Unit 1 Economics and Personal Finance

Associate Degree

A degree that generally takes two years of study and is awarded by a community, junior, or business college.

Cosigner

Someone who legally agrees to take responsibility for a person’s debt if they cannot repay it.

Default

Long-term failure to repay a loan according to the terms agreed to, which has a substantial negative impact on the borrower’s credit score.

Deferment

A process that allows a borrower to pause their federal student loan payments; interest does NOT accrue during this period on subsidized loans.

Direct Plus Loans

A federal loan available to graduate or professional students and eligible parents of dependent undergraduate students to help pay for student’s education at participating schools.

Direct Subsidized Loan

A federal student loan available to undergrad students; the federal government pays interest on the loan as long as the student is in school at least part-time.

Student Aid Index

A numerical value that colleges use to determine a student’s financial need for federal aid.

Federal Student Aid

The largest form of student aid in the country; federal aid programs come in the form of government grants, loans, and work-study opportunities.

Financial Aid Offer

The total amount of financial aid (federal and nonfederal) a student is offered by a college, designed to help meet a student’s education costs.

Fixed-Rate Loan

A loan with an interest rate that does not change over the life of the loan.

Forbearance

A process that allows a borrower to pause their federal student loan payments; interest continues to accrue during this time period and may be capitalized.

FAFSA

A free form that students can fill out to determine if they are eligible for federal, state, and school financial aid.

Gap Year

A year between high school and college when some students engage in various educational and developmental activities, such as travel or some type of regular work.

Gift Aid

Financial aid that does not have to be paid back, such as scholarships and grants.

Grace Period

A period of time during which a borrower is typically not required to make loan payments; begins on the day after a borrower graduates, leaves school, or drops below half-time enrollment.

Grants

Student aid coming from the state or federal government, the school, or from private sources that does not need to be repaid.

Interest Rates

The rate charged for borrowing money usually expressed as a percent of the amount borrowed.

Internship

A temporary paid or unpaid position that involves direct work experience in a career field.

Loan Refinancing

A process that REPLACES one or more existing federal or private loans with a new private student loan.

Loan Consolidation

A process that allows a borrower to COMBINE multiple federal loans into one, allowing the borrower to make one monthly payment.

Loan Servicer

The organization that collects payments on a loan, responds to customer service inquiries, and performs administrative tasks associated with maintaining a loan.

Opportunity Cost

The value of the next best alternative that is given up when making a decision.

Net Price

The actual cost a student pays to attend a school, calculated as the sticker price minus grants and scholarships.

Principal

Original amount of money borrowed, separate from interest or fees.

Private Student Loan

A non-federal student loan made by a bank, credit union, or other entity.

Repayment Period

The maximum time period over which you must repay your student loan.

Repayment Plan

A plan that outlines your monthly payment, repayment period, and how much interest you will pay over the life of the loan.

Return of Investment (ROI)

A financial metric that measures profitability of an investment.

Room and Board

Cost of housing and food while at college.

Scholarship

A type of aid primarily awarded for academic merit or accomplishments which does not need to be repaid.

Sticker Price

Total expense of going to college which may include various costs; also known as cost of attendance.

Submission Summary

A report you receive with the information you submitted in the FAFSA.

Trade School

A school that prepares students to enter a specific career directly after training.

Tuition

The sticker price for the academic portion of college expenses.

Variable-Rate Loan

Where the interest rate fluctuates throughout the loan term based on market conditions.

Vocational Learning

Training focused on hands-on work that prepares you for skilled trades.

Work-Study

A federal program that provides part-time jobs for students with financial need.