| alternative repayment | A repayment plan the Servicing Center provides to a borrower who adequately demonstrates that the term and conditions of the four Direct Loan repayment plans do not accommodate the borrower's exceptional circumstances. |
| borrower | Person responsible for repaying a loan who has signed and agreed to the terms in the promissory note. |
| capitalizing interest | Adding accumulated interest to the loan principle rather than having the borrower make monthly interest payments. Capitalizing interest increases the principle amount of the loan and, therefore, the total costs of the loan. |
| collection costs | Costs the government incurs when collecting a delinquent or defaulted loan. These costs are charged to the borrower. |
| default | Failure to repay a loan in accordance with the terms of the promissory note and the selected repayment plan. |
| deferment | The temporary postponement of loan payments. |
| Direct Consolidation Loan |
One or more federal education loans combined into a single loan under the Direct Loan Program. Only one monthly payment is made to the U.S. Department of Education. |
| Direct Loan Servicing Center |
The place where Direct Loan borrowers send their loan payments. The Servicing Center can answer questions you might have about your Direct Loan. |
| discharge (cancellation) |
The release of borrowers from their obligations to repay their Direct Loans. Borrowers must meet certain requirements to be eligible for discharges. |
| exit counseling | A group or individual session during which Direct Loan borrowers who are leaving school or dropping below half-time enrollment receive important information about their repayment obligations and update information about themselves. |
| Extended Repayment Plan |
A plan that requires the borrower to pay at least $50 a month and allows up to 30 years to repay, depending on the amount borrowed. |
| Federal Direct Loan Program |
The William D. Ford Federal Direct Loan Program, also referred to as Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education. The loans are Federal Direct Stafford/Ford Loans, Federal Direct Unsubsidized Stafford/Ford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans. |
| Federal Direct Stafford/Ford Loan |
Also referred to as "Direct Subsidized Loan." A federally financed and subsidized student loan made on the basis of the student's financial need and other specific eligibility requirements. The federal government does not charge interest on these types of loans while borrowers are enrolled at least half-time, during the six-month grace period, or during authorized periods of deferment. |
| Federal Direct Unsubsidized Stafford/Ford Loan |
Also referred to as "Direct Unsubsidized Loan." A federally financed student loan made to students meeting eligibility requirements. Students need not demonstrate financial need. Interest is charged throughout the life of the loan. The borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized (added to the loan principal) when the loan enters repayment. |
| forbearance | An arrangement to postpone or reduce a borrower's monthly payment amount for a limited and specific period, or to extend the repayment period. The borrower is charged interest during forbearance. |
| grace period | A six-month period before the first payment must be made on a Direct Subsidized or Unsubsidized Loan. The grace period starts the day after a borrower ceases to be enrolled at least half-time. During the grace period on a Direct Unsubsidized Loan, accumulating interest must be paid or it will be capitalized. |
| Graduated Repayment Plan |
A plan that allows monthly payment amounts to start out at one level and then increase every two years during the repayment period. Borrowers have up to 30 years to repay, depending on the amount they borrowed. The minimum payment must cover interest that accumulates monthly and must be at least half of the payment that would be required under the Standard Repayment Plan. The maximum amount may not be more than 1-1/2 times the payment that would be required under the Standard Repayment Plan. |
| Income Contingent Repayment Plan |
A plan that allows the monthly payment amount to vary with the borrower's income. |
| Repayment Plan | A borrower has up to 25 years to repay. |
| interest | A loan expense charged by the U.S. Department of Education and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the principal amount (loan amount) borrowed. |
| loan | Money borrowed that must be repaid. |
| loan principal | The total sum of money borrowed. |
| postponement(loan) | See deferment and forbearance. |
| prepayment | Any amount paid on a loan before it is required to be paid under the terms of the promissory note. There is never a penalty for prepaying principal or interest on Direct Loans. |
| promissory note | A legally binding contract between the U.S. Department of Education and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid. |
| 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. |
| Standard Repayment Plan |
A plan that requires a borrower to pay at least $50 a month and allows up to 10 years to repay. |