Academic Scholarships-A grant of financial aid awarded to a student to help pay for his or her education on the merits of his/her academic performance.
Annual Fee-The annual cost of membership to a particular credit card account. Most banks now have products without annual fees.
Annual Percentage Rate (APR)-This shows how much credit will cost you on a yearly basis.
Annuity-A contract or agreement by which one receives fixed payments on an investment for a lifetime or for a specified number of years.
Athletic Scholarships-A grant of financial aid awarded to a student to help pay for his or her education on the merits of his/her performance in athletics.
ATM Card-A card used in an automated teller machine (ATM) to access a credit or a debit account to complete banking inquiries and fund transfers between accounts.
Average Daily Balance Computation Method-Credit card issuers assess interest charges by applying the APR to a balance. There are several methods for determining your balance. In this method, the balance is determined by: (1) calculating a daily balance for each day in the current billing cycle; (2) adding all the daily balances together; and (3) dividing the sum of the daily balances by the number of days in the current billing cycle. The daily balance for each day in the billing cycle is calculated by taking the beginning balance, subtracting payments and credits and adding an amount equal to the applicable Daily Periodic Rate multiplied by the previous day's daily balance, and, unless subject to a Grace Period, new transactions and fees.
Bankrupt-The status of being legally declared unable to pay your debts as they become due. Federal bankruptcy laws have been enacted that allow a person or organization to liquidate their assets to pay a reduced amount to their creditors or that allow the rehabilitation of the debtor by requiring creditors to accept reduced payments from future earnings of the debtor. Generally, student loans are non-dischargeable in bankruptcy. A declaration of bankruptcy will remain on a person's credit report from 7 to 10 years. Declaring bankruptcy is generally considered a last resort.
Billing Cycle-The length of time between billing statements.
Charge Card-Unlike revolving credit card accounts, which allow you to carry balances from month to month, charge card accounts must be paid in full every month.
Chip Card-There are various types of Chip Cards, sometimes called Smart Cards. Electronic chips allow these cards to function in different ways: as credit cards, debit cards, frequent buyer or rewards program cards, ID cards, or any combination. Many college ID cards are Chip Cards. These may or may not be credit cards.
Co-Branded Card-A credit card sponsored by both the issuing bank and a retail organization, such as a department store or an airline. Cardholders may benefit through account enhancements that provide such benefits as discounts or free merchandise from the sponsoring merchant based on account usage.
Consumer Credit Counseling Service (CCCS)-This is a nonprofit organization that has helped thousands of people get out of debt. CCCS counselors can advise you on how to develop a budget you can live with and can be invaluable in helping you negotiate repayment plans with your creditors. This service is confidential. To reach the CCCS, call 1-800-355-2227.
Co-signer (also called Joint Applicant)-The person who agrees to take responsibility for making sure the loan is repaid. Co-signers must be able to demonstrate the ability to repay the loan if the borrower fails to pay it. Sometimes called a co-applicant or co-borrower.
Cost of Attendance (COA)- The total amount it will cost you to go to school determined by the school using rules established by law. COA includes tuition, fees, meals, housing costs, books, supplies, transportation and personal expenses.
Credit Reporting Agencies-Credit reporting agencies collect and report vital facts about your financial habits, for instance, whether or not you pay your bills on time. These facts are then compiled into a "credit report," which can be accessed by potential creditors, employers, and the like. The three major credit reporting agencies are:
Equifax, www.equifax.com, 800-685-1111
TransUnion, www.transunion.com, 800-888-4213
Experian, www.experian.com, 888-397-3742
Credit Card-Unlike charge cards, these cards allow you to "revolve" your charges, that is, carry over portions of your balance from month to month. However, you will be assessed interest charges if you do not pay your balance in full, assuming that you have a grace period. To protect your credit rating, be sure to pay at least the minimum amount due by the payment due date.
Credit Card Insurance-Protects you if you are unable to pay your credit card bills because of illness, unemployment, or other severe conditions. Under these circumstances, the insurance provider will pay your minimum payments.
Credit Line-The most you can charge on your credit card account, including or taking into account fees and interest charges. When you receive a new credit card, you're usually issued a set credit line. Under some circumstances, your card issuer may increase or decrease it.
Credit Report-The record of your credit history, which includes such information as whether you pay your bills on time and how much debt you have. Your report is compiled by credit reporting agencies and released to lenders and others.
CSS/Financial Aid PROFILE®-A supplemental financial aid form, processed by The College Board, which is used by some colleges, universities and scholarship programs to determine eligibility for nonfederal financial aid.
Debit Card-A convenient way to "pay as you go," this enhanced ATM card deducts money from your designated deposit account when you use it to make a purchase or get cash.
Default-Failure to repay a loan according to the terms and conditions agreed to, which can result in serious long-term consequences.
Delinquency-Failure to make payments on time; late fees may be charged.
Demonstrated Need-The difference between the calculated EFC (expected family contribution) and the cost of attendance is called demonstrated need. This is calculated one year at a time, and it is based on an assessment of all financial data required by a given college as a student/family applies for financial aid for an academic year. Schools will be able to tell students what portion of demonstrated need they are able to meet in any given year.
Dependent Student- A student who does not meet the criteria for an independent student or is claimed on the parents' income tax return.
Disbursement-Payment of loan proceeds by the lender.
Educational IRA-A custodial account or trust, usually maintained by a bank or financial organization, exclusively for the purpose of paying the qualified higher-education expenses of the designated beneficiary.
Education Tax Credit-A tax credit that can reduce an individual's (or business's) total tax burden on a dollar-for-dollar basis. Visit www.irs.gov for more information.
Endorsed Card-A credit card endorsed by groups, such as colleges, sports teams, professional organizations or special interest groups, and offered to their alumni, fans or members. Typically, use of the credit card gives financial benefit to the endorsing organization.
Expected Family Contribution (EFC)-Amount a student's family is expected to be able to contribute toward college costs, based on a federal formula. To calculate EFC, the government assesses the detailed financial information indicated on the FAFSA.
Equal Credit Opportunity Act (Implemented by Federal Reserve Regulation B)-This federal law protects your rights against being denied credit because of sex, race, color, age, national origin or religion. It also guarantees your right to have credit in your given name or your married name, the right to know why your credit application is rejected, and the right to have someone other than your husband or wife co-sign for you.
FAFSA4caster-A tool provided by the federal government that helps students and their families to learn about the financial aid process and get an early estimate of their eligibility for federal student aid. The FAFSA4caster can be found here.
Fair Credit Billing Act-This federal act protects many important credit rights including your rights to dispute billing errors, unauthorized use of your account, and charges for unsatisfactory goods and services.
Federal Default Fee-Fee deducted from the loan proceeds and paid to the guaranty agency to cover the loan if the borrower defaults.
The Federal Family Education Loan (FFEL) program-This is the largest source of federal aid. Stafford, PLUS and Graduate PLUS loans are part of the FFEL program. The advantage of federal aid is that the government pays the interest on certain types of loans while the student is in school. Students don't have to make payments until they graduate, leave school or drop below half-time status.
Federal Student Aid-Need-based financial aid provided by the federal government, such as grants, loans and work-study programs.
Financial Aid-Financial assistance intended to aid students in paying for their education. This assistance may come in a variety of forms such as grants, scholarships, work-study and loan programs and may be provided by the federal government or by the student's college or university. Financial aid is available for qualifying students for a variety of qualifying schools, including community college programs and online programs.
Free Application for Federal Student Aid (FAFSA)-Application that students must complete to qualify for federal aid. This application must be resubmitted each year the student wishes to obtain financial aid.
Gapping: Also called unmet need. When a college or university does not, or cannot, make up the difference between the Expected Family Contribution (EFC) and the cost of attendance, the college has "gapped" the student or offered the student less in his or her award package than his or her demonstrated need.
Grace Period-For student loans, the grace period is the set time period after borrowers graduate, leave school, or drop below half-time enrollment during which the borrower doesn't need to make payments of principal or interest on certain loans. For a credit card, the grace period is the period of time that the issuer does not charge interest on certain types of transactions. Many credit cards have a grace period on purchases, but not on balance transfers or cash advances.
Grant-A type of need-based financial aid that a student does not have to repay.
Guarantor-A guarantor is someone who pledges that a loan or other type of debt will be paid. Usually, a guarantor agrees to pay another person’s debt should that person fail to do so. For example, if a parent cosigns a loan for a child, the parent could be considered a guarantor – should the child default on his or her debt, the parent would be held liable for the remainder of the loan.
Guaranty Agencies (Guarantors)-State agencies or private nonprofit institutions that insure student loans for lenders and help administer the FFEL program for the U.S. Department of Education.
Independent Student-Individual at least 24 years old, orphan, state ward, U.S. Armed Forces on active military duty or who is a veteran or married; or with a legal dependent other than a spouse.
Inheritance-Property passing at the owner's death to the heir or those entitled to succeed; legacy.
Interest Charge-The total cost of credit including interest charges, service fees, late fees and transaction fees.
Interest Rate-Credit is not free! When you use money provided by a bank or financial institution, the interest rate reflects the amount the organization charges for that service.
Introductory APR-A temporary, usually low, interest rate (expressed as an annual percentage rate) offered by providers to "introduce" you to their services. It will usually expire after a certain amount of time and may often be terminated based on your behavior, such as if you make a late payment. Be sure to check the details of the offer for any limitations on an introductory APR.
Institutional Financial Aid-Financial aid awarded to students by a college or university, rather than the federal government. Most schools will require the student fill out the FAFSA, CSS/Financial Aid PROFILE® and/or the school's own institutional aid application in order to be eligible for institutional aid.
Investments-Property or possessions acquired for future financial return or benefit.
LIBOR (London interbank offered rates) Five major London banks determine these fixed rates daily for specific maturities. What does this mean to you? LIBOR may be used by some banks instead of the Prime Rate to set APRs.
Major Scholarships-A grant of financial aid offered to students who are pursuing a particular degree, major, credential, or certificate.
Master Promissory Note (MPN)-Legally binding contract between the borrower and lender that is valid for 10 years. Use of the MPN may eliminate the need to complete a new promissory note every year a loan is needed.
Minimum Payment-Shown on your credit card statement, the minimum amount a credit card holder is required to re-pay each billing period, based on that month's balance at the time of billing.
Need-Based Scholarship-A grant of financial aid awarded to a student based on demonstrated financial need. These scholarships typically fall in to three categories - Private, Service and Institutional.
Non-Variable APR-Unlike a "variable APR," this type of APR does not automatically fluctuate based on changes in an index such as Prime Rate or LIBOR. A "fixed APR" does not mean that the rate is guaranteed not to change, though. Refer to your account terms for information on your issuer's ability to change the APR on your account.
Origination Fee-Charge deducted from the loan proceeds and paid to the federal government or lender to partially offset the cost of the loan.
PLUS Loan (Parent Loan for Undergraduate Students) -A low-interest student loan for parents of undergraduate, dependent students. A version of the PLUS loan is also available for graduate students.
Prepaid Tuition-College savings plans that are guaranteed to increase in value at the same rate as college tuition.
Previous Balance-How much you owed your card issuer at the end of your last billing period.
Prime Rate-The prime lending rate that banks charge their best commercial customers for loans. The Prime Rate changes often, is reported daily in The Wall Street Journal and is used as a reference point for many businesses. For instance, the Prime Rate is used by some financial institutions to calculate variable interest rates for credit cards.
Principal-Unlike interest or fees, the principal reflects the actual dollar amount of the purchases you made or the balance that remains on your loan or credit card account.
Private Loan-Private loans are typically offered by private lenders (like banks) and are used by families when there is still a gap between the cost of attendance and what the government allows you to borrow.
Purchasing Card-A real convenience for businesses, this card eliminates the need for time-consuming purchase orders. A company simply places orders directly with suppliers and charges them to the card, usually for purchases of $5,000 or less.
Secured Card-A great "first credit card" or way to reestablish your credit rating, this kind of card is "secured" by money you deposit in a designated savings account. For instance, if you deposit $500, your credit card limit generally will be for that amount. If for some reason you cannot pay your credit card bills, your credit card issuer will be paid from the savings account.
Servicing Agencies (Servicers)-An organization that administers loans for lenders and secondary markets. They issue monthly statements, handle billing and collect payments. If your lender transfers administrative tasks to a servicing agency, you'll receive your payment schedule from, and make your payments to, that agency.
Smart Card-See Chip Card.
State 529 Plan-A tax-advantaged investment vehicle designed to encourage saving for the future higher education expenses of a designated beneficiary.
Student Aid Report (SAR)-Summarizes the information included in the FAFSA. The SAR is the notification of the student's Expected Family Contribution
(EFC) and eligibility for other types of federal financial aid.
Subsidized Interest-Interest paid on certain types of federal student loans by the federal government while the student is in college or during grace and deferment periods.
Transaction Fees-Fees charged when you make certain types of transactions. Transaction fees are typically assessed on balance transfers, cash advances and cash-like transactions, such as money orders, wire transfers and casino gaming chips.
Trusts-A legal title to property held by one party for the benefit of another.
Truth in Lending Act (Implemented by Federal Reserve Regulation Z)-This federal law protects you by making sure lenders tell you about the costs, terms and conditions at the time they offer you a loan or credit card.
Unsubsidized Interest-Interest paid by the borrower on certain types of loans beginning on the date the loan is disbursed.
Variable APR-An APR that changes periodically and is usually tied to a published rate such as the prime rate.