Annual Percentage Rate: The annual interest rate that represents your actual yearly cost over the life of your loan. This includes any fees or additional costs associated with the loan.


Cosign: When someone cosigns on your loan, they take on the legal obligation to make payments should you fail to pay (default). Having a cosigner is one way for students with low incomes or poor/limited credit histories to qualify for loans.


Credit History: A record of your credit accounts and payment history (bankers and employers take this data very seriously)


Credit Reports: There are three major credit report agencies that provide information about your credit history: Equifax, Experian, and TransUnion. They are required by the federal government to give you a free report once a year.


Credit Scores: A variety of factors such as the amount of money you owe to your payment history go into your credit score. Scores range from 300 (super bad) to 800 (awesome). If your score is less than 660, you have some repair work to do.


Distressed Borrower Options: There are circumstances where the government may allow you to postpone payments and there are circumstances where the government may forgive your loan if you die or become permanently disabled, depending on the type of loan you have.


Federal Student Loans: Loans offered by the Federal government that typically feature low rates, fixed terms, and other benefits. There are limits to how much you can borrow: Freshmen = $5500, Sophomore = $6500, Junior = $7500, Senior = $7500.


Financial Aid Award Letter: A letter sent by a school (after you’ve been accepted!) that details how much the school will cost and what kind of financial aid package you'll receive — including federal, state, and school sources.


Financial Aid Package: Financial aid is a term used to refer to any one of the following financial vehicles used to pay for college:  student loans, scholarships, grants, and work-study. Your financial aid package is a collection of different types of financial aid from potential sources like the federal government, state government, and the school to which you applied. Most schools detail the financial aid package they’re offering in the letter they send after you’re accepted (sometimes called the Award Letter).


Fixed rate loan: Provides a locked-in interest rate over the life of your loan.


Grace period: Offered on Federal Student Loans and on many Private Student Loans, the “grace period” gives you six months after leaving school to get on your feet financially before you have to start making loan payments.


Line of credit: Rather than returning each academic year for a new loan, a line of credit provides the total amount upfront. You can then draw on it for school-certified expenses over the course of your education.


Loan Term: The number of payments you’ll make to pay off your loan’s principal and interest, and length of time it will take to do so if you make regularly scheduled payments.


Origination Fees: Some private lenders charge a fee for making a loan to you. Watch out for loans that offer very low rates but include sizable origination fees. (Typically not the best deal.) If possible, find a lender that offers both low rates and a low or no origination fees. (Way better deal.)


Private Lenders: Typically, for-profit banks, finance companies and not-for-profit credit unions that offer private student loans. Some state higher education agencies are now also offering Private Student Loans.


Private Student Loans: Loans offered by banks and credit unions that can cover up to 100% of your estimated college expenses. (Look for low rates and try not to borrow more than you need.)


Principal Balance: The amount to pay off your loan, minus interest or other charges.


Variable rate loan: A loan where the interest rate may change over time based on the movement of an index, like the Wall Street Journal prime rate. These loans often begin with a lower rate up front with the possibility of rate increases depending on the economy.

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