With so many different terms and abbreviations, financial jargon can sound like an entirely different language at times. That’s why we pulled together a list of the basic financial terms every college student should have in their vocabulary.
Cost of Attendance (COA)
Cost of attendance refers to the total amount it will cost you to go to college each year. This includes tuition and fees, room and board, and allowances for books, supplies, transportation, etc. It is important for showing the big picture in terms of college costs.
FAFSA stands for Free Application for Federal Student Aid It’s the form that both current and prospective college students can fill out to determine the amount of financial aid they will receive and what type of aid they are eligible for.
Direct Subsidized Loan
Direct Subsidized Loans are available to undergraduate students whose families meet the financial need criteria, and it is the only federal student loan in which students do not have to pay the interest which accrues while the student is enrolled in school at least half-time, or during the grace period following graduation (typically six months). Interest that accrues during these periods is paid (or subsidized) by the federal government.
Direct Unsubsidized Loan
Direct Unsubsidized Loans are not awarded based on financial need, and they are available to most undergraduates and graduate students. The borrower is responsible to repay the loan with interest.
Grants are a type of “gift aid” and do not need to be paid back. They are usually need-based and are a great way to reduce out-of-pocket education expenses.
Scholarships, like grants, are also considered a form of “gift aid” and do not need to be repaid. However, while grants are often need-based, scholarships are usually merit-based.
Annual Percentage Rate (APR)
APR refers to the annual cost (interest and certain fees) related to credit card balances, auto loans, and student loans. Annual Percentage Rates will vary based on the type of credit card or loan, but it will help you understand how much you will pay in interest.
Minimum Monthly Payment
The minimum monthly payment is the amount you must pay on your student loan each month. Paying only the minimum can cause you to accrue larger interest charges and take longer to pay down your debt. You can always pay more than the minimum required payment, which can help you save on interest. Just make sure your lender won’t charge you a penalty fee if you pay the loan off early.
Your credit score is a number that indicates your “creditworthiness” to lenders. It is based on your credit history and may include factors such as the number of accounts you have, amounts owed, and your payment history. It is meant to show a lender your capacity to repay a loan. The higher your credit score, the better your chances of qualifying for a loan and getting a better interest rate. Most students have low or no credit score due to a lack of credit history. If you have never had a loan or a credit card, then you probably won’t have any credit history.