Loan Terms and Financial Management Information
Better understanding your loan options also means having information about how loans work and the terminology that describes them. Be a knowledgeable consumer.
Know the Terms of Your Loan Before You Borrow
- Annual Percentage Rate (APR) – interest associated with a loan. When the APR is fixed, the rate stays the same throughout the life of the loan. When it is variable, the rate can change during the year and term of the loan.
- Capitalization – addition of unpaid interest to the loan principal, which increases the principal amount of the loan and its total cost.
- Deferment – a postponement of payment on a loan for an agreed upon period of time. You are eligible for a student deferment until you graduate or drop below six units for any given semester.
- Grace Period – a period before the first payment must be made on a loan (six months for a Direct Stafford Loan). The grace period begins the day after the student ceases to be enrolled at least half time, six units for undergraduate and credential students, four units for master’s students).
- Interest – an expense of borrowing money that is calculated as a percentage of the amount borrowed. Accrued interest is the amount that has accumulated on the unpaid balance of your loan.
- Loan Fee – an expense of borrowing deducted proportionately from each loan disbursement.
- Loan Servicer – organization that administers and collects loans, either the holder of the loan or an agent acting on behalf of the holder. The federal government is the loan servicer for Federal Direct Loans.
- Master Promissory Note (MPN) – the legal document you sign to "promise" to repay your Direct Loan. This is a one–time requirement. If you change lenders, a new MPN will need to be signed promising to repay that lender.
- Principal (Payoff) Balance – the amount owed on a loan or loans at any given time (may include capitalized interest).
- Repayment – the period during which a borrower is obligated to make payment on his or her loan(s).
Also visit the Financial Aid and Scholarship Office Web Glossary for additional definitions of terms used in financial aid programs.
Financial Literacy Resources
Consult the following Web links for student loan and money management issues. The more you know about borrowing, credit, and protecting your financial future, the more options you will have when you graduate.
Student Loan Sites
- Direct Loan Home Page
- Direct Loan Servicing Online
- National Student Loan Data System
- Loan Forgiveness