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Here are common terms and their definitions in the world of financial aid:
- Academic Year: The period during which a full-time student is expected to complete two semesters (24 hours), two trimesters, or three quarters at a college, university, technical, or vocational school. If a program is measured in credit hours, it must be at least 36 quarter hours.
- Adjusted Gross Income (AGI): An interim calculation in the computation of income tax liability, computed by subtracting certain allowable adjustments from gross income.
- Asset: An item of value, such as a family’s home, business, real estate, stocks, bonds, mutual funds, cash, certificates of deposit (CDs), bank accounts, trust funds, and other property and investments.
- Asset Protection Allowance: A portion of your parents’ assets that are not included in the calculation of the parent contribution, as calculated by the Federal Methodology need analysis formula. The asset protection allowance increases with the age of the parents.
- Award Year: The year in which you will receive financial aid, running from July 1st through June 30th.
- Base Income Year: The tax year prior to the academic year (award year) for which financial aid is requested. For the freshman year of college, the base year runs from January 1 of the junior year in high school through December 31 of the senior year. Financial information from this year is used to determine eligibility for financial aid.
- Cost of Attendance (COA): The total amount it should cost the student to attend school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses. Loan fees, childcare, and expenses for disabilities may also be included at the discretion of the financial aid administrator. Schools establish different standard budget amounts for students living on-campus, off-campus, married, unmarried, in-state, and out-of-state.
- Custodial Parent: If a student’s parents are divorced or separated, the custodial parent is the one with whom the student lived the most during the past 12 months. The student’s need analysis is based on financial information supplied by the custodial parent.
- Direct Lending: A program where the federal government lends funds to eligible student borrowers through the school, eliminating the role of lenders and guaranty agencies. Students repay their loans directly to the federal government. Not every school participates in this program; check with your financial aid office.
- Enrollment Status: An indication of whether you are a full-time or part-time student. Generally, you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.
- Student Aid Index (SAI): The amount of money that the family is expected to contribute to the student’s education, as determined by the Federal Methodology need analysis formula. The SAI includes the parent contribution and the student contribution and depends on the student’s dependency status, family size, number of family members in school, taxable and nontaxable income, and assets.
- Federal Aid: Student financial aid programs sponsored by the U.S. Department of Education, including Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (SEOG), Federal Work-Study (FWS), Federal Perkins Loans, Federal Stafford Loans, and Federal PLUS Loans.
- Federal Methodology: The need analysis formula used to determine the SAI, taking family size, the number of family members in college, taxable and nontaxable income, and assets into account. Unlike most Institutional Methodologies, the Federal Methodology does not consider the net value of the family residence.
- Federal Family Education Loan Programs (FFELP): Formerly known as the Guaranteed Student Loan (GSL) Program, the FFELP program includes Federal Stafford Loans (subsidized and unsubsidized), Federal PLUS Loans, and Federal Consolidation Loans. Funds for these programs are provided by private lenders and guaranteed by the federal government.
- Federal PLUS Loan: Federal loans available to parents of dependent undergraduate students to help finance the child’s education. Parents may borrow up to the full cost of their child’s education, less the amount of any other financial aid received. PLUS Loans may be used to pay the EFC. A minimal credit check is required for the PLUS loan, so a good credit history is needed.
- Federal Stafford Loans: Federal loans that come in two forms, subsidized and unsubsidized. Subsidized loans are based on need; unsubsidized loans are not. The federal government pays the interest on the subsidized Stafford Loan while the student is in school and during the 6-month grace period. Undergraduates may borrow up to $23,000, and graduate students up to $65,500, including any undergraduate Stafford loans.
- Federal Supplemental Education Opportunity Grant (SEOG): Federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school’s financial aid office and provide up to $4,000 per year. To qualify, a student must also be a recipient of a Pell Grant.
- Federal Work-Study (FWS): A program providing undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student’s salary. Eligibility for FWS is based on need. Money earned from a FWS job is not counted as income for the subsequent year’s need analysis process.
- Free Application for Federal Student Aid (FAFSA): The official document used by every college and university to determine eligibility for Federal Student Aid. A copy of this document is often required by scholarship programs.
- Financial Aid: Money provided to the student and the family to help them pay for the student’s education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work).
- Income: The amount of money received from employment (salary, wages, tips), profit from financial instruments (interest, dividends, capital gains), or other sources (welfare, disability, child support, Social Security, and pensions).
- Independent Student: A student who meets one of the following conditions: 24 years of age or older; an orphan; a ward of the court; a veteran of the US Armed Forces; married; has a child; is a graduate or professional student; or has serious family circumstances.
- Inflation: An increase in the price of products and services over time. The government’s main measure of inflation is the Consumer Price Index.
- Institutional Aid: Student financial aid distributed by the schools, usually in the form of grants and need-based scholarships.
- Institutional Methodology: A formula used by colleges or universities to determine financial need for the allocation of the school’s own financial aid funds.
- Merit Aid: Financial aid awarded on the basis of a student’s academic, athletic, and/or extracurricular excellence.
- Need: The difference between the COA and the EFC, representing the student’s financial need. The financial aid package is based on the amount of financial need. The process of determining a student’s need is known as need analysis.
- Need Analysis: The process of analyzing the household and financial information on the student’s financial aid application and calculating the amount the family can be expected to contribute to educational costs. Need analysis forms include the FAFSA and the Financial Aid PROFILE.
- Need-Based Aid: Financial aid awarded on the basis of a family’s financial situation. Most government sources of financial aid are need-based.
- Outside Resource: Aid or benefits available because a student is in school and counted after need is determined. Examples include outside scholarships, prepaid tuition plans, and VA educational benefits.
- Outside Scholarship: A scholarship that comes from sources other than the school and the federal or state government.
- Parent Contribution: The portion of educational expenses that the federal government believes your parents can afford, based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university, and other relevant factors. Independent students are not expected to have a parent contribution.
- Pell Grant: A federal grant that provides funds of up to $2,340 based on the student’s financial need.
- Perkins Loan: Formerly the National Direct Student Loan Program, the Perkins Loan allows students to borrow up to $3,000/year for undergraduate school and $5,000/year for graduate school. The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The interest on the Perkins Loan is subsidized while the student is in school.
- Professional Judgment: The flexibility given to the financial aid administrator to make individual adjustments due to special