Office of Student Financial Services | Brooklyn Campus

Loan Glossary

Borrowing for an education, is one of the most important investments students make in their future. To help all of our students become informed and empowered borrowers, the following "Glossary" is provided.

Loan Term:	Definition:
Capitalization	Adding accumulated interest to the loan principal rather than having the borrower make interest payments. Capitalizing interest increases the principal amount of the loan and the total cost of the loan.
Consolidation	Consolidation is similar to refinancing, but there is no loan fee. It simplifies loan repayment by combining several types of federal education loans into one new loan. (In the case of Direct Loan consolidation, the interest rate may be lower than one or more of the underlying loans.)
Deferment	A temporary postponement of loan payments.
Discharge	The release of a borrower from the obligation to repay his or her loan.
Forbearance	A postponement of payments or a reduction in monthly payment amounts for a limited and specified period of time during which a borrower is willing but unable to make loan payments. Forbearance may also be an extension of the repayment period. All borrowers are charged interest during forbearance.
Grace Period	A six-month before the first payment must be made on a Direct Subsidized or Unsubsidized Loan. The grace period begins the day after the borrower ceases to be enrolled at least half-time.
Interest	An expense of borrowing money that is calculated as a percentage of the amount borrowed.
Postponement	See "deferment" and "forbearance"
Principal Balance	The amount owed on a loan or loans at any given time. The principal balance may include capitalized interest.
Repayment Period	The period during which a borrower is obligated to make payments on his or her loan(s).
Borrower	Person responsible for repaying a loan who has signed and agreed to the terms in the promissory note.
Collection Costs	Costs the government incurs when collecting a delinquent or defaulted loan. These costs are charged to the borrower.
Default	Failure to repay a loan in accordance with the terms of the promissory note.
Delinquency	Incidents of late or missed loan payments, as specified in the terms of the promissory note and the selected repayment plan.
Direct Loan	The place where Direct Loan Borrowers send their loan payments. The Servicing.
Servicing Center	Center can answer questions you might have about your Direct Loan.
Exit Counseling	A group or individual session during which Direct Loan borrowers who are leaving school or dropping below half-time enrollment receive important information about their repayment obligations and update information about themselves.
Extended Repayment Plan	Plan that requires the borrower to pay at least $50 a month and allows up to 30 years to repay, depending on the amount borrowed.
Federal Direct Loan Program	The William D. Ford Federal Direct Loan Program, also referred to as Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education. The Loans are Federal Direct Stafford/Ford Loans, Federal Direct Unsubsidized Stafford/Ford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans.
Federal Direct Subsidized Stafford/Ford	Also referred to as "Direct Subsidized Loan." A federally financed student loan made to students meeting eligibility requirements. The federal government does not charge interest on these loans while borrowers are enrolled at least half time, during the six-month grace period, or during authorized periods of deferment.
Federal Direct Unsubsidized Stafford/Ford	Also referred to as "Direct Unsubsidized Loan." A federally financed student loan made to students meeting eligibility requirements. Students need not demonstrate financial need. Interest is charged throughout the Loan life of the loan. The borrower may choose to repay the interest charged on the loan or allow the interest to be capitalized (added to the loan principal) when the loan enters repayment.
Graduated Repayment Plan	A plan that allows monthly payment amounts to start out at one level and then increases every two years during the repayment period. Borrowers have up to 30 years to repay, depending on the amount they borrowed. The minimum payment must cover interest that accumulates monthly and must be at least half of the payment that would be required under the Standard Repayment plan. The maximum amount may not be more than 1-1/2 times the payment that would be required under the Standard Repayment Plan.
Income Contingent Repayment Plan	A plan that allows the monthly payment amount to vary with the borrower's income. A borrower has up to 25 years to repay.
Alternative Repayment	A repayment plan the Servicing Center provides to a borrower who adequately demonstrates that the terms and conditions of the four Direct Loan Repayment plans do not accommodate his/her exceptional circumstances.
Loan	Money borrowed that must be repaid.
Loan Principal	The total sum of money borrowed.
Prepayment	Any amount paid on a loan before it is required to be paid under the terms of the promissory note. There is never a penalty for prepaying principal or interest on Direct Loans.
Promissory Note	A legally binding contract between the U.S. Department of Education and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.
Repayment Schedule	A statement provided by the Direct Loan Servicing Center to the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.
Standard Repayment Plan	A plan that requires a borrower to pay at least $50 a month and allows up to 10 years to repay.