Loan Terms You Need to Know Part I

Academic Year: A period of at least 30 weeks (1 semester) of instructional time beginning the first day of classes and ending on the last day of classes usually with examinations. During this time a full-time student is expected to complete at least 24 semester hours (depending on the institutional regulations) equal to 8 classes of 3 credit hours, 36 quarter hours or 90 clock hours.

Automatic Draft (or Direct Repay): The borrower authorizes automatic transfer of funds from checking or savings account to make monthly loan payments.

Capitalization: Adds unpaid accrued interest charges to the principal balance of a loan, thus increasing the loan's principal balance. Capitalization also increases the amount of the monthly payments and the total amount repaid over the life of the loan. Borrowers can choose to pay the interest as it accrues, rather than having it capitalized.

Consolidation: Consolidation of loans allows the borrower to combine some or all of the outstanding loans into one new loan with a new promissory note. Combining all the original loans into one payment. Consolidating multiple educational loans has both advantages and disadvantages.
Advantages: Consolidation permits the borrower to extend the repayment period and lower the monthly payments.
Disadvantages: A drawback of consolidation could result in fewer deferment options as well as a higher interest rate. In addition, you will pay more interest on your debt over the life of the loan because a consolidated loan has a longer repayment period.

Cost of Education or Cost of Attendance (COA): The total estimated cost of attending school for the academic year. This includes tuition, fees, room and board or off campus housing, food, books, supplies, transportation, child care, and other miscellaneous expenses. Some financial aid is available in unusual circumstances. In some cases medical expenses, child care costs, or atypical students are given exemptions, if the situation warrants. Documentation of these unusual expenses is usually required.

Current Accrued Interest: The field on the Account Summary screen of Account Access showing the amount of interest accumulated on the unpaid principal balance of the loans, as of the close of business the previous day.

Daily Interest Amount: The field on the Account Summary screen of PPSLC's Online Account Access showing the amount of interest which accumulates on the unpaid balance of the loans each day.

Deferment: A period of time during which certain criteria have been meet allowing the borrower to stop repayments on the principal of a guaranteed student loan. During these authorized periods the federal government pays the interest on subsidized Stafford loans. The interest payments on unsubsidized Stafford loans and PLUS loans are the responsibility of the borrower. Most lenders require a verbal request for a deferment at which time they will send a form with a request for documentation verifying the borrowers eligibility. A borrower’s eligibility depends on when the loan was made, as well as individual deferment requirements.