Financial aid has a vocabulary of its own, and almost none of it is optional. The words turn up on the forms, the award letters and the servicer’s website whether or not anyone has explained them, and the cost of misreading one is real money.
This page defines every term this site uses. Each entry is written to be read cold, by someone who has just met the word on a letter and needs to know what it means before they can decide anything.
Why some entries give two answers
The federal student loan rules changed on 1 July 2026. For a stretch of terms that means there is no single correct definition any more — there is one answer for borrowers whose first disbursement fell before that date and a different one for everybody after. Eligible, annual limit and repayment plan all behave that way.
Where a term is split like that, the entry says so and gives both answers rather than picking whichever is more common. A glossary is where somebody goes when they are already unsure, so a confident single definition of a two-meaning word does more damage there than it would anywhere else on the site.
Retired terms are kept
Words that no longer describe anything current stay on this page. If you are reading a letter from 2024, an older article, or a servicer’s page that has not been updated, you still need to know what it was talking about — and being told the term does not exist is not help.
The Expected Family Contribution is the clearest example. It was replaced by the Student Aid Index, but it appears in years of paperwork and in a great deal of advice that is still online. It has an entry here, marked as superseded, with a pointer to what replaced it.
What these definitions are not
A definition tells you what a word means. It does not tell you what to do, and nothing on this page is advice about your own situation. Where a term carries a figure, that figure is checked against the federal or state source that sets it and dated so you can see how current it is — but the guides, not the glossary, are where those figures are explained in context.
A
- Accreditation
- Recognition by an approved accrediting body. It controls whether a school can access federal aid and whether its credits transfer. Verify it before enrolling anywhere.
- Aggregate loan limit
- The total you may borrow across your whole education, as distinct from the annual limit.
A single $257,500 lifetime cap applies across all federal Direct Loans for borrowers from 1 July 2026. Parent PLUS sits outside it and is capped separately.
- American Opportunity Tax Credit
- A federal credit of up to $2,500 per student for the first four years of undergraduate study: 100% of the first $2,000 of qualified expenses plus 25% of the next $2,000. Up to $1,000 is refundable.
- Articulation agreement
- A formal arrangement between two colleges setting out which credits transfer and how, usually between a community college and a four-year school.
- Attendance zone
- The geographic area assigned to a public school. It determines your default school and is set by the district, not by your mailing address alone.
- Award year
- The federal aid year, running 1 July to 30 June. Rates, limits and award amounts are set per award year, which is why a figure correct in June may be wrong in July.
C
- Capitalization
- When unpaid interest is added to your principal, so you begin paying interest on interest. It is the mechanism behind balances that grow despite years of payments.
- Charter school
- A publicly funded school run independently of the district under a charter. Free to attend, usually admitting by lottery when oversubscribed.
- Consolidation
- Combining federal loans into a single new federal loan at a weighted-average rate. Free to do directly. Different from refinancing.
- Contributor
- Anyone whose information is required on the FAFSA — the student, and depending on circumstances a parent, a stepparent or a spouse. Each provides consent separately.
- Cost of Attendance
- A school's own estimate of a year's total cost: tuition and fees plus housing, food, books, transport and personal expenses. It sets the ceiling on how much aid you can receive, and it is an estimate rather than a bill.
- Credit recovery
- A route for a high school student to re-earn credit for a failed course, often in a compressed or online format. Policies on how it appears on a transcript vary widely.
D
- Deferment
- An approved pause in payments. On subsidized loans the government may cover the interest; on unsubsidized loans it does not.
- Dependency status
- Whether the FAFSA requires parent information. It is set by statutory questions, not by whether parents support you or claim you on a tax return, which is the most common misunderstanding in the whole aid system.
- Direct Subsidized Loan
- A federal undergraduate loan for students with financial need, on which the government pays the interest while you are enrolled at least half-time.
- Direct Unsubsidized Loan
- A federal loan not based on need, on which interest accrues from disbursement. Available to undergraduate, graduate and professional students.
Graduate borrowing limits changed on 1 July 2026. Loans first disbursed before that date follow the earlier aggregate limits; loans from that date are capped at $20,500 a year and $100,000 in total for most graduate programmes.
- Disbursement
- The moment aid money actually reaches the school. It matters more than the award date, because most limits and rules key off when a loan was first disbursed rather than when it was approved.
- Dual enrollment
- Taking college courses while still in high school, usually for credit at both. Affects later financial aid eligibility in ways worth checking first.
E
- Expected Family Contribution (EFC)
- The predecessor to the Student Aid Index. Retired, but still named in a great deal of published guidance and in older school documents.
F
- FAFSA
- The Free Application for Federal Student Aid. The single form that opens access to federal grants, work-study and loans, and which most states and colleges also use to award their own aid. There is no fee and no separate application for a Pell Grant.
- Federal Work-Study
- A federal programme that funds part-time jobs for students with need. It is not automatically awarded and the money arrives as wages, not as a credit against your bill.
- FERPA
- The federal law governing student education records. It gives parents the right to inspect records and, once a student turns 18 or enrols in college, transfers that right to the student.
- Forbearance
- An approved pause in payments during which interest accrues on everything. Easier to obtain than deferment and more expensive.
- Form 1098-T
- The statement a school sends showing tuition billed or paid and any scholarships applied. Needed to claim an education tax credit, and frequently does not match what you actually paid.
G
- Gift aid
- Money that does not have to be repaid: grants and scholarships. The part of an offer worth comparing first.
- Grace period
- The months after leaving school before repayment begins. Interest usually still accrues on unsubsidized loans during it.
- Grad PLUS Loan
- A federal loan that let graduate and professional students borrow up to the full cost of attendance minus other aid.
Eliminated for new borrowers from 1 July 2026. Existing borrowers may continue under the earlier rules for a limited period. Balances still count toward the lifetime cap.
I
- IEP
- An Individualized Education Program: a legally binding plan for a student who qualifies for special education, setting out services, goals and supports. Created by a team that includes the parent.
- Income-Based Repayment (IBR)
- A long-standing income-driven plan that caps the monthly payment at a share of discretionary income and forgives any remaining balance at the end of the term. It is the plan borrowers on the phased-out options are generally moved to.
Remains open indefinitely to borrowers whose loans were all first disbursed before 1 July 2026. Not available for loans from that date.
- Income-driven repayment
- Any plan that sets your monthly payment from your income rather than your balance, usually ending in forgiveness of any remaining balance after a set period.
Before 1 July 2026 there were several: IBR, ICR, PAYE and SAVE. For loans first disbursed from that date the Repayment Assistance Plan is the only income-driven option.
L
- Lifetime Learning Credit
- A federal credit of up to $2,000, being 20% of up to $10,000 of qualified expenses. Claimed per tax return rather than per student, with no limit on the number of years. Non-refundable.
M
- Magnet school
- A public school with a specialised focus that draws students from across a district, sometimes with selective admission.
N
- Net price
- What a family actually pays after gift aid, as distinct from the published sticker price. The only figure worth comparing between schools.
O
- Open enrollment
- A district or state policy allowing students to attend a school outside their assigned zone, usually subject to space and an application window.
- Origination fee
- A percentage deducted from a federal loan before it reaches your school, so the amount disbursed is less than the amount borrowed. Budget against the disbursed figure, not the approved one.
P
- 504 Plan
- A plan providing accommodations for a student with a disability who does not require specialised instruction. Narrower than an IEP and made under a different law.
- 529 plan
- A state-sponsored education savings account. Contributions are not deductible federally; growth and qualified withdrawals are federally tax-free. State treatment varies and does not automatically follow federal rules.
- Parent PLUS Loan
- A federal loan issued to the parent of a dependent undergraduate, not to the student. Requires a credit check and cannot be transferred to the student.
Before 1 July 2026 there was no fixed cap: parents could borrow up to cost of attendance minus other aid. From that date borrowing is capped at $20,000 a year and $65,000 in total per student, and Parent PLUS is excluded from the Repayment Assistance Plan.
- Pell Grant
- The largest federal grant for undergraduates with financial need. Does not have to be repaid unless you withdraw and create an overpayment. Awarded through the FAFSA; there is no separate application.
- Professional degree
- A statutory category of graduate programme eligible for higher federal borrowing limits than other graduate study.
Actively contested. A rule narrowing the definition to 11 fields took effect on 1 July 2026 but was partly stayed by a court on 24 June 2026, and the Department is operating an interim list it describes as liable to change. Check current status before relying on it.
- Professional judgment
- A financial aid administrator's statutory authority to adjust the data used in your aid calculation when your circumstances differ from what the form captured — a job loss, a death, a one-off income event. It is the mechanism behind most successful appeals.
- Public Service Loan Forgiveness
- Discharge of a remaining federal loan balance after 120 qualifying monthly payments while working full-time for a government or qualifying non-profit employer. Employment certification matters as much as the payments.
For borrowers from 1 July 2026 the Repayment Assistance Plan is the only income-driven route that counts toward it.
R
- Recapture
- A state clawing back a 529 tax deduction it previously allowed, usually after a non-qualified withdrawal or a rollover to another state's plan.
- Refinancing
- Replacing federal loans with a private loan at a new rate. Permanently gives up federal protections, income-driven repayment and forgiveness eligibility. Not reversible.
- Repayment Assistance Plan (RAP)
- The income-driven plan available from 1 July 2026. Payments run between 1% and 10% of income, reduced by $50 a month per dependent; unpaid monthly interest is waived on an on-time payment; a matching principal payment applies where a payment does not reduce principal by at least $50; any remaining balance is discharged after 360 on-time payments.
Only available for loans from 1 July 2026 onward, and not available for Parent PLUS.
S
- Satisfactory Academic Progress
- The academic standard you must keep to remain eligible for federal aid: a minimum GPA, a minimum pace of completion, and a maximum timeframe. Failing it stops aid, and every school has an appeal route.
- SAVE Plan
- An income-driven plan introduced in 2023 and vacated by court order. No longer available. It is listed here because millions of borrowers were enrolled in it and still search for it.
- Self-help aid
- Loans and work-study — money you repay or earn. Listing it alongside gift aid on an award letter is what makes offers hard to compare.
- Standards-based grading
- A system reporting mastery of specific skills rather than a single letter grade. A score of 3 usually means meeting the standard, not a C.
- Student Aid Index (SAI)
- The number the FAFSA produces to measure what a family can contribute. It replaced the Expected Family Contribution. It is not a bill and not a prediction of what you will pay; schools subtract it from cost of attendance to work out need.
- Superfunding
- Electing to treat up to five years of annual gift tax exclusions as made at once, so a large 529 contribution can be given in a single year without gift tax consequences.
T
- Tax parity
- A state rule allowing its residents to claim the state tax benefit for contributions to any state's 529 plan, not only its own. Where it applies, a family can choose a plan on fees without losing the deduction. Most states do not offer it.
- Tiered Standard Repayment
- The fixed-payment plan from 1 July 2026, with a term set by how much you owe: 10 years under $25,000, 15 years to $49,999, 20 years to $99,999, and 25 years above that.
Replaces the flat 10-year Standard plan for borrowers from 1 July 2026.
- Title I
- Federal funding for schools serving a high proportion of students from low-income families. A Title I designation describes funding, not school quality.
V
- Verification
- A process where a school asks for documents confirming what was reported on the FAFSA. Being selected is routine and is not an accusation. Aid is usually not disbursed until it is complete.
W
- Weighted GPA
- A grade point average that gives extra weight to honours, AP or IB courses, so it can exceed 4.0. Colleges frequently recalculate to their own scale, so the number on a transcript is rarely the number they use.