Key Loan Terms

Interest- a percentage rate calculated on the principle of a loan charged to a borrower and paid to the lender.


Lender- an organization that made the loan initially; lenders could be a bank, credit union, or other lending institution or the Department of Education.


Loan Servicer- a company that collects payments on a loan, responds to customer service inquiries and administers the loan on behalf of the lender.


Deferment- a postponement of payment that is allowed under certain conditions, during which time the interest does not accrue.


Forbearance- a postponement or reduction of payments under certain conditions, during which time the interest accrues.


Capitalized Interest- accrued unpaid interest from a loan is aggregated and added to the principle of the original loan.


Subsidized- interest does not accrue on a loan while the student is in school or in deferment.


Unsubsidized- interest accrues on a loan, generally from the point of disbursement.


Grace Period- a period of time when the student ceases attendance (less than 6 credits), but is not yet in repayment. For Direct Loan, students are given a 6 month grace period, for Perkins, students are given 9 months before repayment begins.