11 Financial Terms Decoded for Student Loan Applicants

Confused by the financial jargon used by lending companies? Here is a handy glossary of the financial terms you should know when researching loans and other financial support for your university education.

Cost of Attendance (COA)

Cost of attendance is the total amount you will spend to attend college each year. Contrary to popular perception, tuition is only one component of your total college expense. COA is made up of tuition and other fees, room and meals, books, stationery and other supplies, travel costs, personal expenses, etc.

Knowing your COA is the first step to planning finances for your college education.

Free Application for Federal Student Aid (FAFSA)

FAFSA is the common application form you need to submit when applying for financial aid from the government, i.e., a federal student loan. It helps you determine how much federal student aid you can receive and in what categories (loan, scholarship, grant, work-study). Based on this information, you can make timely arrangements to secure the COA amount that would not be covered through a federal loan, scholarship or grant.

Private Student Loan

Private student loans are loans offered by banks, credit unions, companies and private colleges for undergraduate and graduate education. While federal loans (loans from the government) are available at a fixed rate and carry certain limitations (as well as protections), private loans are available at both fixed and variable rates with somewhat strict repayment terms.

A private student loan helps meet the difference between the COA and the funds raised through federal loans and grants. It can be useful when you’ve exhausted all other avenues of securing college funds. Oftentimes, you can manage your debt by refinancing to consolidate private student loans.

Direct Federal Loan

Direct loans are federal student loans given to undergraduate students whose families cannot pay for their college education owing to financial constraints. There are two types of direct loans: subsidized and unsubsidized. The key difference is that students who qualify for subsidized loans are not required to pay interest during certain periods of their undergraduate education. Unsubsidized loans are not allocated on the basis of financial need and require repayment of the loan amount as well as the interest. Unlike subsidized loans, the latter can be taken by both undergrad and grad school students.

Federal PLUS Loans

These are also federal education loans available to parents of dependent learners (Parent PLUS loans) and graduate students (Grad PLUS loans). PLUS loans help undergrad students meet the cost of attendance not covered by a federal student loan or other financial aid, and they enable grad school applicants to undertake advanced studies.

Scholarships and Grants

Both scholarships and grants are forms of financial aid for students, and neither needs to be paid back. While grants are generally awarded based on financial need, scholarships are given based on merit.

Annual Loan Limit

This is the maximum sum you can borrow in an academic year. Both federal and private student loans have lending limits, which vary based on the type of loan, school level, total amount borrowed, etc.

Annual Percentage Rate (APR)

APR is the yearly cost of your student loan; it includes the percentage of interest to be paid each year and any associated fees. Knowing the APR of your student loan helps you understand the amount you’ll be paying each year toward interest.


If you’re applying for a private loan for students, you will most likely require a co-signer. A co-signer is the co-applicant of your loan and therefore shares the obligation to repay your student loan in case you are unable to do so. A co-signer can be any adult—parent, guardian, grandparent, relative, spouse, friend—with an excellent credit history.

Federal Work-Study Program

A government-led program wherein undergraduate and graduate school students are provided part-time jobs during their time at college. This is a form of financial aid and is intended to help students cover college expenses not covered by a federal student loan or scholarship.


Refinancing means paying off your existing federal and/or private loans through a new private lender and taking a new loan at an interest rate that is usually lower than the previous rates. Refinancing can only be done through private lenders, and it can help you save a substantial amount over the life of your loan. Refinancing a federal student loan, however, would mean foregoing some of the benefits such pay-as-you-go, loan forgiveness, etc.

There are even more loan-related terms you will learn into the student loan application process. Being well informed early on will give you the confidence to take favorable loan decisions.