Your Cheat Sheet for All Financial Aid Terms

FAFSA

Free Application for Federal Student Aid. It’s a standard application used to determine eligibility for the majority of financial aid, including federal loans. You’ll have to fill out a new one each year that you apply for aid, even if you stay at the same school.

Alternative loan

Also called a Private Student Loan. Credit-based, financed through a financial lender with payments deferred until you finish school.

Award letter

Official document from secondary education’s financial aid office that informs you of all the financial aid being offered to you.

Consolidation

The process of combining all outstanding student loans into one, often with extended repayment terms. This loan is only available for those individuals who have completed school.

Dependent student

Any student who depends financially on their parents’ income and assets. Considered heavily in awarding financial aid to particular individuals.

Independent student

To be classified as independent, an individual must meet any one of the following criteria:

• 24 years of age or older
• Married
• Have no living parent or legal guardian
• Veteran of the U.S. Armed Forces
• A ward of the court
• Have a legal dependent (child)

Gift aid

Aid that students are not required to pay back, like grants and scholarships.

Lender code

Each financial institution has its own lender code used to indicate they are the ones funding your aid.

Master Promissory Note

A legally binding contract that includes all terms and conditions under which a borrower promises to repay a loan.

Subsidized loan

A federal loan in which the government pays the accruing interest while the student attends school at least half-time, as well as during the grace period and deferment times.

Unsubsidized loan

A federal loan not based on need. The borrower is responsible for paying the accrued interest at all times.