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  • Writer's pictureSarah Camp

Understanding Student Loan Terms

Student Loan Terms You Should Know

When taking out student loans, it's essential to understand the key terms and processes to make informed financial decisions. Here are some of the most important student loan terms you should know:


1. APR (Annual Percentage Rate)

The total cost of borrowing, including the interest rate and fees, expressed as an annual percentage.


2. Capitalization

When unpaid interest is added to the principal balance, increasing the total amount owed.


3. Cosigner

A person who agrees to share responsibility for repaying the loan.


4. Deferment

A temporary postponement of loan payments.


5. Delinquency

When loan payments are late or missed.


6. Disbursement

The release of loan funds to the school.


7. Forbearance

A temporary reduction or suspension of payments.


8. Grace Period

The time after leaving school before repayment begins.


9. Interest

The cost of borrowing money, usually expressed as a percentage rate.


10. Principal

The initial loan amount borrowed.


11. Private Student Loan

A non-government loan from a lender or loan provider like a bank.


12. Repayment TermThe length of time given to repay the loan.


13. Subsidized Loan

A loan where the government pays the interest while in school.


14. Unsubsidized LoanA loan where the borrower pays all interest charged.


15. Consolidation

Combining multiple loans into one new loan.16. DefaultWhen loan payments are 270+ days past due.


17. Discharge

Release from having to repay the loan.


18. Servicer (Loan)Company that handles billing and customer service for the loan.


Understanding these common student loan terms will help you navigate loan options, repayment, deferment/forbearance, and avoid delinquency or default.


Student Loan Terms You Should know and Next Steps

Next Steps in the Student Loan Process

Now that you understand key terminology, the next step is comparing loan options. Be wary of sites claiming to offer the "best" loan or rate - often they are compensated to promote certain lenders at higher rates. Finding an unbiased loan comparison platform to view all lenders for your school is essential. ELMSelect partners with schools nationwide to provide the best loan options for higher education financing needs.

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