Glossary of Student Loan Related Terms

Debt Management Counseling

Counseling provided to a student about debt and accumulated indebtedness.

Debt to Income Ratio Calculation

This calculation is used in the applicant's credit review and compares a person's outstanding debt payments to his/her income.

Declined

A status assigned to a loan that has failed to meet the loan program's eligibility criteria. A declined loan is no longer being processed.

Default

A loan is in default when the borrower fails to pay several regular installments on time (i.e., payments overdue by 270 days) or otherwise fails to meet the terms and conditions of the loan. if you default on a loan, the university, the holder of the loan, the state, and the federal government can take legal action to recovery the money, including garnishing your wages and withholding income tax refunds. Defaulting on a government loan will make you ineligible for future federal financial aid, unless a satisfactory repayment schedule is arranged, and can affect your credit rating.

Deferment

Occurs when a borrower is allows to postpone repaying the loan. If you have a subsidized loan, the federal government pays the interest charges during the deferment period. If you have an unsubsidized loan, you are responsible for the interest that accrues during the deferment period. You can still postpone paying the interest charges by capitalizing the interest, which increases the size of the loan. Most federal loan programs allow students to defer their loans while they are in school at least half time. If you don't qualify for a deferment, you may be able to get a forbearance. You can't get a deferment if your loan is in default.

Deferred Interest

Interest payments that are delayed for the borrower during a specified period and paid at a later time.

Delinquency

A period that begins on the day after the due date of a payment when the borrower fails to make the equivalent of one full payment.

Delinquent

If the borrower fails to make a payment on time, the borrower is considered delinquent and late fees may be charged. If the borrower misses several payments, the loan goes into default.

Dependency Status

Determines to what degree a student has access to a parent's financial resources.

Dependent

For a child or other person to be considered your dependent, they must live with you and you must provide them with more than half of their support. Spouses do not count as dependents in the Federal Methodology. You and your spouse cannot both claim the same child as a dependent.

Dependent Student

A student who is 23 years old or younger and dependent on his or her parents for financial support.

Direct Loans

The William D. Ford Federal Direct Loan Program (aka the Direct Loan Program) is a federal program where the school becomes the lending agency and manages the funds directly, with the federal government providing the loan funds. Not all schools currently participate in this program. Benefits of the program include faster turnaround time and less bureaucracy than the old "bank loan" program. The terms for direct loans are the same as for the Stafford Loan program. For more information about Direct Loans, contact the Direct Loan Servicing Center at 1-800-848-0979. 

Disbursed

A status assigned to a loan when all loan proceeds have been transferred to the borrower, school or escrow agent.

Disbursement

The release of loan funds to the school for delivery to the borrower. The payment will be made co-payable to the student and the school. Loan funds are first credited to the student's account for payment of tuition, fees, room and board, and other school charges. Any excess funds are then paid to the student in cash or by check. Unless the loan amount is under $500, the disbursement will be made in at least two equal installments.

Disbursement Date

The date when the lender or escrow agent releases an EFT or issues a loan check, not the date the funds are received by the school or student. The funds received date may be several days later than the disbursement date.

Discharge

To release the borrower from his or her obligation to repay the loan.

Disclosure Statement

Provides the borrower with information about the actual cost of the loan, including the interest rate, origination, insurance, and loan fees, and any other kinds of finance charges. Lenders are required to provide the borrower with a disclosure statement before issuing a loan.

Documentation

A written or printed paper, a supporting reference, or a record that can be used to furnish evidence, proof, or information.

DOE

Department of Education

Due Diligence

If a borrower fails to make payments on their loan according to the terms of the promissory note, the federal government requires the lender, holder, or servicer of the loan to make frequent attempts to contact the borrower via telephone and mail to encourage him or her to repay the loan and make arrangements to resolve the delinquency.