As a high school junior or senior, you’ve probably heard a lot of talk about “financial aid” and “student loans.” Your counselor is on your back about filling out a FAFSA, your parents are asking about interest rates, and all the fancy paperwork with charts and numbers about loans and grants and whatnot makes no sense to you.
It’s no surprise that you aren’t familiar with a lot of the terms being thrown around. As a high school student, you probably don’t have any loans yet. You likely don’t have a credit card yet. You may not even have a checking account or bills to pay. To save you from having to smile and nod through conversations about paying for college, here is a cheat sheet of the most common financial aid terms you need to know.
Financial Aid: Money the government lets you borrow for college if it’s determined your family is unable to afford it on their own. Need is based on your family’s income.
Interest Rate: The cost of borrowing money, expressed as a percentage of the total amount owed. This amount is paid back, on top of your total loan amount. The more money you borrow, and the longer you take to pay it off, the most interest you’ll be paying.
Loan: Money you borrow and will pay back with interest.
Stafford Loan: The most common form of student loan.
Subsidized Loan: A loan the government pays interest on while you’re in school. You’ll be responsible for the rest of the interest once you’ve left school.
Unsubsidized Loan: A loan you’ll pay the accumulated interest on once you’ve left school. You’re responsible for all of the interest.
FAFSA: An acronym that stands for Free Application for Federal Student Aid. Think of it as a long job application you and your parents will fill out together, only instead of applying for a job, you’re applying to borrow money from the government to pay for school.
Academic Year: The school year, usually two semesters (Fall and Spring) or three trimesters.
Borrower: This is you. If you’re borrowing the money, you’re the borrower.
Master Promissory Note: A contract that states you’ll pay back the money you borrow.
Award Letter/Award Package: Documents your college will use to outline how much money you’ll receive for that school in loans and scholarships.
Grace Period: A six month period between when you leave college and when your first student loan bill is due. It’s a time to get your living situation and a job in order before you have to start paying money back.
Work Study Program: A program that helps students earn financial funding through a part-time work program at their college.
Default: Defaulting is officially defined as 270 days without making loan payments when you haven’t qualified for deferment.
Deferment: Pausing your student loans for a six month period when you’re incapable of making payments.