default. These procedures are dictated by federal regulations.

Electronic Funds Transfer: A transfer of funds that is initiated through electronic means such as a data transmission by computer rather than a paper based transaction such as a check. Many schools and lenders use EFT to simplify and shorten the process of disbursing student loan funds.

Entrance/Exit Interview: Counseling sessions provided to student borrowers by the schools concerning debt and accumulated indebtedness. Entrance Counseling is required before the student can receive the first disbursement of the first loan. The student is required to attend Exit Counseling before leaving school.

Expected Family Contribution (EFC): This figure is determined by the Federal Need Analysis Methodology formula. It indicates the amount the student (and the student’s family, if the student is dependent) should contribute to the Cost of Education. This is based on taxable and nontaxable income, assets (such as checking and savings accounts), and benefits (such as Social Security or unemployment).

FAFSA: The Free Application for Federal Student Aid is the application students use to apply for grants, work-study funds and loans. Schools may have additional forms for applicants to complete. Click here to complete a FAFSA on the web.

Federal Family Educational Loan Program (FFELP): The FFELP includes subsidized Stafford Loans, unsubsidized Stafford Loans, and Parent Loans for Undergraduate Students (PLUS). Funds for these loans are provided by private lenders. The loans are guaranteed by guarantors and reinsured by the federal government. The student is the borrower of Stafford Loans, and the parent is the borrower (on behalf of the student) of PLUS loans.

Financial Aid Package: The total amount of financial aid that a school awards a student. Grants, work-study funds and loans are combined to help meet the student's financial/educational needs. Some aid programs have limited funds, so applying early is important.

Forbearance: A period of time during which a borrower, who is willing but unable to make payments and who does not qualify for a deferment, is permitted to temporarily cease making payments or reduce the amount of payments. Some forbearances are entitlements for eligible borrowers, while others are granted at the discretion of the lender. The borrower is always responsible for repayment of accrued interest charges. The borrower can make interest-only payments, or the interest will be capitalized (added on to the principal). Click here for more information on forbearances.

Grace Period: A specific period of time after the student leaves school or is enrolled less than half-time during which he or she is not required to make loan payments. This period is intended to provide the borrower with time to find employment and prepare to repay the loan. The grace period ends 6-12 months after it begins, depending on the interest rate at which the loan is disbursed. The number of months allowed for the grace period is disclosed to the borrower at or before the disbursement of the loan. Parental Loans for Undergraduate Students (PLUS), and Consolidated loans do not have grace periods.

Grad PLUS: [See PLUS Loan] Graduate/professional students may receive an in-school deferment on their PLUS loans until their status changes to less than half-time. The PLUS loan available for graduate/professional students is a fixed rate of 8.5%. The PLUS MPN addendum contains important information about the PLUS loan for graduate/professional students.

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Graduated Repayment: Method of repayment in which the borrower's payments gradually increase since it is assumed borrower earnings will also increase. Generally payments increase after the first 24 months of repayment.

Guaranty Agencies: The guaranty agency (sometimes called the guarantor) oversees the student loan process, including the approval of the loan, and the issuance of a guaranty to the lender that the student loan will be repaid if the borrower defaults (does not repay the loan). A guaranty agency also provides public information about student loans, keeps permanent records of all loans made through it, enforces state and federal rules, and collects on defaulted loans.

Income-Sensitive Repayment: Method of repayment in which the amount of monthly payments are based on the borrower's income. Payments must cover at least the interest, which accrues between payments.

Independent Student: A student who meets one or more of the following eligibility requirements (criteria determined by the Higher Education Act of 1965):

An individual who is at least 24 years old by December 31st of the award year,

An orphan or ward of the court,

A veteran of the U.S. Armed Forces,

A graduate or professional student,

A married person, or

An individual with legal dependents other than a spouse.

Insurance Fee: A fee charged by guaranty agencies which is deducted from student loan proceeds and which is used to insure against defaulted loans. Texas Guaranteed Student Loan Corporation is currently waiving this fee.

Lender: The lender is the financial institution that provides the funding for student loans, and includes commercial banks, federal savings banks, savings and loans, and credit unions.

Loan Disclosure Statement: This statement is issued to a borrower by the lender when the loan is first disbursed and again when the borrower enters repayment. The initial disclosure statement gives such information as the principal amount of the loan, the amount of guaranty and insurance fees, and the interest rate. The repayment disclosure gives such information as the due date of the first installment and the number, amount, and frequency of payments.

Loan Forgiveness: A student's loan debt can be "forgiven" (or written off) by the Federal Government under certain circumstances. These circumstances include: the borrower's school closes while he/she is attending, the borrower becomes permanently disabled, or the borrower becomes deceased. Documentation of the situation is required and eligibility is determined by the guarantor.

Loan Status: An information field on the Loan Detail screen of PPSLC's Online Account Access. Some examples of loans status would be In-School, Repayment, Deferment, Forbearance and Paid In Full.

Master Promissory Note (MPN): A promissory note under which the borrower may receive loans for either a single period of enrollment or multiple periods of enrollment. Currently, not all schools are eligible to use the multi-year feature of the MPN. Borrowers attending these schools must still complete a new MPN for each new loan.

Original Loan Amount: An information field on the Loan Detail screen of PPSLC's Online Account Access. This field shows the loan amount that was originally guaranteed by our guarantor (Texas Guaranteed Student Loan Corporation).

Origination Fee: A fee paid by the borrower of Stafford * and PLUS loans. The fee is paid to the federal government and helps offset the cost of the interest subsidy on Subsidized Stafford loans. The fee is deducted from the principal of the loan before disbursement to the borrower. PLUS loan borrowers are charged a 3% origination fee.

PLUS Loan: A PLUS loan is a federally insured education loan which parents borrow on the behalf of dependent undergraduate students. The PLUS loan is not based on need. However, the applicant must be determined creditworthy based on Federal regulations and/or lender criteria. Parents may borrow up to the cost of education, minus any other financial aid received. PLUS loans may be used to replace the expected family contribution.

Graduate/Professional students may also borrow a PLUS loan to pay for their own education up to the cost of education minus any other financial aid received. The PLUS loan is not based on need. However, the applicant must be determined creditworthy based on Federal regulations and/or lender criteria. Graduate/professional students may apply for the PLUS loan now, but loans may not be certified by the school or disbursed until after 7-1-06 .

Prepayment: Paying all or part of a loan before it is due. FFELP borrowers can prepay any portion of their loan at any time with no penalty.

Principal Balance: The outstanding amount of the loan, on which the lender charges interest. As the loan is repaid, a portion of each payment is used to satisfy current accrued interest; the remainder of the payment is used to reduce the outstanding principal balance.

Promissory Note: The binding legal document a student signs for the student loan. It lists the borrower's rights and responsibilities, and the terms and conditions of the loan. This document should be SAVED!

Repayment: The time during which a borrower actively pays back an education loan. In most cases the maximum repayment term for Stafford loans is 10 years.

Satisfactory Academic Progress: A policy determined by schools, in conjunction with federal guidelines and regulations. This policy sets the level of academic progress required of a student by the Higher Education Act of 1965, to receive or to continue receiving financial aid, including loans.

Secondary Market: Secondary markets buy student loans from lenders. When this transaction takes place, the secondary market becomes the holder of the loan instead of the original lender. The holder of the loan owns the right and title of the promissory note until the loan has been paid in full. One reason lenders choose to sell their loans is to free up funds to make additional student loans.

Servicer: The servicer is an organization hired by a lender or secondary market to provide day to day processing functions for the student loan program. Loan servicing includes disbursing loan funds, monitoring loans while borrowers are in school, collecting payments, and assisting borrowers during repayment of their loans.

STAF: An abbreviation for the Federal Subsidized Stafford loan used in the Loan Type field of the Loan Detail screen of PPSLC's Online Account Access.

Stafford Loans: Stafford loans are federal educational loans for undergraduate and graduate students. The interest is either subsidized or unsubsidized, and is a fixed rate of 6.8%. Dependent undergraduate students can borrow up to $23,000, independent undergraduates can borrow up to $46,000, and graduate students can borrow up to $138,500, including any undergraduate Stafford loans. Borrowers are charged an origination fee and a federal default fee (some guarantors waive the federal default fee), which is deducted from the loan before it is disbursed.

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STAU: An abbreviation for the Federal Unsubsidized Stafford loan used in the Loan Type field of the Loan Detail screen of PPSLC's Online Account Access.

Subsidized: The government pays the interest on subsidized Stafford Loans while the borrower is in school, during grace periods, and during periods of deferment. Subsidized loans are based on financial need (see Expected Family Contribution), and the following maximum limits apply: undergraduates, $23,000; graduates, $65,000.

Unsubsidized: Unlike subsidized loans, the government does not pay the interest on unsubsidized loans. Borrowers may use unsubsidized loans to replace the expected family contribution. Loan limits for Stafford Loans are as follows: dependent undergraduates, $23,000; independent undergraduates, $46,000; graduates $138,000. These limits include subsidized loan limits. See Stafford Loans or Parent Loans for Undergraduate Students.