| Accrued Interest |
Interest that has accumulated at a given time. When a borrower is not making interest payments on Unsubsidized Stafford, Parent PLUS or GradPLUS loans, the interest on the loan accrues and is then capitalized. |
| ACH - Automated Clearing House |
Automated Clearing House (ACH) is a secure payment transfer system that connects all U.S. financial institutions. The ACH network acts as the central clearinghouse facility for all Electronic Fund Transfer (EFT) transactions that occur nationwide, representing a crucial link in the national banking system. It is here that payments linger in something akin to a holding pattern while awaiting clearance for their final banking destination. |
| Auto Debit |
A borrower may sign up to have their payment automatically taken from their checking account. The bank will receive a request from the loan account holder with your name, bank account number and the amount of your payment each month on or about the due date of your loan payment. When your bank receives the request, it takes the requested loan amount from your checking account and pays the requestor. Some benefit programs may require that the borrower be signed up for auto-debit. |
| Capitalize |
Refers to the process by which accured interest is added to the principal balance of your loan. For Stafford Loans, accrued interest is added at repayment. PLUS and GradPLUS loans may vary in their treatment of interest that accrues during deferment and forbearance periods. |
| Default Fee |
A 1% fee that is charged to a borrower by the guarantee agency. Some guarantors pay this fee, or a portion of the fee, on behalf of the borrower. |
| Deferment |
Postponement of payments during which time interest is paid by the federal government for subsidized Stafford loans. An automatic deferment is given to a student based on an in-school status. A student may also request a deferment based on economic hardship or unemployment. |
| Disbursement |
The transfer of requested loan funds to the school. |
| Forbearance |
A postponement of payments which is granted at the lender's discretion. |
| Grace Period |
The period that begins the day after a Stafford loan borrower ceases to be enrolled at least half-time at an eligible school, ends the day before the repayment period begins, and during which payments of principal are not required. |
| Interest Rate Reduction |
Will reduce your actual interest rate and lower the total amount of interest you owe on your loan. Generally, interest rate reductions that occur early in your repayment term have greater impact in reducing your overall loan cost. |
| Origination Fee |
A fee charged to a borrower that is paid to the federal government. Fees for Stafford loans are usually less than fees for PLUS and GradPLUS loans. |
| Principal Balance |
The original amount of your loan debt you owe after accrued interest has been capitalized. |
| Principal Reduction |
A reduction of the principal amount borrowed. A principal reduction could occur due to the borrower making a payment or due to a rebate of the original principal after a set amount of on time payments. |
| Rebate |
A rebate is generally a one time reward that is given to a borrower or credited to his/her account. Rebates on loan amounts can be based on the original principal amount or the amount owed at the time the rebate is activated. |