Glossary

A

Academic Year

This is the amount of the academic work you must complete each year as defined by your school. For example, your school’s academic year may be made up of a fall and spring semester during which a full-time undergraduate student must complete at least 24 semester hours, usually called credits or credit hours. Academic years change from school to school and even from educational program to educational program at the same school.

For purposes of the Teacher Loan Forgiveness Program, an academic year is defined as one complete school year at the same school, or two complete and consecutive half years at different schools, or two complete and consecutive half years from different school years (at either the same school or different schools). Half years exclude summer sessions and generally fall within a 12-month period. For schools that have a year-round program of instruction, 9 months is considered an academic year.

Accreditation

Confirms that the college or career school meets certain minimum academic standards, as defined by an accrediting body recognized by the U.S. Department of Education. Schools must be accredited to be eligible to participate in federal student aid programs.

Adjusted Gross Income (AGI)

Your or your family's wages, salaries, interest, dividends, etc., minus allowable deductions as reported on a federal tax return.

Administrative Wage Garnishment (AWG)

A tool that allows the government to withhold a portion of your earnings to collect unpaid non-tax debts that a borrower owes to the federal government. If you have a federal student loan in default, up to 15% of your disposable pay could be taken by the federal government to repay your debt.

Adverse Credit History

A credit history is a summary of your financial strength, including your history of paying bills and your ability to repay future loans. To qualify for a PLUS loan, you cannot have an adverse credit history. Your credit history may be considered adverse if you are experiencing any of the following credit conditions:

• Bankruptcy discharge within the past 5 years. 
• Voluntary surrender of personal property to avoid repossession within the last 5 years.
• Repossession of collateral within the last 5 years.
• Foreclosure proceedings started.
• Foreclosure within the last 5 years.
• Conveying your real property that is subject to a mortgage (by deed) to your lender to avoid foreclosure (deed in lieu of foreclosure).
• Accounts currently 90 days or more delinquent.
• Unpaid collection accounts.
• Charge offs/write offs of federal student loans.
• Wage garnishment within the last 5 years.
• Defaulting on a loan, even if the claim has been paid.
• Lease or contract terminated by default.
• County/State/Federal tax lien, within the past 5 years.

Agreement to Serve (ATS)

The binding agreement you must sign to receive a TEACH Grant. By signing the ATS, you agree to teach (1) full-time (2) in a high-need field (3) at a low-income school or educational service agency that serves certain low-income schools, and (4) for at least four complete academic years within eight years after completing (or ceasing enrollment in) the course of study for which you received the grant. If you do not complete your teaching service agreement, the amounts of the TEACH Grants you received will be converted to a Direct Unsubsidized Loan that you must repay with interest charges from the date of each TEACH Grant disbursement.

Approved Drug Rehabilitation Program

A drug rehabilitation program that is:
(1) qualified to receive funds from a federal, state or local government or from a federally or state-licensed insurance company; or
(2) administered or recognized by a federal, state or local government agency or court, or a federally or state-licensed hospital, health clinic or medical doctor.

Associate Degree

An undergraduate academic degree granted after completion of two years of study.  Community colleges and career colleges generally award associate degrees.

Award Letter

An offer from a college or career school that states the type and amount of financial aid the school is willing to provide if you accept admission and register to take classes at that school.

Award Year

The school year for which financial aid is used to fund your education.

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B

Bachelor's Degree

An undergraduate academic degree awarded for a course of study that generally lasts four years.  Colleges or universities generally award bachelor's degrees.

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C

Cancellation

This occurs when a borrower meets specific requirements that permit nullifying the borrower's obligation to repay a designated portion of principal and interest on a student loan. Also called discharge of a loan.

Capitalization

The addition of unpaid interest to the principal balance of a loan.  When the interest is not paid as it accrues during periods of in-school status, the grace period, deferment, or forbearance, your lender may capitalize the interest. This increases the outstanding principal amount due on the loan and may cause your monthly payment amount to increase. Interest is then charged on that higher principal balance, increasing the overall cost of the loan.

Collection Agency

An entity that recovers unpaid debt from borrowers who have defaulted on their loans.

Collection Charges

See collection costs.

Collection Costs

Expenses charged on defaulted federal student loans that are added to the outstanding principal balance of the loan.  These expenses can be up to 18.5 percent of the principal and interest for defaulted Direct Loans or FFEL Program loans and may exceed 18.5 percent for defaulted Federal Perkins Loans and Health and Human Service (HHS) loans.

College Aid

Financial aid from your college or career school.

Common-law Marriage

A marriage relationship made by agreement and by living together without a civil or religious ceremony. Not all states allow common-law marriages and the elements required for a common-law marriage change from state to state.

Consolidation

The process of combining one or more loans into a single new loan.

Cost of Attendance (COA)

The total amount it will cost you to go to school—usually stated as a yearly figure. COA includes tuition and fees; on-campus room and board (or a housing and food allowance for off-campus students); and allowances for books, supplies, transportation, loan fees, and dependent care. It also includes miscellaneous and personal expenses, including an allowance for the rental or purchase of a personal computer; costs related to a disability; and reasonable costs for eligible study-abroad programs. For students attending less than half-time, the COA includes tuition and fees and an allowance for books, supplies, transportation, and dependent care expenses, and can also include room and board for up to three semesters or the equivalent at the institution. But no more than two of those semesters, or the equivalent, may be consecutive. Contact the financial aid administrator at the school you’re planning to attend if you have any unusual expenses that might affect your COA.

Credit Bureau

An organization that tracks and reports your credit, including your history of paying bills and your ability to repay future loans. For example, if you default on a student loan, it is reported to a credit bureau. 

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D

Data Release Number (DRN)

The four-digit number assigned to your FAFSA that allows you to release your FAFSA data to schools you did not list on your original FAFSA. You need this number if you contact the Federal Student Aid Information Center to make corrections to your mailing address or the schools you listed on your FAFSA. You find this number below the confirmation number on your FAFSA submission confirmation page or in the top right-hand corner of your Student Aid Report.

Default

Failure to repay a loan according to the terms agreed to in the promissory note. You may experience serious legal consequences if you default.

Default Rate

The percentage of borrowers who fail to repay their loans according to the terms of their promissory notes.

Deferment

A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue for subsidized loans. Unsubsidized loans that are deferred will continue to accrue interest and any accrued unpaid interest will be added to the principal balance (capitalized) of the loan(s) at the end of the deferment period.

Delinquent

Indicates that loan payments are not received by the due dates. Accounts remain delinquent until the borrower brings the account current with payment. If the borrower is unable to make payments, he or she should contact his or her loan servicer to discuss options to keep the loan in good standing.

Dependency Status

The determination of a FAFSA applicant as dependent or independent.

Dependent Student

A student who does not meet any of the criteria for an independent student. An independent student is one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, someone with legal dependents other than a spouse, an emancipated minor or someone who is homeless or at risk of becoming homeless. 

Diploma Mill

An unaccredited school (or a business claiming to be a school) that awards a degree without requiring classwork meeting college-level standards.

Direct Consolidation Loan

A federal loan made by the U.S. Department of Education that allows you to combine one or more federal student loans into one new loan. As a result of consolidation, you will only have to make one monthly payment on your federal loans and the amount of time you have to repay your loan will be extended. 

Direct Loan

A federal student loan, made through the William D. Ford Federal Direct Loan Program, for which eligible students and parents borrow directly from the U.S. Department of Education at participating schools. Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans are types of Direct Loans.

Direct PLUS Loan

A loan made by the U.S. Department of Education to graduate or professional students and parents of dependent undergraduate students for which the borrower is fully responsible for paying the interest regardless of the loan status.

Disbursement (disburse or disbursed)

Payment of the loan funds to the borrower by the school. Students generally receive their federal student loan in two or more disbursements.

Discharge

The release of a borrower from the obligation to repay his or her loan.

Discretionary Income

Your adjusted gross income minus the poverty guidelines for your family size.

Disposable Pay

The amount that remains from an employee's pay after required deductions.

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E

Early Action

A college admission policy that allows applicants to apply and receive notice of their application early.  Applicants accepted under early action are not under a binding agreement to attend that school and may submit applications to other schools.

Early Decision

A college admission policy that allows applicants, who commit to attend that school, to apply and receive notice of their application early.  If the applicant is accepted, he or she agrees to attend that school and must withdraw all other applications.

Educational Service Agency

An educational service agency is a regional public multiservice agency (not a private organization) that is authorized by state law to develop, manage, and provide services or programs to local education agencies, such as public school districts.

Electronic Debit

A service that allows your lender or servicer to electronically deduct your monthly loan payments from your checking or savings account. 

Elementary School or Secondary School

For the purposes of the Teacher Loan Forgiveness Program, an elementary or secondary school is defined as a public or nonprofit private school that provides elementary education or secondary education as determined by state law (or by the U.S. Department of Education if the school is not in a state).

Eligible Noncitizen

A U.S. national (includes natives of American Samoa or Swains Island), U.S. permanent resident (who has an I-151, I-551 or I-551C [Permanent Resident Card]), or an individual who has an Arrival-Departure Record (I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:

• "Refugee" 
• "Asylum Granted" 
• "Cuban-Haitian Entrant (Status Pending)"
• "Conditional Entrant" (valid only if issued before April 1, 1980) 
• Victims of human trafficking, T-visa (T-2, T-3, or T-4, etc.) holder 
• "Parolee" (You must be paroled into the United States for at least one year and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose and that you intend to become a U.S. citizen or permanent resident.) 

If you meet the noncitizen criteria above, you are eligible to receive federal student aid.  If you are unsure of your eligibility, please check with your school's financial aid office for more information.

Eligible Program

A program of organized instruction or study that leads to an academic, professional, or vocational degree or certificate, or other recognized education credential.

Emancipated Minor

An individual (under the age of 18) who has legally been determined to be an adult by a court in his or her state of legal residence.

Endorser

An endorser is someone who does not have an adverse credit history and agrees to repay the loan if the borrower does not repay it.

Entrance Counseling

A mandatory information session which takes place before you receive your first federal student loan that explains your responsibilities and rights as a student borrower.

Exit Counseling

A mandatory information session which takes place when you graduate or attend school less than half-time that explains your loan repayment responsibilities and when repayment begins.

Expected Family Contribution (EFC)

This is the number that’s used to determine your eligibility for federal student financial aid. This number results from the financial information you provide in your FAFSA, the application for federal student aid. Your EFC is reported to you on your Student Aid Report (SAR).

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F

FAFSA

Free Application for Federal Student Aid

FAFSA4caster

An online tool that provides an early estimate of your federal student aid eligibility to help you financially plan for college.

Federal Family Education Loan (FFEL) Program

Under this program, private lenders provided loans to students that were guaranteed by the federal government. These loans included Subsidized Federal Stafford Loans, Unsubsidized Federal Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. As a result of the Health Care and Education Reconciliation Act of 2010, federal student loans under the FFEL Program are no longer made by private lenders. Instead, all new federal student loans come directly from the U.S. Department of Education under the Direct Loan Program.

Federal Pell Grant

A federal grant for undergraduate students with financial need.

Federal Perkins Loan

A federal student loan, made by the recipient's school, for undergraduate and graduate students who demonstrate financial need. 

Federal School Code

An identifier that the U.S. Department of Education assigns to each college or career school that participates in the federal student aid programs. In order to send your FAFSA information to a school, you must list the school's Federal School Code on your application. A list of Federal School Codes is available at www.fafsa.gov.

Federal Student Aid PIN

Your electronic personal identification number that serves as your identifier to allow access to personal information in various U.S. Department of Education systems and acts as your digital signature on some online forms. If you do not already have a PIN, you can request one online at www.pin.ed.gov.

Federal Student Aid Programs

The programs authorized under Title IV of the Higher Education Act of 1965 that provide grants, loans and work-study funds from the federal government to eligible students enrolled in college or career school. 

Federal Student Loan

Money you borrow from the federal government to help pay for your education.  You must repay your loan with interest.

Federal Work-Study

A federal student aid program that provides part-time employment while you are enrolled in school to help pay your education expenses.

FFEL Program

Federal Family Education Loan Program

Financial Aid Offer

The total amount of financial aid (federal and nonfederal) a student is offered by a college or career school. The school's financial aid staff combines various forms of aid into a “package” to help meet a student’s education costs.

Financial Aid Office

The office at a college or career school that is responsible for preparing and communicating information on financial aid.  This office helps students apply for and receive student loans, grants, scholarships and other types of financial aid.

Financial Aid Package

The total amount of financial aid (federal and nonfederal) a student is offered by a college or career school. The school's financial aid staff combines various forms of aid into a “package” to help meet a student’s education costs.

Financial Need

The difference between the cost of attendance (COA) at a school and your Expected Family Contribution (EFC).  While COA varies from school to school, your EFC does not change based on the school you attend. 

Forbearance

A period during which your monthly loan payments are temporarily suspended or reduced. You may qualify for forbearance if you are willing but unable to make loan payments due to certain types of financial hardships. During forbearance, principal payments are postponed but interest continues to accrue. Accrued unpaid interest will be added to the principal balance (capitalized) of your loan(s) at the end of the forbearance period, increasing the total amount you owe.

Foster Care

A temporary living arrangement for dependent children when their parent(s) or another relative cannot take care of them.

Free Application for Federal Student Aid (FAFSA)

The FREE application used to apply for federal student aid, such as federal grants, loans, and work-study. 

Full-time Employment as a Teacher

For the purposes of the Teacher Loan Forgiveness Program, full-time employment as a teacher is determined by the state's standard. For a borrower teaching in more than one school, the determination of full time is based on the combination of all qualifying employment.

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G

General Educational Development (GED) Certificate

A certificate that students receive if they’ve passed a specific, approved high school equivalency test. Students with a GED certificate are eligible to receive federal student aid.

Grace Period

A period of time after borrowers graduate, leave school, or drop below half-time enrollment where they are not required to make payments on their federal student loans. Interest will accrue on subsidized loans made between July 1, 2012 and July 1, 2014, and all unsubsidized loans during grace periods. If the interest is not paid, it will be added to the principal balance of the loan when the repayment period begins. Each loan has only one grace period.

Graduation Rate

Measures the progress of students who began their studies as full-time, first-time degree- or certificate-seeking students by showing the percentage of these students who complete their degree or certificate within a 150% of "normal time" for completing the program in which they are enrolled.

Grant

Financial aid, often based on financial need, that does not need to be repaid (unless, for example, you withdraw from school and owe a refund).

Guaranteed Student Loans

The name for Federal Family Education Loan (FFEL) Program loans that were made prior to 1992.

Guaranty Agency

A state agency or a private, nonprofit institution or organization that administers Federal Family Education Loan (FFEL) Program loans.

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H

Homeless

An individual is considered homeless if he or she lacks fixed, regular and adequate housing. You may be homeless if you are living in a shelter, park, motel or car, or temporarily living with other people because you have nowhere else to go. Also, if you are living in any of these situations and fleeing an abusive parent you may be considered homeless when completing your FAFSA even if your parent would provide support and a place to live.

Homeschool

A school in which children are educated at home either by parents, legal guardians, or tutors, rather than traditional public or private school.

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I

Income Tax Refund Offsets

A debt collection tool that allows the government to seize income tax refunds from individuals who owe the federal government to help repay the outstanding debt.

Independent Student

An independent student is one of the following: at least 24 years old, married, a graduate or professional student, a veteran, a member of the armed forces, an orphan, a ward of the court, or someone with legal dependents other than a spouse, an emancipated minor or someone who is homeless or at risk of becoming homeless. Get additional information to determine your dependency status.

Interest

A loan expense charged for the use of borrowed money. Interest is paid by a borrower to a lender.  The expense is calculated as a percentage of the unpaid principal amount of the loan.

Interest Rate

The percentage at which interest is calculated on your loan(s).

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J

Job Placement Rate

The percentage of graduating students who obtained employment either in the recognized occupation for which they were trained or in a related comparable recognized occupation within a determined timeframe after receiving their degree or certificate.

Judgment Lien

A legal claim to a home or property when the owner fails to pay a debt.  A student (or parent in the case of a parent borrower) will not qualify for federal student aid if he or she owns property that is subject to a judgment lien for a debt owed to the United States. 

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L

Legal Guardianship

A court order, through which the court appoints an individual other than a minor's parent to take care of the minor.  A legal guardian is not considered a parent on the student's FAFSA. In fact, a student in legal guardianship does not need to report parent information on the FAFSA because he or she is considered an independent student.

Lender

The organization that made the loan initially; the lender could be the borrower's school; a bank, credit union, or other lending institution; or the U.S. Department of Education.

Lifetime Eligibility Used (LEU)

The sum of all Federal Pell Grant aid award year eligibility (in percentage) awarded to you. The amount of Federal Pell Grant funds a student may receive over his or her lifetime is limited by a federal law to be the equivalent of six years of Pell Grant funding.

Litigation

The act or process of bringing or contesting a legal action in court.

Loan Forgiveness

The cancellation of all or some portion of your remaining federal student loan balance. If your loan is forgiven, you are no longer responsible for repaying that remaining portion of the loan. 

Loan Holder

The entity that holds the loan promissory note and has the right to collect from the borrower.

Loan Rehabilitation

The process of bringing a loan out of default and removing the default notation from a borrower's credit report. To rehabilitate a Direct Loan or a FFEL Program loan, the borrower must make at least 9 full payments of an agreed amount within 20 days of their monthly due dates over a 10-month period. To rehabilitate a Perkins Loan, a borrower must make 9 on-time, consecutive monthly payments of an agreed-upon amount. Rehabilitation terms and conditions vary for other loan types and can be obtained directly from loan holders.

Loan Servicer

A company that collects payments on a loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a loan on behalf of a lender.  If you're unsure of who your federal student loan servicer is, you can look it up on www.nslds.ed.gov.

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M

Master Promissory Note

A binding legal document that you must sign when you get a federal student loan. The MPN can be used to make one or more loans for one or more academic years (up to 10 years). It lists the terms and conditions under which you agree to repay the loan and explains your rights and responsibilities as a borrower.  It’s important to read and save your MPN because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.

Merit-based

Based on a student's skill or ability. Example: A merit-based scholarship might be awarded based on a student's high grades.

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N

National Student Loan Data System (NSLDS)

A centralized database, available at www.nslds.ed.gov, which stores information on federal grants and loans. NSLDS contains information on how much aid you've received, your enrollment status, and your loan servicer(s). You can access NSLDS using your Federal Student Aid PIN.

Need-based

Based on a student's financial need. Example: A need-based grant might be awarded based on a student's low income.

Net Price

An estimate of the actual cost that a student and his family need to pay in a given year to cover education expenses for the student to attend a particular school.  Net price is determined by taking the institution's cost of attendance and subtracting any grants and scholarships for which the student may be eligible.

Net Price Calculator

A tool that allows current and prospective students, families, and other consumers to estimate the net price of attending a particular college or career school.

Nolo Contendere

A plea of no contest, meaning the defendant neither admits nor disputes a charge, serving as an alternative to a pleading of guilty or not guilty.

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O

Out-of-state Student

A student who is attending a college or career school outside of his or her state of legal residence. 

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P

Partial Financial Hardship

A circumstance in which the annual amount due on your eligible loans, as calculated under a 10-year Standard Repayment Plan, exceeds 15 percent of the difference between your adjusted gross income (AGI) and 150 percent of the poverty line for your family size in the state where you live.

PLUS Loan

A loan available to graduate students and parents of dependent undergraduate students for which the borrower is fully responsible for paying the interest regardless of the loan status.

Postbaccalaureate Teacher Certification Program

A program for students who have already earned a bachelor’s degree that (1) does not lead to a graduate degree, (2) is treated as an undergraduate program, and (3) consists of courses required by a state in order for the student to receive a certification or license to teach in an elementary or secondary school in that state.

Principal

The total sum of money borrowed plus any interest that has been capitalized.

Private Loan

A nonfederal loan made by a lender such as a bank, credit union, state agency, or school.

Promissory Note

The binding legal document that you must sign when you get a federal student loan. It lists the terms and conditions under which you agree to repay the loan and explains your rights and responsibilities as a borrower.  It’s important to read and save this document because you’ll need to refer to it later when you begin repaying your loan or at other times when you need information about provisions of the loan, such as deferments or forbearances.

Proprietary School

A private for-profit school that provides education and training.

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R

Regular Student

A student who is enrolled or accepted for enrollment at an institution for the purpose of obtaining a degree, certificate, or other recognized education credential offered by that institution. To be eligible for federal student aid, you must generally be a regular student.

Retention Rate

Measures the percentage of first-time students who are seeking bachelor's degrees who return to the institution to continue their studies the following fall.

Room and Board

An allowance for the cost of housing and food while attending college or career school.

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S

Satisfactory Academic Progress

A school’s standards for satisfactory academic progress toward a degree or certificate offered by that institution. Check with your school to find out its standards.

Scheduled Award

The maximum grant amount you are eligible to receive for the award year if you are enrolled full-time for the full school year.  This amount is calculated from the information you (and your family) provided when you filed your FAFSA.

Scholarship

Money awarded to students based on academic or other achievements to help pay for education expenses.  Scholarships generally do not have to be repaid. 

Service Obligation

The binding agreement you must sign to receive a TEACH Grant. By signing the ATS, you agree to teach (1) full-time (2) in a high-need field (3) at a low-income school or educational service agency that serves certain low-income schools, and (4) for at least four complete academic years within eight years after completing (or ceasing enrollment in) the course of study for which you received the grant. If you do not complete your teaching service agreement, the amounts of the TEACH Grants you received will be converted to a Direct Unsubsidized Loan that you must repay with interest charges from the date of each TEACH Grant disbursement.

Standardized Test

A test that is designed to assess individuals against a common standard.

State Aid

Financial aid from a student's state of legal residence.

Student Aid Report (SAR)

A summary of the information you submitted on your FAFSA.  You receive this report (often called the SAR) via e-mail a few days after your FAFSA has been processed or by mail within 7-10 days if you did not provide an e-mail address.  If there are no corrections or additional information you must provide, the SAR will contain your EFC, which is the number that's used to determine your eligibility for federal student aid.

Subsidized Loan

A loan based on financial need for which the federal government pays the interest that accrues while the borrower is in an in-school, grace, or deferment status. For Direct Subsidized Loans first disbursed between July 1, 2012, and July 1, 2014, the borrower will be responsible for paying any interest that accrues during the grace period. If the interest is not paid during the grace period, the interest will be added to the loan’s principal balance.

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T

Tax Offset

A debt collection tool that allows the government to seize income tax refunds from individuals who owe the federal government to help repay the outstanding debt.

Teacher Education Assistance for College and Higher Education (TEACH) Grant

A federal grant that provides up to $4,000 per year to students who agree to teach for four years at an elementary school, secondary school, or educational service agency that serves students from low-income families and to meet other requirements. If the service obligation is not met, the grant is converted to a Direct Unsubsidized Loan.

Transfer Rate

The percentage of the full-time, first-time students who transferred to another institution.

TRIO

Program outreach and student services programs designed to identify and provide services for individuals from disadvantaged backgrounds. TRIO includes eight programs targeted to serve and assist low-income individuals, first-generation college students, and individuals with disabilities in progressing through the academic pipeline from middle school to postgraduate programs.

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U

Unsubsidized Loan

A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.

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V

Verification

The process your school uses to confirm the data reported on your FAFSA. Your school has the authority to contact you for documentation that supports income and other information that you reported.

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W

William D. Ford Federal Direct Loan Program

The federal program that provides loans to eligible student and parent borrowers under Title IV of the Higher Education Act.  Funds are provided by the federal government to eligible borrowers through participating schools.

Work-Study

A federal student aid program that provides part-time employment while you are enrolled in school to help pay your education expenses.

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