Student Loan Consolidation: Common Terms Explained
There's no question that the student loan consolidation industry has its own jargon, which can be both confusing and bewildering. To help you decode the mysteries of loan consolidation, we've prepared this list of commonly used terms and their meanings.
Borrower
The person who has taken out the loan.
Borrower benefits
Borrower benefits is essentially the same as "discounts". Borrower benefits are the discounts given to borrowers as incentives. Common benefits include 1% rate reductions after the first 36 on time payments and 0.25% rate reductions for using automatic checking account withdrawal.
Default
Default is a condition of student loan payment - or lack of payment, actually. When you default on a loan, you cease making payments. This is bad.
Direct Loan
A Direct Loan is a form of federal student loan, usually either a Stafford Loan or a PLUS loan, which is issued by the Department of Education directly, and does not involve any third party lender, servicer, or guarantor.
ESignature
The process of signing a loan application online; no paper application is mailed either to or from the borrower. eSignature applications are often processed more quickly than paper applications because the post office is removed from the process.
Grace period
Your grace period is a period of time six months long, from the day you either graduated or stopped attending school more than half time.
Guarantee Agency
The company or organization which will pay the lender if the borrower doesn't make payments on their loans.
The Guarantee Agency is the reason most banks will lend federal student loans - Uncle Sam picks up the tab if the students don't pay.
Guarantor
See Guarantee Agency
Lender
The lender is the company or organization which provides the money for the loan.
PIN
PIN stands for personal identification number and in the context of financial aid often refers to a four digit number assigned to borrowers by the Department of Education. The PIN is used for the FAFSA and for interacting with the Department of Education
Repayment rate
Your repayment rate is the interest rate your student loans have 6 months after you graduate or stop attending school more than half time. For Stafford Loans, the repayment rate is 0.6% higher than the grace rate.
Servicer
The servicer is the company or organization which sends out bills and collects money on behalf of the lender.
They're the paperwork people.
T-Bill
Student loan interest rates are based off the auction price of the 91-day Treasury Bill (T-Bill) for the last auction in the month of May of each calendar year. Rates take effect on July 1 of each calendar year. |
