The following are common terms and their definitions in the world of financial aid.


Academic Year

Time in which a full-time student should complete two semesters (24 hours), two trimesters, or three quarters at a college, university, technical or vocational school. Or it must be at least 36 quarter hours if a program is measured in credit hours.


An item of value, such as a family’s home, business, real estate, stocks, bonds, mutual funds, cash, certificates of deposit (CDs), bank accounts, trust funds and other property and investments.

Asset Protection Allowance

A portion of your parents’ assets that are not included in the calculation of the parent contribution, as calculated by the Federal Methodology need analysis formula. The asset protection allowance increases with the age of the parents.

Award Year

The year in which you will receive financial aid. It runs from July 1st through June 30th.


Base Income Year

The tax year prior to the academic year (award year) for which financial aid is requested. The base year for the freshman year of college runs from January 1 of the junior year in high school through December 31 of the senior year. Financial information from this year is used to determine eligibility for financial aid.


Cost of Attendance (COA)

The total amount it should cost the student to go to school, including tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses. Loan fees, if applicable, may also be included in the COA. Child care and expenses for disabilities may also be included at the discretion of the financial aid administrator. Schools establish different standard budget amounts for students living on-campus and off-campus, married and unmarried students and in-state and out-of-state students.

Custodial Parent

If a student’s parents are divorced or separated, the custodial parent is the one with whom the student lived the most during the past 12 months. The student’s need analysis is based on financial information supplied by the custodial parent.


Direct Lending

The Direct Lending Program is another approach to delivering educational loans to eligible student borrowers. The terms and conditions governing Direct Loans are similar to the Federal Family Education Loan Program (FFELP) program. The difference is that the federal government lends funds to eligible borrowers through the school, eliminating the role of lenders and guaranty agencies. Students repay their loans directly to the federal government. Not every school participates in this program. Check with the financial aid officer at your institution. If a school is a direct lender, it will determine how a federal student loan is obtained.


Enrollment Status

An indication of whether you are a full-time or part-time student. Generally you must be enrolled at least half-time (and in some cases full-time) to qualify for financial aid.

Expected Family Contribution (EFC)

The amount of money that the family is expected to be able to contribute to the student’s education, as determined by the Federal Methodology need analysis formula approved by Congress. The EFC includes the parent contribution and the student contribution, and depends on the student’s dependency status, family size, number of family members in school, taxable and nontaxable income and assets.


Federal Aid

Student financial aid programs sponsored by the U.S. Department of Education which include Federal Pell Grants , Federal Supplemental Educational Opportunity Grants (SEOG), Federal Work-Study (FWS), Federal Perkins Loans, Federal Stafford Loans, and Federal PLUS loans.

Federal Methodology

The need analysis formula used to determine the EFC. The Federal Methodology takes family size, the number of family members in college, taxable and nontaxable income and assets into account. Unlike most Institutional Methodologies, however, the Federal Methodology does not consider the net value of the family residence.

Federal Family Education Loan Programs

The Federal Family Education Loan Program (FFELP) was formerly known as the Guaranteed Student Loan (GSL) Program. The FFELP program includes the Federal Stafford Loans (subsidized and unsubsidized), Federal PLUS Loans, and Federal Consolidation Loans. Funds for these programs are provided by private lenders and the loans are guaranteed by the federal government.

Federal PLUS Loan

Federal loans available to parents of dependent undergraduate students to help finance the child’s education. Parents may borrow up to the full cost of their children’s education, less the amount of any other financial aid received. PLUS Loans may be used to pay the EFC. There is a minimal credit check required for the PLUS loan, so a good credit history is required.

Federal Stafford Loans

Federal loans that come in two forms, subsidized and unsubsidized. Subsidized loans are based on need; unsubsidized loans are not. The federal government pays the interest on the subsidized Stafford Loan while the student is in school and during the 6-month grace period. The Subsidized Stafford Loan was formerly known as the Guaranteed Student Loan (GSL). Undergraduates may borrow up to $23,000 ($2,625 during the freshman year, $3,500 during the sophomore year and $5,500 during the third, fourth and fifth years) and graduate students up to $65,500 including any undergraduate Stafford loans ($8,500 per year). These limits are for subsidized and unsubsidized loans combined. The difference between the subsidized loan amount and the limit may be borrowed by the student as an unsubsidized loan.

Federal Supplemental Education Opportunity Grant (SEOG)

Federal grant program for undergraduate students with exceptional need. SEOG grants are awarded by the school’s financial aid office, and provide up to $4,000 per year. To qualify, a student must also be a recipient of a Pell Grant.

Federal Work-Study (FWS)

A program providing undergraduate and graduate students with part-time employment during the school year. The federal government pays a portion of the student’s salary. For this reason, work-study students often find it easier to get a part-time job. Eligibility for FWS is based on need. Money earned from a FWS job is not counted as income for the subsequent year’s need analysis process.

Free Application for Federal Student Aid (FAFSA)

The official document used by every college and university to determine eligibility for Federal Student Aid. A copy of this document is often required by a scholarship program.Financial Aid

Money provided to the student and the family to help them pay for the student’s education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work).

Free Application for Federal Student Aid (FAFSA)

Form used to apply for Pell Grants and all other need-based aid. As the name suggests, no fee is charged to file a FAFSA.



Federal, state or institutional aid which the student doe not have to pay back.

Gross Income

Income before taxes, deductions and allowances have been subtracted.


Hope Scholarship Credit

A tax credit that may be claimed for qualified tuition and expenses for student enrolled at least half time in one of the first two years of post-secondary education.



The amount of money received from employment (salary, wages, tips), profit from financial instruments (interest, dividends, capital gains), or other sources (welfare, disability, child support, Social Security and pensions).

Independent Student

Must meet one of the following conditions: twenty-four years of age or older; an orphan; a ward of the court; a veteran of the US Armed Forces; is married; has a child; is a graduate or professional student; has serious family circumstances.

Institutional Aid

Student financial aid distributed by the schools usually in the form of grants and need-based scholarships.

Institutional Methodology

If a college or university uses its own formula to determine financial need for allocation of the school’s own financial aid funds, the formula is referred to as the Institutional Methodology.


Lifetime Learning Tax Credit

A tax credit that may be claimed for tuition and related expenses for students who are enrolled in eligible educational institutions.


Merit Aid

Financial aid awarded on the basis of a students academic, athletic, and/or extracurricular excellence.



The difference between the COA and the EFC is the student’s financial need — the gap between the cost of attending the school and the student’s resources. The financial aid package is based on the amount of financial need. The process of determining a student’s need is known as need analysis.

Need Analysis

The process of analyzing the household and financial information on the student’s financial aid application and calculating the amount the family can be expected to contribute to educational costs. The student must submit a need analysis form to apply for need-based aid. Need analysis forms include the Free Application for Federal Student Aid (FAFSA) and the Financial Aid PROFILE.

Need-Based Aid

Financial aid awarded on the basis of a families financial situation. Most government sources of financial aid are need-based.


Outside Resource

Aid or benefits available because a student is in school and is counted after need is determined. Outside scholarships, prepaid tuition plans and VA educational benefits are examples of outside resources.

Outside Scholarship

A scholarship that comes from sources other than the school and the federal or state government.


Parent Contribution

The portion of your educational expenses that the federal government believes your parents can afford. It is based on their income, the number of parents earning income, assets, family size, the number of family members currently attending a university and other relevant factors. Students who qualify as independent are not expected to have a parent contribution.

Pell Grant

A federal grant that provides funds of up to $6,895 (2022-23 academic year) based on the student’s financial need.

Perkins Loan

Formerly the National Direct Student Loan Program, the Perkins Loan allows students to borrow up to $3,000/year (5 year maximum) for undergraduate school and $5,000/year for graduate school (6 year maximum). The Perkins Loan has one of the lowest interest rates and is awarded by the financial aid administrator to students with exceptional financial need. The student must have applied for a Pell Grant to be eligible. The interest on the Perkins Loan is subsidized while the student is in school.

Professional Judgment

While the method for determining the student’s need for federal student aid is defined in the law, it does give the financial aid administrator the flexibility to make individual adjustments due “special conditions”. These adjustments must be made on a case-by-case basis, and the reasons for the adjustment must be documented in the student’s file.


Renewal FAFSA Application

An application that simplifies the process of reapplying for financial aid. Some of the information from the student’s previous year application is preprinted on the Renewal FAFSA application. Students do not have to enter new information if the preprinted information is still correct.


Satisfactory Academic Progress

Some scholarships can be taken away if a student is not making measurable progress towards the completion of a course of study.


A form of financial aid given to undergraduate students to help pay for their education. Scholarships are a form of gift aid and do not have to be repaid.

Scholarship Search Service

A service that charges a fee to compare the student’s profile against a database of scholarship programs. Few students who use a scholarship search service actually win a scholarship.

Special Conditions

Unusual circumstances, such as excessive medical expenses, elementary or secondary private school tuition, loss of job, death or divorce, which would impact the parent’s ability to pay college costs. In such situations, the Financial Aid Administrator may use his “professional judgment” to adjust the Expected Family Contribution.

Student Aid Report (SAR)

The document printed by a FAFSA processor and mailed to the student. The SAR contains the family’s financial and other information reported by the student on the financial aid application. The student’s Expected Family Contribution (EFC) and Pell Grant eligibility are indicated on the front of the SAR.

Student Contribution

The amount of money the federal government expects the student to contribute to his or her education and is included as part of the EFC. The amount depends on the student’s income and assets.



All classes taken and all grades received by a student. An official transcript is sent by the school with an original signature of a school official.



A process of checking the information the student reported on the financial aid application. Many schools conduct their own form of verification. In addition, schools may be required to verify students as selected by the federal central processing system or state aid organization.