Financial Aid: Common Terms & Definitions
Last updated January 17, 2024
Here are some important financial aid terms and definitions you'll likely come across during the college application process.
Your budget is a plan for how you spend your money. Your budget should show you how much you make compared to how much you spend in a given week or month, how much you can afford to save, and what expenses you can or should cut to save money. Your budget should ensure you have enough money to cover your living expenses.
College expenses are the things you will need to pay for as a college student, like housing, food, transportation, books and class fees, and more.
A contributor is anyone that provides information on your FAFSA. This includes a student, their parent(s), and the student’s spouse (only if applicable). All contributors are required to create a StudentAid.gov account (FSA ID) in order to complete their portion of the FAFSA.
Cost of attendance (COA)
The COA is an estimate of what you can expect to pay for one year of college. This includes tuition and fees, room and board, books and supplies, transportation, and more.
FAFSA Submission Summary
The FAFSA Submission Summary is a document that gives you basic information about your eligibility for financial aid. This report includes your Student Aid Index (SAI) and your answers to questions on the FAFSA. Typically, you should receive your FAFSA Submission Summary after you finish completing your FAFSA.
Federal student loans
Federal student loans help many students pay for college. These loans typically offer borrowers lower interest rates and have more flexible repayment options than private loans from banks or credit unions. All types of federal student loans typically must be paid back after graduating or leaving college.
Work-study is a federal student aid program that provides students at participating colleges with part-time job opportunities. Eligibility for work-study is determined once you've completed or renewed the FAFSA.
Financial aid is money that helps students cover college costs, like tuition, room and board, class fees, and more. Some of the most common forms of financial aid are scholarships, loans, grants, and work-study.
Financial aid award letter/offer letter
An official letter from a college you’ve been accepted to that breaks down the details of your financial aid package and the aid you’re being offered in a given school year. It may include financial aid from a variety of sources, including grants, scholarships, work-study, and loans.
Financial need is the amount calculated by taking the cost of attendance (COA) at a college minus your Student Aid Index (SAI) as calculated by the FAFSA.
Free Application for Federal Student Aid (FAFSA)
The FAFSA is a federal financial aid application form that students must complete in order to be eligible for federal, state-based, campus-based, and most forms of private financial aid for college. You must complete or renew the FAFSA for every year you are in college.
Grants are amounts of money given to students with financial need by their college, state, or the federal government. They typically don’t need to be repaid.
The net price is an amount of money that a student pays to attend a college in a single academic year after subtracting any scholarships or grants they receive.
Parent PLUS loans
This type of federal student loan is taken out by a parent or legal guardian on your behalf to help you pay for college. Parent PLUS loans typically must be repaid in full.
These types of loans come from private organizations, such as banks, credit unions, or online lenders. Typically, they have higher interest rates and less favorable repayment options than federal student loans.
Scholarships are sums of money awarded to students to help them pay for college. Scholarships are typically awarded to students by a college, company, or private organization/foundation. Different scholarships will have different eligibility requirements. Scholarships typically never need to be repaid.
State-based financial aid
This type of aid is awarded to college students by their state, rather than the federal government. Different states will have different amounts of aid offered to students and different eligibility requirements.
StudentAid.gov Account (FSA ID)
A StudentAid.gov account (FSA ID) is a unique login that each contributor to a FAFSA must make in order to access, complete, and sign it.
Student Aid Index (SAI)
Your SAI is the number that a college will use to determine how much financial aid you’re eligible for. This number is determined by the financial information you provided on your FAFSA. The number can go as low as -1,500.
Subsidized loans do not accrue interest while you are attending college. After you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you are required to begin repayment.
Unsubsidized loans accrue interest from the moment the loan is granted to you. After you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you are required to begin repayment.
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