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Federal Direct Student Loan Glossary


Person responsible for repaying a loan who has signed and agreed to the terms in the promissory note.


Adding unpaid interest to the loan principal. Capitalization increases the principal amount of the loan and its total cost.


Failure to repay a loan according to the terms of the promissory note. This failure must persist for 270 days.


A postponement of payment on a loan that is allowed under certain conditions and during which interest does not accrue for subsidized loans.

Dependent Student

A student who does not meet any of the criteria for an independent student (see below).


A payment of loan money to the student or parent borrower.


The release of a borrower from the obligation to repay his or her loan.

Direct Loan Program

The William D. Ford Federal Direct Loan Program provides loans to student and parent borrowers directly through the U.S. Department of Education rather than through a bank or other lender.

Direct Loan Servicing Center

The U.S. Department of Education's agent contracted to collect Direct Loans and handle deferments, repayment options, and consolidation.

Direct Subsidized Loan

A loan for students with financial need as determined by federal regulations. No interest is charged while you are in school at least half-time, during your grace period, and during deferment periods.

Direct Unsubsidized Loan

A student loan that is not based on financial need. Interest is charged during all periods.

Expected Family Contribution (EFC)

The EFC is a measure of the financial strength of a student's family. The U.S. Department of Education calculates a student's EFC based on information provided on the Free Application for Federal Student Aid (FAFSA).


A postponement of payment on a loan, typically if the borrower doesn't qualify for a deferment and is unable to make payments for a reason such as poor health. Interest continues to accrue during forbearance.

Grace Period

A six-month period before the first payment must be made on a subsidized or unsubsidized loan. The grace period begins the day after the borrower ceases to be enrolled at least half time.

Independent Student

A student who is at least 24 years old, married, a graduate or professional student, a veteran or on active duty in the military for other than training or state purposes, an orphan, a ward of the court, or who has legal dependents other than a spouse.


An expense of borrowing money that is calculated as a percentage of the amount borrowed.


Money borrowed that must be repaid.

Loan Fee

An expense of borrowing deducted proportionately from each loan disbursement.

Principal Balance

The amount owed on a loan, which includes any capitalized interest.

Promissory Note

A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.

Repayment Period

The period during which a borrower is obligated to make payments on his or her loan(s).

Repayment Schedule

A statement provided by the Direct Loan Servicing Center to the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.

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