A quick guide to financial aid terms
Free Application for Federal Student Aid (FAFSA): This form is used by the government to determine the amount of federal and state aid you are eligible to receive. For more information about the FAFSA visit: http://www.fafsa.ed.gov.
Student Aid Report (SAR): The official notification sent to students after submitting the FAFSA. Students may be required to submit this document to the college’s financial aid office. It will also include your Expected Family Contribution.
Expected Family Contribution (EFC): This is a measure of your family’s financial strength based on income, assets, family size, etc. – gathered from info on your FAFSA. Your EFC represents the amount of money the federal government believes your family can contribute toward one academic year of college. The actual amount your family ends up paying could differ from the EFC figure, depending on which sources of aid are available to you.
Aid Eligibility: This is the total aid you are eligible to receive. It can include scholarships, grants, work-study and loans. Any aid that is offered is typically summarized in an award letter and sent to you by your prospective college(s).
Award Eligibility Letter (Financial Aid Award Letter): This is the list of aid that you are eligible to receive from your prospective college, including terms and conditions. you should be aware that you are not required to accept all the aid found in the letter. You could turn down loans, for example.
Click here for a link to “Understanding Your Financial Aid Award Letter” from FastWeb.com
Cost of Attendance (COA): This figure includes the total price of tuition, fees, room, board, books, supplies, transportation and personal expenses for one year of college. This is also known at some colleges as the “Student Budget”. Remember, the farther your college is from home, the more you must allocate for trips home!
Financial Need: This is the difference between your Cost of Attendance (COA) and you EFC.
Grants: Awards typically based on financial need and do not need to be paid back.
Scholarships: Awards usually based on achievement or talent that also do not need to be paid back.
Loans:
These funds must be paid back, usually with interest. There are federal student loans, federal parent loans, and private loans. Federally-guaranteed student loans can come from a private lender (like a bank) or from the federal government and administered by your college.
Interest: An annual charge for borrowing money, expressed as a percentage of the loan balance. Interest rates are either variable (the rate can change) or fixed (the rate will not change).
Annual Percentage rate (APR): The overall cost of borrowing money, expressed as an annual percentage of the loan balance. The APR combines the interest rate with loan fees, and also includes the effects of compounding.
Default: Failure to repay your loan; it may lead to legal action to recover the money and can negatively affect your credit rating.
Principal: The full amount borrowed. During repayment, it refers to the portion of the original amount still owed (not including interest).