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Loan Requirements
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Scholarships, Grants, and Financial Assistance

Definitions of Important Terms

Guaranteeing Agency – the agency that secures the loans against loss in the case of non-compliance with the student federal loan programs.

Service Agency – agency designated to provide services and follow-up related to student loans.

Cancellation – release of the borrower from the responsibility of all or part of a loan payment. The loans must include certain requirements in order to have the right of cancellation.

Academic Year – period of time used by institutions to measure the number of credits earned by a student according to the study program.

Loan Year – university year during which the loan was obtained. For example, if the loan was obtained in August 2007, the loan year will last until May 2008, which represents the 2007-2008 academic year.

Payment Deferment – temporary postponement of payments. While the loan is deferred by the Federal Government, you will pay only the interest that accumulates on the subsidized portion. You must contact the agency for the awarding of same.

There are various kinds of postponements.

  • During a subsidized loan postponement, the principal payments are postponed and do not accumulate interest.

  • During the payment of non-subsidized loans, payment of the principal is postponed but interest is accumulated. This interest is added to the balance of the loan’s principal and capitalized at the end of the payment period, which increases the amount of the loan.

Bank – institution that provides the loan money through the Federal Student Loan Program.

Grant/Scholarship – financial assistance that usually does not have to be repaid.

Cancellation – release from the loan payment obligations. Borrowers can be eligible for absolution if they die, become totally and permanently incapacitated or do not receive a refund as the result of a sudden closing by the educational institution the student attends, or if the university falsely certified the eligibility of the borrower. In certain cases, the loan can be absolved by reasons of bankruptcy.

Capitalization – unpaid accumulated interest applied to the loan balance that increments the total debt to be paid. This happens at the end of a payment, leniency, or grace period for unsubsidized loans and at the end of the grace period for subsidized loans.

Academic Course Load – minimum amount of course credits a student must maintain during the academic term in order to be eligible for a loan payout.

Late Charge – amount charged when a monthly payment is made a month after its due date.

Consolidation – the combination of various student loans into a new loan with only one payment and fixed interest rate.

Expected Family Contribution (EFC) – the amount estimated by the federal government through the FAFSA process, in which the family must contribute to the cost of the university education based on income, assets, the number of university students, family makeup, and other circumstances.

Annual Study Cost – the amount it will cost a student to attend an educational institution for one academic year. This is determined by using the regulations established by the U.S. Congress. This includes tuition, fees, lodging, and meals at the campus, as well as books, materials, transportation, loan fees, and other related study costs.

Collection Costs – additional costs for breach of payment that are added to the outstanding balance. Collection costs can be up to a maximum of 18.5% of the outstanding interest and principal of the payment.

Account – each loan that is paid out during an academic year constitutes a separate account. Each account has a unique number that identifies it and is assigned by the agency.

Guarantee Fee – fee charged by the agency guaranteeing the loan, and is deducted from the loan amount. Insures the loan against financial loss in the case of breach by the borrower.

Origination Fees – origination amount charged by the Federal Government to pay for the cost of processing the loan and deducted from the loan amount.

Delinquency – loan payment default according to the terms established when the borrower signed.

Payout – transaction that occurs when the lender releases the loan funds. The payout term in the consolidation process refers to the payments made to the creditors of the loans that were consolidated.

Default – loan payment non-compliance according to the terms of the master promissory note. This is incurred after 270 days of non-payment.

Student Dependent – the Federal Department of Education established that students qualify as dependents if they have not yet graduated from a university and their parents pay more than half of their economic support; are not married; under age 24; do not have legal dependents; are not orphans; are not under the guardianship of a court; and are not veterans of the U.S. Armed Forces.

Graduate Students – students that have earned a Bachelor’s Degree.

Independent Student – the Federal Department of Education established that a student qualifies as independent if he or she qualifies as at least one of the following: university graduate, married, age 24 or older, has legal dependents, is an orphan or under the guardianship of a court, or is a U.S. Armed Forces veteran.

Undergraduate Student – student that has not yet received a Bachelor’s Degree.

FAFSA - Free Application Federal Student Aid. Federal form that students must complete in order to apply for federal financial assistance. It also determines acceptability for all federal financial assistance programs. Students can submit the FAFSA via the Internet through FAFSA on the Web using the FAFSA Express program or apply at the university, which will submit the form electronically.

Payment Date – dates on which a payment was received.

Due Date – date by which a monthly payment must be received by the agency. If any amount or commissions/expenses are pending, these are due immediately. Monthly payments must be received on or before the due date. If payments are not electronically debited from your bank account, they must be sent by mail far enough in advance to be applied to your account by the due date.

Payout Date – date on which the money is paid out to the educational institution. According to Federal Department of Education rules, the loan must have two payouts, no matter which semester they are applied to.

Loan Date – date on which the loan was approved.

FFELP – Federal Family Education Loan Program, previously known as the Guarantee Student Loan Program.

Payment Default – payment default occurs when a student loan borrower is behind on a loan payment by 270 days. After 360 days the loan is turned over to Collections Services. The consequences of a default are serious.

Forbearance – this is an agreement to delay or temporarily reduce the monthly loan payment while the interest on the principal continues to accumulate.

Student Aid Report (SAR) – a form received by students after they submit their Free Application for Federal Student Aid (FAFSA), whereby the student is notified of his or her eligibility to receive federal student financial assistance.

Interest – loan expenses charged by the credit institution and paid by the borrower for the use of the funds obtained through the loan. The daily accumulation on the principal amount is based on the interest rate. The amount is calculated based on a percentage of the principal amount (amount of the loan (lent).

Accrued Interest – interest accumulated on the loan(s) and added to the principal balance if a payment is not made before a specified date. The amount of the principal balance is increased as a result of the capitalization. Future interest is accumulated based on the higher principal. Interest is usually considered as the cost of borrowing the money and is calculated daily on the outstanding principal.

Simple Daily Interest – the method used to calculate student loan interest.

Less than Halt-Time – taking courses for less semester or trimester hours required by the academic period. At the undergraduate level, this is less than 6 credits. At the graduate and doctoral levels, this is less then 3 for each academic term.

Half-Time – these are students who carry an academic course load of 6 credits for the undergraduate level and 3 credits for the graduate or doctoral level for each academic term.

Payment Method – the method used to make payments on a student loan and can be:

  • Sent by mail: check or money order
  • EDA: Electronically debit a bank account
  • Online Payment: Payments made through the Internet to the service agency.

Total Payment – amount agreed to with the agency according to the corresponding monthly payment plan.

Loan Cancellation Amount – total amount required to completely pay off the loan. If you request an estimated loan cancellation amount, you will calculate it in the following way: remaining principal balance + accumulated interest not paid + 10 days of interest + pending unpaid commissions and expenses.

Note: Interest is accumulated from the date of the estimation of the payment calculation to the due date of the cancellation payment (10 days after). To aggregate this 10-day interest, calculate the cancellation amount, taking into account the accumulated interest in the account(s) up to the time the final cancellation payment is received.

Payment in Arrears – failure to make a monthly loan payment within the established installment periods. This happens when a payment is not received by its due date as agreed with the agency. An account is considered in arrears until payments are brought up to date, or there is a postponement or leniency. If the account is in arrears but the payment cannot be made, a deferment or forbearance can be considered with the agency in charge of the account.

Economic Need – formula established by law used to measure the economic situation of a family based on income and assets. This is the annual cost of the university education, less the Expected Family Contribution (EFC), or the amount the federal government expects the student and parents to require for the annual cost of university studies.

Financing Need – the difference between the student’s educational costs and the Expected Family Contribution (EFC).

NSLDS (National Student Loans Data System) – a centralized database containing information on all student loans. It also contains all information on your university registration. You can access this information using your Department of Education PIN.

Parent Borrowers – parents that have at least one PLUS Loan to finance the education of those children who are university dependents.

Master Promissory Note – legal and obligatory contract signed between the lender and the borrower that states that the loan will be paid according to the terms of the contract. Contains a list of conditions that bind the loan and the terms by which the borrower commits to pay back the loan. Includes information on interest rates, installments, and cancellation terms.

Prepayment – amount paid towards a loan before the date required according to the terms of the master promissory note. There is never a penalty for prepayments towards a loan’s principal or interest.

Class Attendance Period – stage at the beginning of the loan’s grace period and during which time the borrower must be studying at least half time in an educational institution approved for the program.

Grace Period – period before the date when loan payments are to begin. This can be six or nine months depending on the loan type. This period begins when you graduate, discontinue your studies, or you carry less than the academic load required. Parents do not receive a grace period.

Payment Plan – document you will receive from the agency once the first separation takes place. This document will inform you regarding how much you owe, when each monthly payment is due, and when you must make your first payment.

Repayment plans – payment plan options offered by the loan agency where the borrower selects the plan that best suits his or her situation.

Payment Term – the number of months required to pay your loan(s) in a specific payment plan provided by the agency.

Lender – institution that provides the funds to be loaned through the student loan program.

Loan – money that is given to the student to be used for expenses related to studies and is to be paid back with interest.

Subsidized Loan – loan based on the financial need of the student. No interest is charged while the individual is studying at least half time, during which the student is in a grace or deferment period.

Federal Plus Loan – loan that allows parents to obtain funds to pay for their children’s educational expenses if they meet the eligibility requirements based on the parents’ credit history.

Non-subsidized Loan – loan not based on the student’s financial need but provided based on study costs. The borrower is responsible for paying interest once the loan is paid out and accumulates until the loan is paid in full.

Borrower – person responsible for paying a loan according to the terms and conditions of the signed Master Promissory Note.

Principal – loan amount that must be paid during the repayment of the loan and on which interest is accumulated.

Satisfactory Academic Progress – requirement used by institutions that participate in the federal lending program to measure the academic achievement of those students receiving financial assistance.

Rehabilitation – process by which non-compliance to pay is established and the non-compliance qualification is eliminated on the borrower’s credit form. To rehabilitate a loan, it is necessary to make 12 complete consecutive monthly payments on time. Depending on the type of loan and the period in arrears, various additional terms and conditions can be acquired for the rehabilitation, which will be communicated by the loan agency.

Invoice Summary – information provided by the agency in relation to the invoice summary, which includes the account number, the total amount of the loan, the outstanding principal balance, the last payment received, and the due date.

Separation of Studies – final class attendance.

Interest Rate – current rate used to calculate loan interest.

Holder - lender or other company that possesses the loan promissory note. This may or may not be the same lender with whom you have originally taken the loan.

University Attended – name of the university for which you have received the loan. In the case of a Consolidation Loan, this field will simply give the name of the agency with which you have consolidated it.

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