When you register for the Free Application for Federal Student Aid (FAFSA), whether for the first time as a high school senior or for the third time as a seasoned college student, the entire process can seem like a labyrinth with no map for students to navigate around. The last thing we want is for students to get lost in any kind of unsolvable maze, we’re going to supply you a mini-dictionary. Granted, it’s not a map showing you every nook and cranny of the FAFSA application process, but understanding these key terms will give you a good jumpstart before you dive in the great ocean of financial aid.
Adjusted Gross Income (AGI): the amount that you’ll be reporting when you complete federal tax returns on your or your family’s wages, salary, interest, dividends, and so on.
Borrower: YOU! If you are the one taking out loans, you are the borrower.
Capitalization: unpaid interest added to your loan: essentially, if you do not pay the interest on your loan, you may end up having to pay interest on your loan’s interest, ultimately paying more for the whole loan.
Disbursement: loan funds your school will be paying to you (the borrower).
Expected Family Contribution (EFC): while you’re completing your FAFSA application, the website will calculate this number, which determines whether you are eligible for financial aid.
Financial need: cost of attendance at your school – EFC (see “E”) = your financial need; a simple equation!
Grant: financial aid that, unlike a loan, does not need to be paid back; this is often offered based on your financial need (see “F”).
Interest: you’ve been hearing about this over and over here and perhaps learned a bit about it in your math courses but…just what is this and what is it doing in financial aid lingo?! It actually plays a HUGE part in the financial aid process: interest is a certain percentage of the unpaid principal amount of your loan that you will be paying (perhaps after you graduate with that sweet diploma in your hands) as an expense for borrowing money.
Lender: where you are taking your loan out from, whether it is your school, the bank, of the government.
Merit-based: loans or scholarships that are given based not on your financial need (see “F”) but on what you have achieved (e.g., your grades, extracurricular activities, et cetera).
Number: not quite the kind that you always deal with in math, but you’re going to need a special series of numbers—decided by you—to make up the all-important PIN (Personal Identification Number); if your family will be helping you through college, be sure that a parent gets his or her own PIN as well.
Promissory note: a document that you must sign whenever you take out a loan from the government; this will list all the nitty-gritty details that you probably typically look over about your loan (i.e., “I have read and agree with the terms and conditions”…even though you may have neglected reading it all). However, be sure you have a copy on hand for when you repay your loan or need to pull out information about it.
Regular student: the term sounds odd, but you MUST be one—that is, a student who is at a school to obtain some sort of degree or certificate from that school—in order to eligible for federal student aid.
Subsidized loan: a need-based loan for which the interest is paid by the government instead of by you during the time you’re in college.
Unsubsidized loan: in contrast to a subsidized loan (see “S”), this is a loan for which you must pay the interest, which accrues from the time it is disbursed (see “D”).
Verification: just as it sounds, this is when your school is confirming the information on your FAFSA application; during this time, your school can contact you to make sure that the application is honest and accurate.
Work-study: think you can balance a job and school? Sign up for this program, and the government will help you pay off your college expenses after finding you a part-time job.
Zones of Over-Ambitious Maturity (ZOOM): the feeling you will occasionally get (especially while completing financial aid applications) when it FINALLY starts sinking in that you’re either going to be or you currently are a college student and well on your way on the road of adulthood.
Any other complicated terms you’ve come across while you filled out your FAFSA application? Let us know in a comment below, and we’ll try to help you out!