|
Glossary
Academic Year: The measure of
the time in which academic work is to be accomplished by a
student each year as defined by the school. For instance, at a
school that uses terms, the academic year must contain at least
30 weeks of instructional time in which a full-time student is
expected to complete at least 24 semester or trimester hours,
36-quarter hours, or 900 clock hours.
Accrued Interest:
The interest on a student loan that begins to accrue
(accumulate) after a student completes school. This interest is
charged on the principal (dollar) amount of the loan.
Administrative
Cost Allowance (ACA): Monies the Federal government may pay
a guaranty agency as reimbursement for administrative expenses
incurred in the operation of its program. Agencies apply
annually and are paid quarterly for ACA.
Alternative
Repayment: A repayment plan the Servicing Center provides to
a borrower who adequately demonstrates that the terms and
conditions of the four FDLP repayment plans do not accommodate
the borrower's exceptional circumstances.
Bankruptcy:
Legal proceedings that relieve borrowers from their creditors.
Booked
Disbursements: A booked disbursement occurs when funds for a
booked loan become disbursed. At this time, the booked
disbursement date becomes an actual disbursement date.
Booked Loan:
An FDLP loan becomes booked when a promissory note, origination
record, and anticipated disbursement date exists in the loan
origination system.
Borrower:
Person responsible for repaying a loan who has signed and agreed
to the terms in the promissory note.
Capitalizing
Interest: Adding accumulated interest to the loan principal
rather than having the borrower make monthly interest payments.
Capitalizing interest increases the principal amount of the loan
and, therefore, the total cost of the loan.
Cash Reserve
Ratio: The amount of cash reserves that an agency holds
divided by the original principal of outstanding loans.
Cash Reserves:
An agency's cumulative sources of funds minus an agency's
cumulative uses of funds to pay.
Cohort:
Borrowers who enter repayment in a given fiscal year
Cohort Default
Rates: The rate calculated by dividing the number of
borrowers who defaulted at the end of the specified time
interval, by the total number of borrowers in the cohort. A
cohort of student borrowers who entered repayment in the same
year may be tracked over a specific time interval to determine
the percentage of students who default on their loans. (A cohort
default rate may also be based on the total dollar amount loaned
to students. In this case, the rate would be expressed as the
percentage of dollars borrowed that are defaulted.)
Collection Costs:
Costs the government incurs when collecting a delinquent or
defaulted loan. These costs are charged to the borrower.
Collections:
Amounts collected by guaranty agencies or the Federal government
from borrowers after default claims are paid to lenders.
FY86-FY96 figures reported in the Data Book include collections
by the Internal Revenue Service through offset of Federal income
tax refunds.
Commitment
(Direct Loans): For the FDLP, a commitment occurs when the
Department receives and accepts an origination record and a
signed promissory note from the borrower.
Commitment (FFEL
program): In the FFEL program, a commitment occurs when the
guaranty agency issues a commitment to the lender for a loan.
Consolidation Loans: Loans under the FDLP or FFEL in grace or
repayment status are eligible for consolidation. Consolidation
occurs when a borrower with multiple loans requests that all of
his or her loans be consolidated into one loan. Repayment begins
60 days after discharge of prior loans; certain deferments are
authorized. Interest is the greater of nine percent or weighted
average of underlying loans.
Constant Dollars:
Dollars adjusted using a price index to eliminate inflationary
factors. This adjustment facilitates direct comparison over
time.
Cross-Program
Participation: Student participation in more than one FFEL
program component. Students may borrow under both Stafford
Subsidized and Stafford Unsubsidized programs, and their parents
may borrow under the Parent Loan for Undergraduate Students
(PLUS) program. However, a student may not receive an FDLP loan
and an FFELP loan for the same period of enrollment.
Default:
Failure to repay a loan in accordance with the terms of the
promissory note.
Deferment:
The temporary postponement of loan payments. Delinquency:
Incidents of late or missed loan payments, as specified in the
terms of the promissory note and the selected repayment plan.
Dependent Student: A student that is
financially dependent upon a parent or legal guardian or a
student who does not meet certain criteria for being classified
as independent (see
Independent Student).
Direct
Consolidation Loan: One or more federal education loans
combined into a single loan under the FDLP. Only one monthly
payment is made to the U.S. Department of Education.
Direct Loan
Servicing Center: The place where FDLP borrowers send their
loan payments. The Servicing Center can answer questions a
student might have about an FDLP loan. The toll-free telephone
number is 1-800-848-0979.
Disbursement:
When loan proceeds are paid by the school to the student or
parent borrower.
Discharge:
The release of borrowers from their obligations to repay their
FDLP loans. Borrowers must meet certain requirements to be
eligible for discharges.
Disclosure
Statement: Statement of the actual cost of a loan, including
the interest costs and the loan fee.
ECMC:
Educational Credit Management Corporation is a guaranty agency,
which guarantees loans for many lenders in various states.
Exit Counseling:
A group or individual session during which FDLP borrowers who
are leaving school or dropping below half-time enrollment
receive important information about their repayment obligations
and update information about themselves.
Expected Family
Contribution (EFC): The amount that a family can be expected
to contribute toward college costs.
Extended
Repayment Plan: A plan that requires the borrower to pay at
least $50 a month and allows up to 30 years to repay, depending
on the amount borrowed.
Federal Direct
Loan Program (FDLP): The William D. Ford Federal Direct Loan
Program, also referred to as the Direct Loan Program, is a
federal program that was authorized under by the Student Loan
Reform Act of 1993. FDLP provides low-interest loans to
students. These loans are originated by participating
institutions with capital provided directly through the U.S.
Department of Education, which is the sole lender. Several loan
programs exist under the umbrella of FDLP. These loans are the
Stafford Subsidized loan program, the Stafford Unsubsidized loan
program, the Parent Loan for Undergraduate Students (PLUS), and
Consolidation loans.
Federal Family
Education Loan (FFEL) program: The Federal Family Education
Loan FFEL program is formerly known as Guaranteed Student Loans
(GSL). Funds for the FFEL program are provided primarily by
commercial lenders. Loans are guaranteed by individual state or
private non-profit guaranty agencies and reinsured by the
federal government. Several loan programs exist under the
umbrella of FFEL. These loans are the Stafford Subsidized
program, the Stafford Unsubsidized program, the Parent Loans for
Undergraduate Students (PLUS), the Supplemental Loan for
Students (SLS), and Consolidation loans.
Federal Insured
Student Loan Program (FISLP): The Higher Education Act of
1965 authorized the Federal Insured Student Loan Program, a
program that provided loan guarantees to state and private
nonprofit agencies. Changes in legislation gradually phased out
this program and no new FISLP loan guarantees have been provided
since July 14, 1984.
FFEL:
See
Federal Family Education Loan Program.
FDLP:
See Federal Direct Loan Program.
Fiscal Year (FY):
The annual accounting year for the federal government begins on
October 1 and ends the following September 30. The fiscal year
is designated by the calendar year in which it ends. For
example, the FY96 begins on October 1, 1995 and ends on
September 30, 1996. [NOTE: Prior to FY76, the fiscal year began
on July 1 and ended on the following June 30.]
Forbearance:
An arrangement to postpone or reduce a borrower's monthly
payment amount for a limited and specified period, or to extend
the repayment period. The borrower is charged interest during
forbearance.
Foreign
Borrowers: Borrowers who attend eligible foreign
institutions.
GA Reimbursement:
Monies that guaranty agencies return to the government for
collections on defaulted loans.
Grace Period:
A six-month period before the first payment must be made on a
Stafford Subsidized or Stafford Unsubsidized loan. The grace
period starts the day after a borrower ceases to be enrolled at
least half time. During the grace period on a FDLP Unsubsidized
loan, accumulating interest must be paid or it will be
capitalized.
Graduated
Repayment Plan: A plan that allows monthly payment amounts
to start out at one level and then increase every two years
during the repayment period. Borrowers have up to 30 years to
repay, depending on the amount they borrowed. The minimum
payment must cover interest that accumulates monthly and must be
at least half of the payment that would be required under the
Standard Repayment Plan. The maximum amount may not be more than
1-1/2 times the payment that would be required under the
Standard Repayment Plan.
Guarantee Agency
(GA): A State or private nonprofit agency that has an
agreement with the Secretary to administer the Guaranteed
Student Loan programs. The agency insures lenders against losses
due to a borrower's default. Also called "guarantor" or
"guaranty agency."
Half-time
Student: A student who is not a full-time student, who is
enrolled in a school that participates in the FFEL program or
the FDLP, and who is carrying an academic workload that is
considered at least one-half the workload of a full-time student
(as determined by the school).
HEAF: Higher
Education Assistance Foundation is a guaranty agency, which
guarantees loans for many lenders in various states.
Income Contingent
Repayment Plan: A plan that allows the monthly payment
amount to vary with the borrower's income. A borrower has up to
25 years to repay.
Independent
Student: A student who meets one of the following criteria:
the student is 24 years or older, a graduate or professional
student, married, orphaned or a ward of the court, veteran of
the armed services, or has documents describing circumstances of
independence.
In-School Period:
Under the Stafford Subsidized loan program, the period
during which a borrower pursues his or her studies as at least a
half-time student at a participating school. This period begins
with the date of disbursement and ends with the beginning of the
grace period. During the in-school period, the Federal
government pays lenders interest benefits and special allowance
on behalf of eligible borrowers.
Institution
Default Rates: Each institution's cohort default rate
calculated annually by the Department of Education. The cohort
consists of the borrowers who enter repayment in a given fiscal
year. The rate is calculated by dividing the number of borrowers
who default by the end of the following fiscal year by the total
number of borrowers in the cohort.
Insurance
Premium: The amount charged a lender by a guarantee agency
for insuring the lender against losses on GSLP loans. The
lender, however, may pass the cost of the insurance premium to
the borrower.
Interest: A
loan expense charged by the lender and paid by the borrower for
the use of borrowed money. The expense is calculated as a
percentage of the principal amount (loan amount) borrowed.
Interest
Benefits: Under the FFEL Stafford loan program, Federal
payments to lenders on behalf of eligible borrowers for interest
which accrues during the in-school and grace periods, and during
any authorized deferment periods.
IRS Offset:
Defaulted loans on accounts that the Department of Education has
turned over to the Internal Revenue Service (IRS). This action
will offset the debt against the defaulter's income tax refund.
Lender (active):
An eligible lending institution which has made at least one
Stafford Subsidized, Stafford Unsubsidized, PLUS, or SLS loan in
a fiscal year.
Lenders' Default
Claims Rate: The ratio of default claims paid since program
inception to all loans that have entered repayment (matured
paper) since program inception. The default rate does not
reflect any collection activity subsequent to the default.
Commonly referred to as the gross default rate.
Loan: Money
borrowed that must be repaid.
Loan Advances:
Non-interest bearing loans with no fixed maturity, which the
Federal government makes to a guaranty agency to help establish
or maintain the guaranty agency's reserves for loan guarantees.
Advances were authorized in 1965, 1968, and 1976.
Loan Fee: An
expense of borrowing deducted proportionately from each FFEL
disbursement.
Loan Limits:
Limits placed on student borrowers in terms of the maximum
numbers of dollars they may obtain through Federally funded
Student Financial Assistance programs (SFA). Loan limits vary by
type of loan, academic level, program length, and whether a
student is dependent or independent. Here is one example of
Stafford Subsidized and Unsubsidized loan limits for FFEL and
FDLP loans to independent students when program length or the
enrollment period is one academic year:
Loan
Postponement: See
deferment and
forbearance.
Loan Principal:
The total sum of money borrowed.
Loan Volume:
Refers to the dollar amount or number of loans committed. Loan
volume may be reported in thousands or millions of dollars.
Loan Volume
Commitments: The total amount of loans that lenders or
guarantee agencies commit to borrowers. The principal amount
actually loaned may be less than the total value of loan
commitments due to cancellations. Also, consolidated loans are
excluded from the totals when calculating total loan
commitments.
Loans in
Repayment: Loans that have entered the repayment period
after expiration of the grace period.
Mandatory
Assignments: Loans assigned to the Department of Education
after the guaranty agency has made the required effort to
collect on defaulted loans.
Matured Paper:
The cumulative dollar amount of loans that have ever entered
repayment. It is a measurement equal to the cumulative dollar
amount of loans disbursed since the program's inception less the
dollar amount of loans in the in-school and grace periods.
National Cohort
Default Rate: The number of student borrowers that entered
repayment in a cohort fiscal year and defaulted on these loans
divided by the total number of student borrowers that entered
repayment in the cohort fiscal year.
Net Cost of Loan
Defaults: The cost of the loan default claims minus the
collections that are made on the defaulted loans.
Net Default Rate:
The net default rate is computed by dividing the cumulative
dollar amount of default claims paid to lenders, less cumulative
collections by matured paper. It measures, on a cumulative
basis, the dollar amount of net loss to the Department compared
to the total dollar amount of loans subject to default. This
definition was revised in 1985 to reflect the proper credit for
collection active while providing a valid barometer of the cash
loss to the Department.
Operating
Expenses: Expenses incurred by a guaranty agency, such as
salaries, travel, computer hardware and software, equipment,
rent, supplies, and contractor costs.
Origination Fee:
A fee charged and deducted from the proceeds of an FFEL program
loan before the loan is disbursed. The origination fee offsets
some of the administrative costs of loan processing. The fee
must not exceed the maximum rate established by law. This fee is
deducted from the interest and special allowance the Federal
government pays the lender. Generally, lending institutions pass
this fee on to borrowers at the time the loans are made.
PLUS Loan (FDLP
or FFEL): Parent Loans for Undergraduate Students. Loans
taken out by parents for the purpose of helping to pay for their
children's undergraduate education. Parents are responsible for
all interest charges. The loan value may not exceed the full
cost of the student's education, minus any other financial aid
that the student receives. Interest rates are fixed or variable,
not to exceed 12 percent.
Postponement (loan): See
Deferment and
Forbearance.
Prepayment:
Any amount paid on a loan by the borrower before it is required
to be paid under the terms of the promissory note. There is
never a penalty for prepaying principal or interest on FDLP
loans.
Promissory Note:
A legally binding contract between a lender and a borrower. The
promissory note contains the terms and conditions of the loan,
including how and when the loan must be repaid.
Proprietary
Borrowers: Borrowers at for-profit institutions.
Proprietary
Institutions: Postsecondary institutions that are operated
for profit.
Recovery Rate:
The ratio of cumulative dollars collected by the Federal
government or a guaranty agency on defaulted loans to cumulative
dollars paid in default claims.
Refinancing of
PLUS/SLS: There are three refinancing options for PLUS
student, SLS and PLUS parent borrowers: (1) refinancing to
secure combined payment; (2) refinancing to secure a variable
interest rate; (3) refinancing by discharge of previous loan.
Rehabilitation
Loans: When 12 consecutive payments have been made on a
formerly defaulted loan, it can become a rehabilitation loan.
Once a loan becomes rehabilitated, it becomes a new loan. A
borrower again becomes eligible for participation in Title IV
programs.
Reinsurance Fees:
Guarantee agencies must pay to the Department a fee of 0.25
percent of the total principal amount of loans guaranteed by the
agency during the fiscal year, beginning FY 1987. The fee is 0.5
percent for any year in which the agency hits the five- percent
reinsurance "trigger." The fee applies to all Stafford, PLUS and
SLS loans (except refinanced loans).
Reinsurance
Payments (Reinsurance Default Claims): Monies the Federal
government gives a guarantee agency as reimbursement for
payments made to lenders for losses due to borrower default.
Repayment Period:
The period, which a borrower is responsible for repaying his or
her loan. In the case of Stafford loans, this period begins on
the day after the last day of the grace period. In the case of
PLUS and SLS loans, this period begins on the day the loan is
disbursed. The maximum repayment period is ten years, not
including any authorized deferment or forbearance periods.
Repayment
Schedule: A statement provided by the Direct Loan Servicing
Center to the borrower that lists the amount borrowed, the
amount of monthly payments, and the date payments are due.
Sallie Mae: A
Federally chartered, stockholder-owned corporation which
provides liquidity to lenders by purchasing and/or warehousing
student loans. Sallie Mae, with over $15 billion in outstanding
loans, is currently the largest holder of FFEL program loans.
Sallie Mae is also referred to as the Student Loan Marketing
Association (SLMA).
Secondary Market:
An institution or organization that purchases eligible
student loans and provides lenders with a source of liquidity to
make new loans. Congress established Sallie Mae as a national
secondary market. In addition, other secondary markets operate
in a number of States at either the State or regional level.
Special
Allowance: A quarterly supplemental interest payment to
lenders based on the outstanding principal balance of Stafford,
PLUS, SLS and Consolidation loans. This payment assures that, as
a complement to the borrower's interest rate, the lenders
receive an equitable yield on their loans.
Stafford
Subsidized Loan (FDLP and FFEL): A federally subsidized
student loan made on the basis of the student's financial need
and other specific eligibility requirements. Stafford Subsidized
loans have subsidized interest, which means that the federal
government does not charge interest on these loans while
borrowers are enrolled at least halftime, during the six-month
grace period following graduation, or during authorized periods
of deferment. Stafford Subsidized loans are available to
undergraduate and graduate students while the student is in
school. The borrower begins to repay the principal and interest
after leaving school. Following a 1992 amendment to the Higher
Education Act, an unsubsidized component was added to the
Stafford Loan Program.
Stafford
Unsubsidized Loan (FDLP and FFEL): As part of the Higher
Education Amendments of 1992, this unsubsidized component was
added to the Stafford loan program. These loans are made to
borrowers meeting specific eligibility requirements. Interest is
charged throughout the life of the loan. The borrower may choose
to pay the interest charged on the loan or allow the interest to
be capitalized (added to the loan principal).
Standard
Repayment Plan: A plan that requires a borrower to pay at
least $50 a month and allows up to 10 years to repay.
Student Financial
Assistance (SFA) programs: Student Financial Assistance
programs, administered by the Office of Postsecondary Education,
U.S. Department of Education, provide funds to help borrowers
meet the costs of postsecondary education. The terms "SFA
Programs" and "Title IV Programs" are often used
interchangeably.
Supplemental
Loans for Students (SLS): Prior to July 1, 1994,
Supplemental Loan for Students (SLS) loans were available for
independent students who were not qualified for sufficient
financial aid under the FFEL Stafford loan program. Graduate and
professional students, independent students and, in some cases,
dependent undergraduate students could participate in this loan
program. Repayment began within 60 days after disbursement was
not subject to deferral. There was no Federal interest subsidy.
Interest rates were fixed or variable and could not exceed 12
percent.
Trigger Rate:
The ratio of reinsurance claims paid to a guarantee agency
during any fiscal year to the agency's total amount of loans in
repayment at the end of the preceding fiscal year. If this ratio
equals 5 percent, an agency is reimbursed for 90 percent of its
losses. If the ratio equals 9 percent, the agency is reimbursed
for 80 percent of its losses.
USAF: United
Student Aid Funds is a guaranty agency, which is the designated
guarantor for several states.
Variable
Interest: Rate of interest on a loan that is tied to a
stated index and changes annually every July 1 as the index
changes.
Warehousing
Advances: Advances provided to lenders to invest in
additional student loans. This enables the lenders to finance
their new and outstanding student loan portfolios without
depleting their funds.
|
