Glossary of Terms

The Annual Percentage Rate, or APR, is the interest rate that results from including the nominal (advertised) interest rate and other factors that affect the cost of borrowing, such as the repayment schedule, repayment options, fees, etc. The true APR quoted for a variable rate loan cannot actually be known until after the final payment is made. The APR quoted reflects current economic conditions.

The person legally responsible for repayment of a loan and who has signed the promissory note.

The maximum allowable interest rate that can be charged in a variable interest rate loan program regardless of economic fluctuations.

Unpaid, accumulated interest that is added to the loan principal. Because the principal increases, so does the total cost of the loan.

The person who applies for a loan with and signs a promissory note agreeing to be responsible for repayment if the borrower fails to meet the terms of repayment. This person’s creditworthiness may make the borrower eligible for a lower interest rate, lower fees, and/or other more favorable terms.

The combination of several federal educational loans into one new loan to simplify loan repayment.

A loan offered on the basis of the creditworthiness of the borrower.

Failure to repay a loan in accordance with the terms of the promissory note.

The temporary postponement of loan payments; during this time, the borrower may not have to pay either principal or interest.

Failure to make payments when due, as specified in the promissory note and in the selected repayment plan. Delinquency can lead to default and an adverse credit history.

The process of sending the proceeds of an educational loan to Boston University Student Accounting Services, usually at the start of each semester.

A company that handles billing, processes payments, deferment and forbearance requests and performs other services on behalf of the U.S. Department of Education for your Federal Direct Loans. Your loan is assigned to a loan servicer by the U.S. Department of Education after the first disbursement has been paid out.

Temporary postponement or reduction of payments, or extension of the repayment period, because of the borrower’s financial difficulties. Interest accrues during forbearance.

The total cost of education for the academic year, minus the calculated expected family contribution.

The total cost of education for the academic year, minus the total financial aid for the year.

An interest rate that is set for the life of the loan.

A loan expense charged a borrower for the use of borrowed money. Interest is calculated as a percentage of the principal of the loan, which includes the original amount borrowed and any capitalized interest.

The London Interbank Offered Rate Index (LIBOR) is an average of the interest rates that major international banks charge each other to borrow U.S. dollars in the London money market.

Any amount the borrower pays before it is required to be paid under the terms of the promissory note.

The total sum of money borrowed. Loan principal includes the original amount borrowed plus any interest that has been capitalized.

A binding legal contract between a loan holder and a borrower. The promissory note stipulates the loan terms and conditions, including how and when the loan must be repaid. By signing this note, the borrower formally agrees to repay the loan.

A statement the loan holder provides the borrower that lists the amount borrowed, the amount of monthly payments, and the date payments are due.

A federal student loan made on the basis of the borrower’s financial need and other specific eligibility requirements. The federal government pays the interest on subsidized loans while the borrower is enrolled at least half time, during the grace period, or during periods of deferment.

A federal student loan made to a borrower meeting specific eligibility requirements, but not based on financial need. The borrower is responsible for paying all interest that accrues throughout the life of an unsubsidized loan. During in-school status, deferment, and forbearance periods, the borrower may choose to pay the interest charged on the loan or allow the interest to be capitalized.

An interest rate that fluctuates with market conditions. Loans with variable rates usually have the rate linked to a standard index, such as the U.S. Treasury bill rate, the prime rate, or the LIBOR rate, etc.