Accrue
The process in which interest accumulates on a borrower's loan. (last updated 03/19/2004)

Amortization
A repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest over the term of the loan. (last updated 03/19/2004)

Annual Percentage Rate (APR)
The APR shows the cost of a loan expressed as a yearly interest rate, including the interest and other fees associated with the loan. Because the APR includes up-front costs paid to obtain the loan, it is usually a higher amount than the interest rate stipulated in the note. (last updated 03/19/2004)

Application
The first step in the official loan process to gather and record information about the potential borrower. (last updated 03/19/2004)

Borrower
A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms. (last updated 03/19/2004)

Capitalization
Adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan. (last updated 03/19/2004)

Collateral
Property pledged as security for a loan to ensure repayment of a loan. (last updated 03/19/2004)

Credit Agencies/Credit Bureaus
Organizations that collect individual consumer credit information and provide credit reports to potential lenders. (last updated 03/19/2004)

Credit History
The history of an individual's debt repayment. For most types of loans, lenders use this information to gauge a potential borrower's ability to repay a loan. (last updated 03/19/2004)

Credit Rating
A grade assigned to denote the net worth and credit standing of an individual or a business. (last updated 03/19/2004)

Credit Report
A record that lists all past and present debts and the timeliness of their repayment, and documents an individual's credit history. (last updated 03/19/2004)

Debt
Amount owed to another that must be repaid. (last updated 03/19/2004)

Default
The failure to repay a loan according to the terms of the loan. (last updated 03/19/2004)

Delinquency
Failure of a borrower to make a timely payment on a loan. (last updated 03/19/2004)

Direct Loan
A loan provided to the borrower directly from a Federal agency. (last updated 03/19/2004)

Guaranteed/Insured Loan
A loan made and serviced by a lending institution under agreement that a governmental agency may either purchase the guaranteed portion if the borrower defaults or insure against losses the lender may incur a loss due to default. (last updated 03/19/2004)

Interest
A fee charged for the use of money. (last updated 03/19/2004)

Interest Rate
The amount of interest charged on a loan, usually expressed as a percentage. (last updated 03/19/2004)

Lender
The entity that provides loan funds to the borrower. Depending on the type of loan, the lender may be a bank or other financial institution, or a government agency. (last updated 03/19/2004)

Lien
A legally enforceable hold or claim on the property of another obtained as security for the repayment of indebtedness or an encumbrance on property to enforce payment of an obligation. (last updated 03/19/2004)

Loan
Money borrowed from a lending institution or a government agency, usually repaid with interest. (last updated 03/19/2004)

Loan Applicant
The party applying to the lender (in the case of guaranteed loans) for a guaranteed loan or the party applying for a loan (in the case of direct loans). (last updated 03/19/2004)

Note
The binding legal document you sign when you get a loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan (also called a promissory note or a mortgage note). (last updated 03/19/2004)

Payment
Periodic (usually monthly) installments paid to a lender to be applied toward repaying your loan. Payments are generally applied first to accrued interest and then to principal. (last updated 03/19/2004)

Principal
The loan amount borrowed from a lender, not including interest or additional fees. (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Servicer
An organization that collects loan payments on behalf of a lender. (last updated 03/19/2004)

Term
The time limit within which a loan must be repaid. (last updated 03/19/2004)

Variable Interest Rate
An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly. (last updated 03/19/2004)

Beginning Farmer or Rancher
An individual or entity who has not operated a farm or ranch, or who has operated a farm or ranch for not more than 10 years (last updated 03/19/2004)

Entities
Cooperatives, corporations, partnerships, joint operations, trusts, or limited liability companies. (last updated 03/19/2004)

Family Farm
A farm which

A. produces agricultural commodities for sale in sufficient quantities so that it is recognized in the community as a farm rather than a rural residence;
B. provides enough agricultural income by itself, including rented land, or together with any other dependable income, to enable the borrower to pay necessary family living and operating expenses, maintain essential chattel and real property, and pay debts.
C. is managed by: the borrower when a loan is made to an individual; the members, stockholders, partners, or joint operators responsible for operating the farm when a loan is made to a cooperative, corporation, partnership, or joint operation
D. has a substantial amount of the labor requirements for the farm and non-farm enterprise provided by: the borrower's immediate family; the members, stockholders, partners, or joint operators responsible for operating the farm when a loan is made to a cooperative, corporation, partnership, or joint operation
E. uses or may use a reasonable amount of full-time hired labor and seasonal labor during peak loan periods. (last updated 03/19/2004)

Family living expenses
Any withdrawals from income to provide for needs of family members. (last updated 03/19/2004)

Farm
A tract or tracts of land, improvements, and other appurtenances considered to be farm property which is used or will be used in the production of crops, livestock, and aquaculture products for sale in sufficient quantities to that the property is recognized as a farm rather than a rural residence. (last updated 03/19/2004)

Farm Service Agency (FSA)
The Farm Service Agency (FSA) is an agency of the U.S. Department of Agriculture. (last updated 03/19/2004)

Graduation
FSA's determination that a borrower of a direct loan is financially stable enough to refinance that loan with a commercial lender with or without a guarantee. (last updated 03/19/2004)

Interest Assistance
A program under FSA's guaranteed farm operating loan program which enables lenders to provide credit to operators of family farms who do not have the financial resources to meet the standard repayment terms. Under this program, FSA enters into an agreement with the lender to reimburse the lender 4 percentage points on the loan, in exchange for the lender reducing the interest rate charged to the borrower. (last updated 03/19/2004)

Non-farm Enterprise
Include, but are not limited to, raising earthworms, exotic birds, tropical fish, dogs, or horses for non-farm purposes (including racing, pleasure riding, or show. Farm purposes would include draft or cutting horses). FSA loan funds cannot be used to finance a non-farm enterprise. (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Socially Disadvantaged Applicant
A loan applicant who is a member of a group whose members have been subjected to racial, ethnic or gender prejudice because of their identity as a member of a group, without regard to their individual qualities. These groups include women, blacks, American Indians, Alaskan Natives, Hispanics, Asians, and Pacific Islanders. (last updated 03/19/2004)

504 Loan Program
Typically, a 504 project includes a loan secured with a senior lien from a private-sector lender covering up to 50 percent of the project cost, a loan secured with a junior lien from the Certified Development Company (CDC) (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business being helped. The maximum SBA debenture is $1,000,000 for meeting the job creation criteria or a community development goal. Generally, a business must create or retain one job for every $35,000 provided by the SBA. The maximum SBA debenture is $1.3 million for meeting a public policy goal. (last updated 03/19/2004)

7(a) Loan Guaranty
The 7(a) Loan Guaranty Program is one of SBA's primary lending programs. It provides loans to small businesses unable to secure financing on reasonable terms through normal lending channels. The program operates through private-sector lenders that provide loans which are, in turn, guaranteed by the SBA -- the Agency has no funds for direct lending or grants. (last updated 03/19/2004)

Affiliates
Business concerns, organizations, or individuals that control each other or that are controlled by a third party. Control may include shared management or ownership; common use of facilities, equipment, and employees; or family interest. The calculation of a firm's size includes the employees or receipts of all affiliates. Affiliation with another business concern is based on the power to control, whether exercised or not. Such factors as common ownership, common management and identity of interest (often found in members of the same family), among others, are indicators of affiliation. Power to control exists when a party or parties have 50 percent or more ownership. It may also exist with considerably less than 50 percent ownership by contractual arrangement or when one or more parties own a large share compared to other parties. The affiliated business concerns need not be in the same line of business. (last updated 03/19/2004)

Asset
The entire property of a person, association, corporation, or estate applicable or subject to the payment of debts. (last updated 03/19/2004)

Balance Sheet
Financial statement listing a company's assets, liabilities, and equity on a specific date. (last updated 03/19/2004)

Book Value
The value of an item or property at a specific time after deducting depreciation from original cost. (last updated 03/19/2004)

Break-Even Point
The break-even point in any business is that point at which the volume of sales or revenues exactly equals total expenses -- the point at which there is neither a profit nor loss -- under varying levels of activity. The break-even point tells the manager what level of output or activity is required before the firm can make a profit; reflects the relationship between costs, volume and profits. (last updated 03/19/2004)

Business Plan
A comprehensive planning document which clearly describes the business developmental objective of an existing or proposed business applying for assistance in SBA's 8(a) or lending Programs. The plan outlines what and how and from where the resources needed to accomplish the objective will be obtained and utilized. (last updated 03/19/2004)

Capital
1. Assets less liabilities, representing the ownership interest in a business; 2. A stock of accumulated goods, especially at a specified time and in contrast to income received during a specified time period; 3. Accumulated goods devoted to the production of goods; 4. Accumulated possessions calculated to bring income. (last updated 03/19/2004)

Carrying Costs
Inventory costs associated with capital, storage, handling expenses, insurance, taxes and obsolescence. (last updated 03/19/2004)

Cash Flow
The movement of money into and out of your business. (last updated 03/19/2004)

Cash Flow Statement
An accounting presentation showing how much of the cash generated by the business remains after both expenses (including interest) and principal repayment on financing are paid. A projected cash flow statement indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flows can be calculated for any given period of time, normally done on a monthly basis. Also, one of the Five "Cs" evaluated in determining a loan applicant's credit-worthiness (last updated 03/19/2004)

Certified Development Company (CDC)
The 504 Certified Development Company (CDC) Program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. A Certified Development Company is a nonprofit corporation set up to contribute to the economic development of its community. CDCs work with the SBA and private-sector lenders to provide financing to small businesses. There are about 270 CDCs nationwide. Each CDC covers a specific geographic area. (last updated 03/19/2004)

Community Adjustment and Investment Program (CAIP)
The United States Community Adjustment and Investment Program was created to help communities that suffered job losses due to changing trade patterns with Mexico and Canada following the North American Free Trade Agreement (NAFTA). The CAIP promotes economic implementation of the adjustment by increasing the availability and flow of credit and encourages business development and expansion in impacted areas. Through the CAIP, credit is available to businesses in eligible communities to create new, sustainable jobs or to preserve existing jobs. The CAIP works with the SBA in both their 7(a) Loan Guarantee Program and 504 Program to reduce borrower costs and increase the availability of these proven business assistance programs. (last updated 03/19/2004)

Compromise
The settlement of a claim resulting from a defaulted loan for less than the full amount due. Compromise settlement is a procedure available for use only in instances where the government cannot collect the full amount due within a reasonable time, by enforced collection proceedings or where the cost of such proceedings would not justify such effort. (last updated 03/19/2004)

Current Ratio
The ratio of current assets to liabilities. Also called "quick ratio." (last updated 03/19/2004)

Debenture
Debt instrument evidencing the holder's right to receive interest and principal installments from the named obligor. Applies to all forms of unsecured, long-term debt evidenced by a certificate of debt. (last updated 03/19/2004)

Debt Capital
Business financing that normally requires periodic interest payments and repayment of the principal within a specified time. (last updated 03/19/2004)

Debt Financing
The provision of long term loans to small business concerns in exchange for debt securities or a note. (last updated 03/19/2004)

Debt to Total Assets Ratio
Total debt divided by total assets. (last updated 03/19/2004)

Equity
An accounting term used to describe the net investment of owners or stockholders in a business. Under the accounting equation, equity also represents the result of assets less liabilities. (last updated 03/19/2004)

Equity Financing
The provision of funds for capital or operating expenses in exchange for capital stock, stock purchase warrants and options in the business financed, without any guaranteed return, but with the opportunity to share in the company's profits. Equity financing includes long-term subordinated securities containing stock options and/or warrants. Utilized in SBIC financing activities. (last updated 03/19/2004)

Equity Partnership
A limited partnership arrangement for providing start-up and seed capital to businesses. (last updated 03/19/2004)

Fair Market Value
What a qualified buyer will pay for goods, services, or property. (last updated 03/19/2004)

Fair and Reasonable Price
A price that is fair to both parties, considering the agreed-upon conditions, promised quality, and timeliness of contract performance. "Fair and reasonable" price is subject to statutory and regulatory limitations. (last updated 03/19/2004)

Financial Plan
An outline for how to use the money (capital) you have and how to raise the money you will need. (last updated 03/19/2004)

Fixed Assets
Equipment, buildings, etc., which are purchased and used for long-term purposes. (last updated 03/19/2004)

Fixed Costs
Costs of doing business such as rent, utilities, depreciation, taxes, etc., that remain generally the same regardless of the amount of sales of goods or services. (last updated 03/19/2004)

Franchise Registry
SBA's Franchise Registry is a good example of helping small businesses owners through cooperation between government and industry. The dedicated efforts of SBA employees, franchisees, franchisors, and lenders have led to streamlined eligibility guidelines and operating procedures that will reduce costs and processing time and help SBA serve its customers better. (last updated 03/19/2004)

Goodwill
An intangible asset of a business that relates to a favorable relationship with customers, and excess earning power. (last updated 03/19/2004)

Income Statement
Financial statement showing a company's sales, expense and net income or loss for a specific period of time. (last updated 03/19/2004)

Incubator
A facility designed to encourage entrepreneurship and minimize obstacles to new business formation and growth, particularly for high technology firms, by housing a number of fledgling enterprises that share an array of services. These shared services may include meeting areas, secretarial services, accounting services, research libraries, on-site financial and management counseling and word processing facilities. (last updated 03/19/2004)

Intermediary Organization
Organizations that play a fundamental role in encouraging, promoting, and facilitating business-to-business linkages and mentor-protégé partnerships. These can include both nonprofit and for-profit organizations: chambers of commerce; trade associations; local, civic, and community groups; state and local governments; academic institutions; and private corporations. (last updated 03/19/2004)

Inventory
Merchandise that is purchased and/or produced and stored for eventual sale. (last updated 03/19/2004)

Inventory Turnover
How often the inventory is sold and replenished over the course of a year. (last updated 03/19/2004)

Lease
A contract between the owner (lessor) and the tenant (lessee) stating the conditions under which the tenant may occupy or use real estate or equipment. Terms usually include a specific period of time and a predetermined rate. (last updated 03/19/2004)

Liability
Debt owed by the company such as bank loans or accounts payable. (last updated 03/19/2004)

Line of Credit
A short-term loan, usually less than one year. (last updated 03/19/2004)

Liquid Assets
Cash, checks and easily-convertible securities available to meet immediate and emergency needs. (last updated 03/19/2004)

Market Value
What a willing buyer will pay for goods, services, a property or a business. (last updated 03/19/2004)

Microloan Program
The MicroLoan Program provides very small loans to start-up, newly established, or growing small business concerns. Under this program, SBA makes funds available to nonprofit community based lenders (intermediaries) which, in turn, make loans to eligible borrowers in amounts up to a maximum of $35,000. The average loan size is about $10,500. Applications are submitted to the local intermediary and all credit decisions are made on the local level. (last updated 03/19/2004)

Negative Net Worth
A business condition when total liabilities exceed total assets. (last updated 03/19/2004)

Net Worth
Property owned (assets), minus debts and obligations owed (liabilities), is the owner's equity (net worth). (last updated 03/19/2004)

North American Industry Classification System (NAICS)
The North American Industry Classification System (NAICS) is replacing the U.S. Standard Industrial Classification (SIC) system. NAICS will reshape the way we view our changing economy. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America. (last updated 03/19/2004)

Quick Ratio
Current assets less inventories divided by current liabilities. Also called "acid ratio." (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Return on Investment
The amount of profit (return) based on the amount of resources (funds) used to produce it. Also, the ability of a given investment to earn a return for its use. (last updated 03/19/2004)

Revolving Credit Account
A formal line of credit offered to larger businesses in exchange for up-front fees and standard interest payments. (last updated 03/19/2004)

SBA Loan
The SBA enables its lending partners to provide financing to small businesses when funding is otherwise unavailable on reasonable terms by guaranteeing major portions of loans made to small businesses. (last updated 03/19/2004)

Size Standards
The term "size standard" describes the numerical definition of a small business. In other words, a business is considered "small" if it meets or is below an established "size standard." (last updated 03/19/2004)

Small Business Investment Company (SBIC)
SBICs, licensed by the Small Business Administration, are privately owned and managed investment firms. They are participants in a vital partnership between government and the private sector economy. With their own capital and with funds borrowed at favorable rates through the Federal Government, SBICs provide venture capital to small independent businesses, both new and already established. (last updated 03/19/2004)

Standard Industrial Classification (SIC) Code
A code representing a category within the Standard Industrial Classification System administered by the Statistical Policy Division of the U.S. Office of Management and Budget. The system was established to classify all industries in the US economy. A two-digit code designates each major industry group, which is coupled with a second two-digit code representing subcategories. (last updated 03/19/2004)

Trade Name
The term used to identify a company. Any type of business may call itself a company. (last updated 03/19/2004)

Trademark
Words, names, symbols or devises, or any combination of these, used to identify the goods of a business and to distinguish these goods from the goods of others. (last updated 03/19/2004)

Turnover
Turnover is the number of times that an average inventory of goods is sold during a fiscal year or some designated period. Care must be taken to ensure that the average inventory and net sales are both reduced to the same denominator; that is, divide inventory at cost into sales at cost into sales at cost or divide inventory at selling price into sales at selling price. The turnover when accurately computed, is one measure of the efficiency of a business. (last updated 03/19/2004)

Variable Costs
Those costs of doing business such as cost of goods, shipping, handling and storage, sales commissions, etc., which are directly related to the sales of goods or services. (last updated 03/19/2004)

Venture Capital
Money used to support new or unusual commercial undertakings; equity, risk or speculative capital. This funding is provided to new or existing firms that exhibit above-average growth rates, a significant potential for market expansion and the need for additional financing for business maintenance or expansion. (last updated 03/19/2004)

Working Capital
Cash and short-term assets that can be used for current needs -- bills, etc. (last updated 03/19/2004)

Damage Assessment
The process used to determine damage to property and business. (last updated 03/19/2004)

Disaster
An occurrence of a natural catastrophe, such as a hurricane, tornado, tsunami, earthquake, landslide, mudslide, volcanic eruption, fire, or snowstorm, a technological accident, or human-caused event that has resulted in severe property damage, death, and/or multiple injuries. (last updated 03/19/2004)

Disaster Area
When a disaster is beyond the capabilities of state and local government to respond, the Governor must make a formal request to the President to declare the affected region a "disaster area." When the presidential declaration is enacted, federal assistance is made available to public and certain non-profit entities, as well as to individuals who were adversely affected by the disaster. (last updated 03/19/2004)

Disaster Field Office (DFO)
The office established in or near the designated area of a Presidentially declared major disaster to support Federal and State response and recovery operations. (last updated 03/19/2004)

Disaster Recovery Center
Places established in the area of a Presidentially declared major disaster to provide victims the opportunity to apply in person for assistance and/or obtain information to that assistance. (last updated 03/19/2004)

Preparedness
Activities prior to a disaster. Examples include: preparedness plans, emergency exercises/training, and warning systems. (last updated 03/19/2004)

Recovery
Activities following a disaster. Examples include: temporary housing, claims processing and grant,; long-term medical care and counseling. (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Response
Activities during a disaster. Examples include: public warning systems, emergency operations; and search and rescue. (last updated 03/19/2004)

Ability to Benefit
If you don't have a high school diploma or its recognized equivalent, you may still be eligible to receive federal student loans and other aid if you pass an independently administered ability to benefit (ATB) test the U.S. Department of Education has approved. (last updated 03/19/2004)

Academic Year
A period of time schools use to measure a quantity of study. For example, a school's academic year may consist of a fall and spring semester during which a student must complete 24 semester hours. Academic years vary from school to school and even between educational programs within the same school. (last updated 03/19/2004)

Consolidation
The process of combining a number of unpaid federal student loans with various repayment schedules into one loan with one monthly payment. (last updated 03/19/2004)

Consolidation Education Loan
A Consolidation Education Loan allows you to combine several types of federal student loans with various repayment schedules into one loan. The repayment process is simpler because you make only one payment a month. Also, the interest rate on the Consolidation Loan might be lower than what you're currently paying on one or more of your loans. (last updated 03/19/2004)

Cost of Attendance (COA)
The total amount it will cost you to go to school - usually expressed as a yearly figure. For purposes of determining your eligibility for federal student loans, COA is determined using rules established by Congress. The COA includes tuition and fees; on-campus room and board (or a housing and food allowance if you live off campus); and allowances for books, supplies, transportation, loan fees, and, if applicable, dependent care costs related to a disability and miscellaneous expenses, including an allowance for the rental or purchase of a personal computer. Also included are reasonable costs for eligible study-abroad programs. If you are attending less than half time, the COA includes only tuition and fees and an allowance for books, supplies, transportation, and dependent-care expenses. Talk to the financial aid administrator at the school you're planning to attend if you have any unusual expenses that might affect your cost of attendance. (last updated 03/19/2004)

Default
Default is a failure to repay a loan according to the terms you agreed to when you signed a promissory note. For the Federal Family Education Loan (FFEL) and Direct Loan programs, default is more specific - it occurs if you fail to make a payment for 270 days if you repay monthly (or 330 days if your payments are due less frequently). The consequences of default are severe. Your school, the lender or agency that holds your loan, the state, and the federal government may all take action to recover the money, including notifying national credit bureaus of your default. This affects your credit rating for a long time. For example, you might find it very difficult to borrow money from a bank to buy a car or a house. In addition, the Internal Revenue Service can withhold your U.S. individual income tax refund and apply it to the amount you owe, or the agency holding your loan might ask your employer to deduct payments from your paycheck.

Also, you're liable for loan collection expenses. If you return to school, you're not entitled to receive additional federal student aid. Legal action also might be taken against you. In many cases, default can be avoided by submitting a request for a deferment, forbearance, or discharge (cancellation) and by providing the required documentation. (last updated 03/19/2004)

Deferment
A deferment is a temporary suspension of your monthly student loan payments. There are many different types of deferments available - check with your school or lender to find out if you qualify. (last updated 03/19/2004)

Dependent Student
You are considered a "dependent student" and must include your parents' income on your Free Application for Federal Student Aid (FAFSA) if you are less than 24 years old, you are not married or separated, you are not and will not be enrolled in a master's or doctorate program (beyond a bachelor's degree), you do not have children who receive more than half their support from you, you are not a veteran, you are not an orphan or a ward of the court.. (last updated 03/19/2004)

Direct Education Loan
Direct Education Loans are federal student loans made directly from the U.S. Department of Education to help eligible students pay for their education expenses. These loans are made under the William D. Ford Federal Direct Loan Program. For more information, visit the Stafford Loan Report. (last updated 03/19/2004)

Disbursement
Payment of loan proceeds to the student or parent borrower. For a Consolidation Loan, this term refers to sending payoffs to the loan holders of the underlying loans you are consolidating. (last updated 03/19/2004)

Eligible Non-citizen
If you are not a U.S. citizen or U.S. national, to be eligible for federal student loans and other aid, you must:

You are not eligible for federal student loans if:

Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau are not eligible for federal student loans. (last updated 03/19/2004)

Eligible Program of Study
A program of organized instruction that leads to a recognized educational credential. To get federal student loans, you must be enrolled in an eligible program. Check with your school to see if your program is eligible. (last updated 03/19/2004)

Expected Family Contribution (EFC)
Your Expected Family Contribution (EFC) is calculated by the U.S. Department of Education based on the information you submit on your Free Application for Federal Student Aid (FAFSA), and is used to determine your eligibility for federal student loans and other aid. The formula used to calculate your EFC is established by law and is used to measure your family's financial strength on the basis of your family's income and assets. The EFC indicates how much money you and your family are expected to contribute toward your Cost of Attendance (COA) for the school year. (last updated 03/19/2004)

Federal Family Education Loan (FFEL)
Federal Family Education Loans (FFELs) are federal student loans made by eligible private lenders to help students pay for their education expenses. For students, these are generally known as Federal Stafford Loans. For more information, visit the Stafford Loan Report. (last updated 03/19/2004)

Financial Aid Package
The total amount of financial aid (federal and non-federal) a student receives. The financial aid administrator at a postsecondary institution combines education loans and other forms of aid into a "package" to help meet your need. (last updated 03/19/2004)

Forbearance
Forbearance can be used to temporarily suspend or reduce monthly student loan payments. You may qualify for forbearance if you are willing but unable to make loan payments due to certain circumstances, including financial hardship. Check with your lender to see if you qualify. (last updated 03/19/2004)

Free Application for Federal Student Aid (FAFSA)
The FAFSA is the form you must complete to apply for federal student loans or other student aid from the U.S. Department of Education. Many states and schools also use the FAFSA data to award aid from their programs. The information you report is used to calculate your Expected Family Contribution (EFC), which measures your family's financial strength on the basis of your family's income and assets. To visit the FAFSA online, go to http://www.fafsa.ed.gov. (last updated 03/19/2004)

General Education Development (GED) Certificate
A certificate showing that an individual has passed a specific, approved high school equivalency test. Students with GEDs may still qualify for federal student loans. (last updated 03/19/2004)

Grace Period
A period of time after you graduate, leave school, or drop below half-time enrollment before you must begin repaying your federal student loan. If you have a Perkins Loan, your grace period is nine months; if you have a FFEL or Direct Stafford Loan, your grace period is six months. (For unsubsidized Stafford Loans, you are responsible for the interest during the grace period.) (last updated 03/19/2004)

Guaranty Agency
The organization that administers the Federal Family Education Loan (FFEL) Program in your state. This agency is the best source of information on FFELs. To find out the name, address, and telephone number of the agency serving your state, you can visit http://www.ed.gov/erod/org_list.cfm?category_id=she for a directory of guaranty agencies. (last updated 03/19/2004)

Half-Time Attendance
The definition of half-time attendance depends on how your school measures the course load of its full time students. Check with your school to find out how it defines half time. (last updated 03/19/2004)

In-school Period
Generally, your loan is in an in-school period if you have been continuously enrolled at least half-time since the loan was disbursed. (last updated 03/19/2004)

Independent Student
You are considered an "independent student" and do not need to include your parents' income on your Free Application for Federal Student Aid (FAFSA) if you are at least 24 years old, married (or separated but not divorced), a graduate or professional student, a veteran, a ward of the court (or both parents are deceased), or have legal dependents other than a spouse. (last updated 03/19/2004)

Interest Capitalization
If you have unsubsidized FFEL or Direct Stafford Loans, and you don't pay the Interest that accrues (accumulates) while you are in school or during deferment periods, the interest will be capitalized - added to the principal amount of your loan. Capitalization increases the amount of your loan. (last updated 03/19/2004)

PLUS Loan
The Federal PLUS Loan enables parents of eligible dependent undergraduate students borrow to help pay their children's education expenses. For more information, visit the PLUS Loan Report. (last updated 03/19/2004)

Perkins Student Loan
Perkins Loans are low-interest (five percent) federal student loans for both undergraduate and graduate students. Perkins Loans are made through a school's financial aid office. Your school is your lender, and the loan is made with government funds. For more information, visit the Perkins Loan Report. (last updated 03/19/2004)

Promissory Note
The binding legal document you sign when you get a student loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan. It includes information on how interest is calculated and what the deferment and cancellation provisions are for your loan. It's very important to read and save this document because you'll need to refer to it later when you begin repaying your loan. (last updated 03/19/2004)

Regular Student
If you are enrolled in an institution to obtain a degree, certificate, or other recognized educational credential, you are considered a "regular student." Generally, to receive federal student loans and other aid, you must be a regular student. (For some programs, there are exceptions to this requirement. Check with your school for more information.) (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Satisfactory Academic Progress
To be eligible to receive federal student loans and other aid, you must maintain satisfactory academic progress toward a degree or certificate, according to your school's written standard of satisfactory progress. Check with your school to find out about its standard. (last updated 03/19/2004)

Selective Service Registration
If you are a male who was born on or after January 1, 1960, are at least 18 years old, and are not currently on active duty in the U.S. Armed Forces, you must register, or arrange to register, with the Selective Service in order to receive federal student loans and other aid. Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau are exempt from registering. (last updated 03/19/2004)

Stafford Student Loan
Stafford Loans are federal student loans made to eligible students to help pay their education expenses. Stafford Loans are made under the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. See the definitions of "Federal Family Education Loans (FFEL)" and "Direct Loan," above. For more information, visit the Stafford Loan Report. (last updated 03/19/2004)

Subsidized/Unsubsidized Stafford Student Loan
Borrowers who demonstrate financial need can receive a subsidized FFEL or Direct Stafford Loan, which means the government pays the interest on your loan while you are in school at least half time, in your grace period, or in an authorized period of deferment (but not during forbearance). If you don't demonstrate financial need (or if you need to borrow more than your subsidized loan limit), you can receive an unsubsidized FFEL or Direct Stafford Loan. This means you are responsible for the interest that accumulates - the government doesn't pay it. (last updated 03/19/2004)

Unsubsidized Stafford Student Loan
If you don't demonstrate financial need (or if you need to borrow more than your subsidized loan limit), you can receive an unsubsidized FFEL or Direct Stafford Loan. This means you are responsible for the interest that accumulates - the government doesn't pay it. For more information, visit the Stafford Loan Report. (last updated 03/19/2004)

Variable Interest Rate
FFEL and Direct Stafford Loans have variable interest rates, which means the rates change yearly, on July 1st. The interest rate is tied to, and fluctuates with, the Treasury Bill rate. You will be notified throughout the life of your loan what your current interest rate is. (last updated 03/19/2004)

Adjustable Rate Mortgage (ARM)
Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap. (last updated 03/19/2004)

Assumption
The procedure whereby the transferee becomes liable for all or part of the debt of the transferor. An assumption may be at the same rates and terms or at new rates and terms, depending on the circumstances. (last updated 03/19/2004)

Closing
Also known as Settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer. (last updated 03/19/2004)

Closing Costs
Various fees required to conclude a real estate transaction. (last updated 03/19/2004)

Co-applicant
An adult member of the household who joins the applicant in applying to the lender for a loan. (last updated 03/19/2004)

Condominium
A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner also shares financial responsibility for common areas. (last updated 03/19/2004)

Cosigner
An individual or entity that joins in the execution of a promissory note to compensate for any deficiency in the applicant's repayment ability. The cosigner becomes jointly liable to comply with the terms of the promissory note in the event of the borrower's default, but is not entitled to any interest in the security or borrower's rights. (last updated 03/19/2004)

Discount Point
Normally paid at Closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan. (last updated 03/19/2004)

Down Payment
The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. (last updated 03/19/2004)

Elderly Family
An elderly family consists of one of the following:

A.   a person who is the head, spouse or sole member of a family and who is 62 years of age or older, or who is disabled, and is an applicant or borrower; or
B. two or more persons who are living together, at least one of whom is 62 or older or disabled, and who is applicant or borrower. (last updated 03/19/2004)

FHA
Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages (last updated 03/19/2004)

Fixed Rate Mortgage
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change. (last updated 03/19/2004)

Funding Fee
A fee charged to guarantee a mortgage loan. (last updated 03/19/2004)

Lease Purchase
Assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy. The rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment. (last updated 03/19/2004)

Low Income
An adjusted income that is greater than the HUD established very low-income limit, but that does not exceed the HUD established low-income limit (generally 80 percent of median income adjusted for household size) for the county or Metropolitan Statistical Area where the property is or will be located. (last updated 03/19/2004)

Mortgage Insurance
A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. (last updated 03/19/2004)

Mortgage Insurance Premium
A monthly payment - usually part of the mortgage payment - paid by a borrower for mortgage insurance. (last updated 03/19/2004)

PITI Ratio
The amount paid by the borrower for principal, interest, taxes and insurance, divided by repayment income. (last updated 03/19/2004)

Payment Assistance
A payment subsidy available to eligible Section 502 borrowers that reduces the effective interest rate of a loan. (last updated 03/19/2004)

Rehabilitation Mortgage
A mortgage that covers the costs of rehabilitating (repairing or improving) a property. (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Rural Area
A rural area is:

A.     Open country which is not part of or associated with an urban area.
B.     Any town, village, city or place, including the immediately adjacent densely settled area, which is not part of or associated with an urban area, and which

1.       has a population not in excess of 10,000 if it is rural in character, or
2.       has a population in excess of 10,000 but not in excess of 20,000, is not contained within a Metropolitan Statistical Area, and has a serious lack of mortgage credit for low- and moderate- income households as determined by the Secretary of Agriculture and Secretary of HUD.

C. An area classified as a rural area prior to October 1, 1990, (even if within a Metropolitan Statistical Area) with a population exceeding 10,000 but not in excess of 25,000, which is rural in character and has a serious lack of mortgage credit for low- and moderate-income families. This is effective through receipt of census data for the year 2010. (last updated 03/19/2004)

Service Connected Disability
Disability incurred or aggravated in line of duty. (last updated 03/19/2004)

Settlement
Also known as Closing, this is the time at which the property is formally sold and transferred from the seller to the buyer. (last updated 03/19/2004)

Specially-Adapted Housing
Housing that provides a barrier-free living environment which affords a level of independent living. (last updated 03/19/2004)

Total Debt Ratio
The amount paid by the borrower for principal, interest, taxes and insurance and any recurring monthly debt, divided by repayment income. (last updated 03/19/2004)

Very Low Income
An adjusted income that does not exceed the HUD-established very-low income limit (generally 50 percent of the median income adjusted for household size) for the county or Metropolitan Statistical Area where the property will be located. (last updated 03/19/2004)

Beneficiary
A person who may be eligible to receive or is receiving benefits under an insurance policy other than a policyholder. (last updated 03/19/2004)

Endowment Insurance
A form of insurance where the amount is payable to the insured at the end of the contract period or to a beneficiary if the insured dies before that. (last updated 03/19/2004)

Funding Fee
A fee charged to guarantee a mortgage loan. (last updated 03/19/2004)

Maturity
The date at which the amount of a policy becomes payable by reason of either death or endowment. (last updated 03/19/2004)

National Service Life Insurance (NSLI)
A Veterans Affairs (VA) insurance program was generally issued to veterans of World War II. (last updated 03/19/2004)

Repayment
A loan is borrowed money that must be repaid. You have a choice of repayment plans if you received a FFEL or a Direct Loan. Federal Perkins Loans don't have repayment plan choices; you generally have up to 10 years to repay, however. Your monthly payment will depend on the size of your debt and the length of your repayment period. Repaying Your Student Loans http://studentaid.ed.gov/students/publications/repaying_loans/index.html explains available repayment options, includes examples of monthly payments for different loan amounts, and covers other topics you need to consider when managing your loans. (last updated 03/19/2004)

Service Connected Disability
Disability incurred or aggravated in line of duty. (last updated 03/19/2004)

Service Disabled Veterans Insurance (S-DVI)
A Veterans Affairs (VA) insurance program generally issued to World War II, Korean and Vietnam veterans separated on or after April 25, 1951, with a service -connected disability. (last updated 03/19/2004)

Specially-Adapted Housing
Housing that provides a barrier-free living environment which affords a level of independent living. (last updated 03/19/2004)

United States Government Life Insurance (USGLI)
A Veterans Affairs (VA) insurance program generally issued to veterans of World War I. (last updated 03/19/2004)

Veterans Reopened Insurance (VRI)
A Veterans Affairs (VA) insurance program generally issued to World War II and Korean veterans with service-connected or serious non-service connected disabilities. (last updated 03/19/2004)

Veterans' Service Life Insurance (VSLI)
A Veterans Affairs (VA) insurance program generally issued to Korean War veterans. (last updated 03/19/2004)