Honors Financial Literacy: Chapter 7 - Lessons 3 and 4

Vocabulary flashcards covering federal and private student loans, the FAFSA, gift aid, tax implications, repayment terms, loan default consequences, and college return on investment (ROI).

Free Application for Federal Student Aid (FAFSA)

The official federal application used to qualify for federal student loans, federal and state grants, and work-study programs.

Gift Aid

Forms of financial aid—such as federal and state grants or work-study—that do not need to be repaid.

Work-Study

A financial aid program that provides part-time, on-campus employment, often funded by the government instead of the school.

Direct Subsidized Loan

A federal Stafford loan available to undergraduate students with financial need, where the U.S. Department of Education pays the interest while the student is enrolled at least half-time and for up to $6$ months after graduation.

Direct Unsubsidized Loan

A federal Stafford loan available to undergraduate and graduate students without requiring demonstrated financial need; interest accrues during all periods while payments are deferred until after graduation.

PLUS Loan

A federal loan (Parent Loan for Undergraduate Students) available to parents of undergraduate students as well as graduate students.

Private Student Loans

Loans issued by banks, credit unions, and financial institutions that evaluate creditworthiness, typically require a cosigner, have higher interest rates and borrowing limits, and offer less flexible repayment plans than federal loans.

Pell Grant

A need-based federal financial aid subsidy provided to undergraduate students that generally does not require repayment.

Qualified Education Expenses (IRS)

Educational costs—including tuition, fees, books, and required course supplies or equipment—that allow scholarship and grant funds to be received tax-free, excluding non-qualified costs such as room, board, and travel.

Financial Aid Award Letter

A formal notice sent by an accepted college specifying the financial aid package offered, from which the student may choose which specific aid items to accept.

Forbearance

A temporary arrangement where debt payments are postponed or suspended due to financial hardship, medical emergencies, or military service, while interest continues to accrue.

Acceleration Clause

A loan provision, mostly found in private loans, that causes the entire unpaid balance of the loan to become immediately due as a lump sum upon borrower default.

Wage Garnishment

A legal debt collection process where a lender arranges for a borrower's employer to withhold a portion of each paycheck to pay directly toward a defaulted loan.

College Return on Investment (ROI)

A framework for ranking and assessing a college education based on factors such as net price, earning potential, program quality, completion rate, typical class size, location, social opportunities, and school culture.