Default: A loan that is 270 days or more delinquent is considered to be in default. A default loan will affect the borrowers credit. Which can lead to a deficient credit line, garnishment of wages, and retaining of tax returns.

Delinquent: A borrower who fails to make a loan payment on time is considered to be delinquent(this is not the same as default). Lenders are required to follow due diligence (see definition below) procedures when payments are late. Meaning any loan that is 59 days or less delinquent is reported to credit bureaus as current. Any loan that is 60 or more days delinquent is reported to credit bureaus as delinquent. Loans that are 270 days or more delinquent are considered to be in default.

Dependent Student: A student who does not meet the eligibility requirements for an independent student under the Higher Education Act of 1965. Dependent students do not make the required amount of money to sustain themselves are thus determined to be a dependent of their parents. A dependent student must provide parent information when completing the FASFA.

Disbursement: The transfer of loan income from a lender to a school. The school then releases the loan funds to the students. Schools may release these funds in check form, or the funds may be applied directly to the students’ fees and tuition through Electronic Funds Transfer (EFT, see below for definition). If the school charges are less than the financial aid, the school will release the balance to the student to use toward other educational expenses.

Due Diligence: Documented collection actions used by lenders and services to resolve a delinquent account and prevent a default. These procedures are dictated by federal regulations.

Electronic Funds Transfer: A transfer of funds that is made through electronic means such as a data transmission by computer rather than a paper based transaction such as a check. Many schools and lenders use EFT to simplify and shorten the process of disbursing student loan funds.

Entrance/Exit Interview: Counseling sessions ( usually a computer tutorial) provided to student borrowers by the schools concerning debt and accumulated indebtedness. Entrance and Exit tutorials are before and after receipt of loan payouts.

Expected Family Contribution (EFC): This figure is determined by the Federal Need Analysis Methodology formula. The formula determines the amount the student (and the parents of dependent students) should contribute to the Cost of Education. This is based on taxable and nontaxable income, assets (such as checking and savings accounts), and benefits (such as Social Security or unemployment).