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Student Loan Terminology

Easy to understand explanations of all student lender terminology!
by

LendKey www.lendkey.com

on 16 March 2015

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Transcript of Student Loan Terminology

A state agency or private company that purchases student loans from individual lenders.
It holds and collects loans until they are paid.
The company may employ an outside servicer.

LendKey
104 West 27th St.
New York, NY 10001



W - www.lendkey.com

LendKey helps consumers save money with lower interest rates by matching them to a network of community lenders that prioritize people over profits.
Accrued Interest
Loans accrue interest based upon the unpaid balance of the loan principle and the current repayment status of the loan.
A loan that is offered by a private lender (also referred to as a
private student loan
).
These loans are
credit based
and can have v
ariable rates
.
Often times a borrower may receive a
lower rate
with a
cosigner
who is in good financial standing.
Annual Percentage Rate (APR)
A temporary postponement of the student loan principal and/or interest payments that may be granted if the borrower satisfies certain criteria.
Delinquent
Fees
Alternative Student Loan
This not only takes interest into account, but the points, broker fees and other charges that may be associated with a loan.
Capitalized Interest
Unpaid accrued interest is added to the principle amount to be repaid later. You are then incurring interest on this accrued interest as well as the original loan principle.
Compound Interest
Interest that is calculated not only on the initial principle but also the accumulated interest of prior periods.
Interest may be compounded annually, quarterly, monthly or daily, depending on the terms of your loan.
Consolidation Loan
This loan combines your existing loans into
ONE
new and one payment.
Usually a consolidation loan has a lower monthly payment and a longer term than your combined original loans.
Co-Signer
Someone who sign a promissory note along with the borrower, and is legally obligated to assume responsibility if the borrower does not make his or her payment.
Default
Failure to repay your loan(s).
Defaulting on loan impacts your credit score and may have serious legal repercussions.

Deferment
The status of you loan changes to delinquent when at least one payment is missed,
Disbursement
When a lender sends a check or electronically sends funds for your loan to the school.
Multiple disbursements are provided to coincide with each term of school and fees (where applicable) are usually deducted proportionately.
Expected Family Contribution
The total money that a family is expected to pay for a student's college education based on a detailed assessment of the family's financial situation.
Some lenders charge a fee to originate, insure or guarantee a student loan. This includes Federal loans.
The fee is usually proportionately charged to each disbursement.
Origination Fee:
charge deducted from loan proceeds from all Federal loans and some private loans have an origination fee as well.
Forbearance
Written permission to postpone, reduce, or extend payments, usually for 3 to 6 months, because of serious economic hardship.
Interest continues to accrue and remains the responsibility of the borrower. Therefore, the borrower will owe a higher total amount on the loan when forbearance ends.

Grace Period
Refers to the six month period after you graduate, leave or drop below half-time status.
Applicable to many student loans.
Once this period is over, you must start making monthly loan payments or already have obtained a deferment or forbearance.
Interest
The amount a lender charges a borrower for the use of money borrowed, calculated as a percentage of the principal balance.
Some rates are fixed for the term of the loan.
Others are variable meaning the rate is tied to an index with a margin.
Independent Student
You are automatically considered a dependent unless you are:
24 years or older (as of 12/31 of the award year)
A graduate or a professional student
Married
Have legal dependents other than a spouse
An orphan or ward of the court
A veteran of the U.S. Armed Forces
Index
The rate that determines the average interest rate at which bank lend to each other at
This interest is variable and subject to charge each quarter
Margin
The flat rate which a lender will add to the lending index in order to determine the interest rate a consumer will pay
Loan margins are tiered, and determined based on credit score.
Parent Plus Loan
A government-backed loan designed for parents of financially dependent undergraduate students
Principal
The full amount you have borrowed for you loan.
When you are repaying the loan, the principal is the portion of the original amount you still owe, plus capitalized interest, if any.
Promissory Note
A legally binding contract between a borrower and lender that contains the terms and conditions under the borrower promises to repay the loan.
Repayment Schedule
A document listing the total amount you owe, the amount of your monthly payment, and the date your first payment is due.
Secondary Market
Separation Date
The official date you drop below half-time status or withdraw from school.
If you are entitled to a grace period, it begins on that date.
Servicers
Companies that contract with lenders and secondary markets to provide all customer service activities of loan servicing and loan collection.
Subsidized Student Loan
A need-based, government-back student loan
The government will pay the interest while the student is in school at least half-time.
Unsubsidized Student Loan
This loan is not based on need, allowing students at all income and asset levels to be eligible for a lower-cost student loan.
The student is responsible for paying interest while in school - interest will accrue and capitalize.
Student Loan Terminology
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