Common Loan Definitions
Person responsible for repaying a loan who has signed and agreed to the terms of the promissory note.
Adding unpaid accumulated interest to the loan principal.Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan.
Failure to repay a loan in accordance with the terms of the promissory note.
The temporary postponement of loan payments.
This occurs when payments are late or missed, as specified in the terms of the promissory note and the selected repayment plan.
When the school pays loan proceeds to the student or the parent borrower, or posts the funds to the student's account.
The release of a borrower from their obligation to repay their loans. A borrower must meet certain requirements to be eligible for discharge.
Statement of the actual cost of the loan, including the interest costs and the loan fee.
Federal Direct Loan Program
The William D. Ford Federal Direct Loan Program, referred to as Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education. The loans are Federal Direct Stafford/Ford Loans, Federal Direct Unsubsidized Stafford/Ford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans.
An arrangement to postpone or reduce a borrower's monthly payment amount for a limited or specified period, or to extend the repayment period. The borrower is charged interest during a forbearance.
A specified period of time before the first payment must be made on a loan. Typically, the grace period starts the day after a borrower ceases to be enrolled at least half time.
A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the principal amount (loan amount) borrowed.
Money that must be repaid.
An expense of borrowing deducted proportionately from each loan disbursement.
The sum of money borrowed.
Master Promissory Note
The Master Promissory Note (MPN) is a promissory note that can be used to make one or more loans for one or more academic years (up to 10 years). There are two types of MPNs in the Direct Loan Program: one for student loans and one for parent PLUS loans.
Any amount paid on a loan by the borrower before it is required to be paid under the terms of the promissory note.
A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.
A program that enables defaulted borrowers of federal Perkins loans to bring their accounts current, to remove previously reported derogatory credit information, and to reinstate the remaining balance of privileges and benefits of the loan. Borrowers must request rehabilitation from their lender in writing. Additional information and/or rehabilitation agreements can be obtained from the Loan Office.