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Understanding your federal student loans seems impossible sometimes. The biggest hurdle is all the confusing student loan jargon. We’ve created a glossary to help everyone understand their loans and to explain the terms in simple to understand language.

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  • a

  • Armed Forces Deferment
    Federal student loans go into deferment when the borrower is on active duty military service; this deferment has a time limit of three years.
  • c

  • CCRA (College Cost and Access Act)
    2007 introduced the College Cost Reduction and Access Act (CCRA). With some students becoming unable to make the necessary payments on their federal loans, this act increased forgiveness of such loans. After a former student has been employed for a decade with a branch of public service, the(...)
  • Collections
    Any loan that goes into default is automatically sent to a collections agency. These agencies are adamant about getting the money back and will contact you near daily.
  • Consolidation Loan
    The government allows students to consolidate any of the three federal loans into one debt. Throughout the entire consolidation, the interest rate does not change on the loan. To acquire a federal loan consolidation, the student must have one FFEL Loan or Direct Consolidation loan to apply.
  • Criminal History
    Students that have a criminal history may find it more difficult to obtain financial aid due to eligibility limitations. Those that are currently incarcerated in either a federal or state institution are not eligible for a federal student loan or grant. This may also apply to county jails, if(...)
  • d

  • Default Collections
    A loan that has gone unpaid for at least 270 consecutive days enters into default. Student loan default rates have been on the rise in the United States over the past several years and the issue is becoming a major U.S. economic problem. This is what happens when your student loan enters(...)
  • Deferment
    A deferred loan is one where payment is postponed or extended over time. Watch out for skip-a-month offers from your loan servicer: your interest might continue accruing. Depending on the type of loan you have, the federal government might pay your loan’s interest during a deferment period.
  • Department of Education
    Federal student loans are serviced by the Department of Education. Your loan repayment options will be handled through this department. Direct Loans through the Department of Education (as funded by the federal government) is known as The William D. Ford Federal Direct Loan Program. There are(...)
  • Discretionary Forbearance
    A discretionary forbearance is not a sure thing. It is granted at the discretion of your loan servicer. You can ask for a discretionary forbearance in the case of your illness or financial hardship.
  • e

  • Economic Hardship Deferment
    Tough times, financially? Apply for an economic hardship deferment. The maximum amount that the Economic Hardship Deferment can last for is three years.
  • Exit Counseling
    The United States Department of Education ensures that all of its borrowers are well informed by providing them with exit counseling upon the completion of their education. This counseling is available on the internet at Your questions or concerns can be emailed to(...)
  • f

  • FAFSA (Free Application for Federal Student Aid)
    Completion of the FAFSA is done entirely on the website Much of it can be completed each year that the student is in school. There will be several questions regarding your personal and tax information, so make sure to have these figures readily available to ensure the(...)
  • FAFSA Application Process
    To begin the process of achieving financial aid through a federal student loan, you must go to the financial aid website and create a unique Personal Identification Number (PIN). It only takes a few minutes. Once your PIN has been issued, make sure to print it out or remember the number,(...)
  • Federal Loan
    As Federal Loans are guaranteed by the government, they are easy to obtain for any student that is hoping to attend college. However, if a student defaults on one of these loans, they will not be eligible for any more until it is paid off.
  • Federal Perkins Loan
    These loans have a fixed 5-percent interest rate that does not change during the 10-year repayment schedule. Similar to other loans, there is a grace period after no longer being enrolled at least half-time, but it is longer than most: nine months instead of six. Students that apply for the(...)
  • Fee Accrual
    Collection fees, late fees, and many other fees are likely to be tacked on by the collections agency as a result of a loan in default.
  • FFEL (Federal Family Education Loan)
    FFEL stands for the Federal Family Education Loan. These loans were originated along with regular Stafford Loans during the Higher Education Act of 1965. As of 2008, more than 6 million students held an FFEL loan. FFEL loans are funded not only by public programs, but also private lenders.(...)
  • Forbearance
    By filing a forbearance of a federal student loan, the payments will either be stopped temporarily or reduced until you are past a financial hardship or other situation. During forbearance, student-loan interest accrues while monthly payments are reduced or stopped. Forbearances apply to all(...)
  • g

  • Graduate Fellowship Deferment
    It is also possible to qualify for a deferment if you are enrolled in a Graduate Fellowship Program. This may depend on your course of study, as some medical internships and residencies do not defer student loans. To qualify, your program must provide financial assistance or support to allow(...)
  • h

  • Higher Education Act of 1965
    The Higher Education Act of 1965 was signed into law on Nov. 8, 1965 by President Lyndon B. Johnson as part of his ‘Great Society’ domestic agenda. It was enacted “to strengthen the educational resources of our colleges and universities and to provide financial assistance for students in(...)
  • i

  • In-School Deferment
    No matter what type of loan you received from the Federal Government, you qualify for in-school deferment as long as you stay enrolled at least half-time each semester. The Direct Loans, FFEL Loans, and Perkins Loans are all eligible for this deferment.
  • l

  • Loan Consolidation
    If you consolidate your defaulted loan with another loan, this will remove the defaulted status. It is possible to have a consolidation loan also go into default if you fail to make payments. This will accrue fees as well.
  • Loan Rehabilitation
    This is a mutually agreed upon payment schedule between you-the-borrower and the U.S. Department of Education. They may add fees, but this will remove your student loan from default status. The payments are typically lower and your credit history is cleared from default. This is a one-time(...)
  • m

  • Mandatory Forbearance
    If you meet the eligibility criteria for forbearance, it is mandatory for your lender to grant a mandatory forbearance. You will be granted a mandatory forbearance if you: Serve a medical or dental internship or residence Owe 20-percent or more of your total monthly gross income for(...)
  • Military Deferment
    If you finished active-duty military service within the past 13 months, you can defer if you meet certain qualifications.
  • n

  • Negatively Impacted Credit History
    Having a default on your credit history will basically ensure that you won’t be able to obtain new credit. This will make it difficult to obtain a car, home, or even a credit card.
  • o

  • Online Web Portal
    The Online Web Portal ensures easier access and editing of your loan information. Through this portal, provided by the federal government, you can receive the exit counseling that was discussed earlier in this chapter, as well as tools for maintaining your loan, such as making payments online(...)
  • p

  • PLUS (Parent Loans for Undergraduate Students)
    PLUS stands for Federal Parent Loans for Undergraduate Students. PLUS Loans are federal loans available to the parents of students who attend college on at least a half-time basis. Similar to Stafford Loans, PLUS Loans may be consolidated and are provided by the federal government. Before July(...)
  • r

  • Rehabilitation Training Programs
    For this deferment, you must be in an approved rehabilitation training program for people with disabilities, addiction issues, and poor mental health. The rehab program must be licensed and approved through the VA or a state rehabilitation agency.
  • s

  • Stafford Loan
    The interest rate on Stafford Loans is lower than most other loans because the federal government guarantees these loans. While enrolled in school at least half-time, the student does not have to make any payments. The payment schedule begins six months after the student has either left school(...)
  • Subsidized Loan
    A student who proves great financial need may receive a subsidized loan. While the student is enrolled at least half-time, the interest will be paid not by the student but through the government. This also happens during deferment or during the post-college six-month grace period. The(...)
  • t

  • Tax Return Withholding
    While in default status, your tax returns will be completely withheld to pay towards any outstanding student loan debt currently in default. While it’s possible that you can pay off the entire default amount this way, let’s be honest: it’s unlikely.
  • u

  • Unemployment Deferment
    If you have become unemployed while out of school or find yourself working less than 30 hours per week, you may qualify.
  • Unsubsidized Loan
    An unsubsidized loan will accrue interest while the student is attending school. Interest while the student is enrolled in higher education can be deferred, but that interest is added to the original loan amount after graduating. Because eligibility largely is determined by dependency(...)
  • w

  • Wage Garnishment
    The loan collector can garnish your income once you have gone into default. This means that 15 percent of your discretionary income will be paid directly to the collection agency.