Financial aid has its own vocabulary, and a lot of it changed in the last few years. This glossary explains the terms you’ll run into when you apply for aid for a trade, technical or vocational program, in plain English. Terms are listed A to Z. Where an old term still shows up on forms or websites, we say what replaced it.
Recent changes (as of October 2026)
- New FAFSA vocabulary. The Student Aid Index (SAI) replaced the Expected Family Contribution (EFC), and the FAFSA Submission Summary replaced the Student Aid Report (SAR). Anyone who has to provide information on your FAFSA is now called a contributor, and each one must give consent for direct IRS data sharing. The 2027-28 FAFSA opened October 1, 2026.
- Workforce Pell started July 1, 2026. Pell Grants can now pay for state-approved short job-training programs of 150 to 599 clock hours (8 to 15 weeks).
- New loan repayment plans. The Repayment Assistance Plan (RAP) and the Tiered Standard plan launched July 1, 2026. The SAVE plan has ended, and PAYE and ICR close July 1, 2028.
- Loan limits changed. Grad PLUS loans ended for new borrowers on July 1, 2026, and Parent PLUS loans now have caps of $20,000 a year and $65,000 per student.
- Forgiveness taxes. Starting January 1, 2026, loan balances forgiven under income-driven repayment count as federal taxable income again. Public Service Loan Forgiveness (PSLF) stays tax-free.
A
Ability to benefit (ATB): A way for students without a high school diploma or GED to qualify for federal aid, usually by passing an approved test or finishing a set amount of college coursework while enrolled in an eligible career pathway program. Ask your school whether it offers an ATB option.
Academic year: The period your school uses to measure a year of study for financial aid. Many trade schools define it by clock hours and weeks of instruction, not by a fall-to-spring calendar, so your academic year may start in any month.
Accreditation: Approval from a recognized accrediting agency showing that a school meets quality standards. A school must be accredited (and approved by the Department of Education) before its students can get federal aid.
Aid offer: The notice from your school listing the grants, scholarships, work-study and loans you can get, and your estimated costs. Also called an award letter or financial aid package.
Annual percentage rate (APR): The yearly cost of a loan, including interest and certain fees, shown as a percentage. Private lenders must show it, and it’s the best way to compare private loans side by side.
B
Borrower defense to repayment: A federal process that can cancel your federal student loans if your school misled you or broke certain laws, for example by lying about job placement rates. You apply through StudentAid.gov.
C
Capitalization: When unpaid interest is added to your loan’s principal balance. After that, you’re charged interest on the bigger balance, so your loan costs more.
Clock hour: A unit that measures time spent in class, lab or shop instruction. Many trade programs are measured in clock hours instead of credit hours, which affects how and when your aid is paid.
Closed school discharge: Cancellation of your federal student loans if your school closes while you’re enrolled, or shortly after you withdraw, and you can’t finish your program.
Consent (FA-DDX): Permission that every FAFSA contributor must give so the Department of Education can get federal tax information directly from the IRS through the FUTURE Act Direct Data Exchange (FA-DDX). Without everyone’s consent, the FAFSA can’t calculate your eligibility. This replaced the old IRS Data Retrieval Tool (DRT).
Consolidation: Combining several federal student loans into one new Direct Consolidation Loan with one monthly payment. It can make repayment simpler, but it can also change your interest rate and reset progress toward forgiveness, so check first.
Contributor: Anyone who must provide information on your FAFSA, such as you, your spouse, or one or more parents. Each contributor needs a StudentAid.gov account and must give consent for IRS data sharing. Being a contributor doesn’t mean you have to pay for the student’s school.
Cosigner: A person, usually a parent or relative, who signs a private loan with you and is equally responsible for repaying it. Federal student loans for students don’t need a cosigner.
Cost of attendance (COA): Your school’s estimate of the total cost of one year in your program: tuition and fees, tools and supplies, books, housing, food, transportation and personal costs. Your aid can’t be more than your COA.
Credit hour: A unit that measures coursework in credit-based programs, usually based on time in class each week over a term. Compare with clock hour.
D
Default: Failing to repay a loan as agreed. For most federal student loans, default happens after a long stretch of missed payments. It can damage your credit, and the government can take your tax refund or part of your wages.
Deferment: A break from making federal loan payments, for reasons such as going back to school at least half time, unemployment or military service. Interest may not build up on subsidized loans during deferment, but it does on unsubsidized loans.
Delinquent: Behind on loan payments. A loan is delinquent the day after a missed payment and stays that way until you catch up. Long delinquency leads to default.
Dependency status: Whether you file the FAFSA as a dependent or independent student. It decides whether your parents have to be contributors. Dependency is based on questions about things like your age, marriage, children and military service, not on whether you live with your parents.
Direct Loans: Federal student loans made by the U.S. Department of Education, including Direct Subsidized, Direct Unsubsidized, Direct PLUS and Direct Consolidation Loans. For 2026-27, undergraduate Direct Loans have a fixed 6.52% interest rate. See our student loans guide.
Disbursement: When your school pays out your aid. Schools usually apply it to your tuition and fees first and send you any money left over.
E
Eligible program: A program of study that meets federal rules for minimum length and quality, so students in it can get federal aid. Not every program at a school is automatically eligible.
Enrollment status: Whether you’re enrolled full time, three-quarter time, half time or less than half time. It affects how much aid you get, and you usually must be at least half time for federal loans.
Entrance counseling: A required online session you complete before you get your first federal student loan. It explains how your loan works and what you’ll owe.
Exit counseling: A required session when you graduate, leave school or drop below half time. It covers your repayment options, your loan servicer and how to avoid default.
Expected Family Contribution (EFC) (former term): The old FAFSA measure of what a family could pay. It was replaced by the Student Aid Index (SAI).
F
FAFSA (Free Application for Federal Student Aid): The free form you file to apply for federal grants, work-study and loans, and much state and school aid. You file it at StudentAid.gov, and you need to refile each year. The 2027-28 FAFSA opened October 1, 2026 and uses 2025 tax information. See our FAFSA guide.
FAFSA Submission Summary: The summary you get after your FAFSA is processed. It shows your Student Aid Index and estimated Pell Grant eligibility. Review it for mistakes. It replaced the Student Aid Report (SAR).
Federal Family Education Loan (FFEL) Program (no longer offered): An older federal loan program run through banks and other private lenders. No new FFEL loans are made, but some people are still repaying them. New federal loans are Direct Loans.
Federal school code: A six-character code that identifies your school on the FAFSA. You can find it using the Federal School Code Search. If a school isn’t listed, it doesn’t take federal aid.
Federal Supplemental Educational Opportunity Grant (FSEOG): A federal grant for undergraduates with exceptional financial need, given first to Pell Grant recipients. Funding is limited and each school decides who gets it, so file the FAFSA early.
Federal Work-Study: A program that pays students with financial need for part-time jobs, on or off campus, while they’re in school. Not every school takes part, and funds are limited.
Financial aid administrator: A staff member in your school’s financial aid office who reviews your FAFSA, builds your aid offer and can answer questions about your aid.
Financial need: The difference between your cost of attendance and your Student Aid Index, minus certain other aid. Your need sets how much need-based aid you can get.
Fixed interest rate: An interest rate that stays the same for the life of the loan. All new federal student loans have fixed rates.
Forbearance: A temporary pause or reduction in loan payments if you’re having money problems or other hardships. Interest keeps building up on all loan types during forbearance, which makes the loan cost more.
G
Grace period: A set time after you graduate, leave school or drop below half time before you have to start repaying certain federal loans.
Grad PLUS Loan (no longer offered to new borrowers): A federal loan for graduate and professional students. It ended for new borrowers on July 1, 2026.
Grant: Financial aid you usually don’t have to pay back, often based on need. Grants come from the federal government, states, schools and private groups. See our grants guide.
I
Income-Based Repayment (IBR): An income-driven repayment plan that bases your federal loan payment on your income and family size. It stays open for loans made before July 1, 2026.
Income-driven repayment (IDR): A group of federal loan plans that set your monthly payment based on your income and family size, and forgive any balance left after a set number of years. Plans include RAP and IBR. Starting January 1, 2026, the forgiven balance is federal taxable income again.
Independent student: A student who doesn’t have to include parent information on the FAFSA, based on the FAFSA dependency questions.
Interest: The cost of borrowing money, charged as a percentage of your loan balance.
ISIR (Institutional Student Information Record): The electronic record of your processed FAFSA that your school receives. It’s the school’s version of your FAFSA Submission Summary, and the financial aid office uses it to build your aid offer.
L
Lifetime Eligibility Used (LEU): How much of your lifetime Pell Grant limit you’ve used, shown as a percentage. The limit is 600%, about six years of full-time Pell. You can see your LEU in your StudentAid.gov account.
Loan forgiveness: Cancellation of some or all of your remaining federal loan balance after you meet certain conditions, such as years of qualifying payments or public service work. See our loan forgiveness guide.
M
Master promissory note (MPN): The legal document you sign promising to repay your federal student loans and their interest and fees. One MPN can cover loans for several years.
Merit-based aid: Aid awarded for skills, grades, talent or other achievements instead of financial need. Most scholarships are merit-based.
N
Need-based aid: Aid awarded based on financial need, such as Pell Grants, FSEOG, Federal Work-Study and subsidized loans.
O
Origination fee: A fee taken out of each federal loan disbursement, so you get slightly less than you borrow. For 2026-27, it’s 1.057% for Direct Subsidized and Unsubsidized Loans and 4.228% for PLUS loans.
P
Parent PLUS Loan: A federal loan parents can take out to help pay for a dependent undergraduate’s education. It requires a credit check. For 2026-27 it has a fixed 9.07% interest rate, and new borrowing is capped at $20,000 a year and $65,000 per student.
Payment period: The chunk of your program your school uses to pay out aid. In clock-hour programs, a payment period is based on hours and weeks you complete, so you may get your next payment only after finishing a set number of hours.
Pell Grant: A federal grant for undergraduates with financial need that you usually don’t repay. It can be used at accredited trade schools for certificate, diploma and associate degree programs. For 2026-27 the maximum is $7,395 and the minimum is $740. You can’t get Pell if your SAI is $14,790 or more, or if other grants and scholarships already cover your full cost of attendance. See our Pell Grants guide.
Perkins Loan (no longer offered): An older low-interest federal loan made through schools. The program has ended, and no new Perkins Loans are made, though some borrowers are still repaying them.
Principal: The amount you borrowed, not counting interest. Unpaid interest that’s capitalized becomes part of the principal.
Private student loan: A loan from a bank, credit union or online lender rather than the government. Private loans usually need a credit check or cosigner and don’t offer federal benefits like income-driven repayment or forgiveness. Use federal aid first.
Professional judgment: A financial aid administrator’s ability to adjust your FAFSA information or cost of attendance when you have unusual circumstances, such as a job loss or high medical bills. Ask the aid office and bring documents.
Public Service Loan Forgiveness (PSLF): A program that forgives the rest of your Direct Loan balance after you make the required number of qualifying payments while working full time for a government or qualifying nonprofit employer. PSLF forgiveness is tax-free.
R
Repayment Assistance Plan (RAP): The new income-based federal repayment plan launched July 1, 2026. Payments are 1% to 10% of your adjusted gross income, with a $10 monthly minimum and $50 less per month for each dependent. Any remaining balance is forgiven after 30 years.
Return of Title IV funds (R2T4): The federal rule for what happens to your aid if you withdraw before finishing a payment period. If you leave before completing about 60% of it, you or your school may have to return part of your federal aid.
S
Satisfactory academic progress (SAP): Your school’s standards for grades and pace (how much of your program you complete on time). If you don’t meet them, you can lose federal aid until you get back on track or win an appeal.
Scholarship: Money for school that you don’t repay, often awarded for merit, a career interest, community or background. See our scholarships guide.
Selective Service (no longer required): Registering with Selective Service used to be required for federal student aid. It no longer affects your eligibility.
Servicer: The company that handles billing and customer service for your federal student loans. Your servicer is who you contact about payments, repayment plans, deferment and forbearance.
Stafford Loan (former term): The old name for federal student loans for undergraduates. Today’s equivalent is the Direct Subsidized or Direct Unsubsidized Loan.
Student Aid Index (SAI): The number the FAFSA calculates from your and your contributors’ information to measure eligibility for aid. A lower SAI means more need-based aid. It can be a negative number. The SAI replaced the Expected Family Contribution (EFC).
Student Aid Report (SAR) (former term): The old FAFSA results summary. It was replaced by the FAFSA Submission Summary.
StudentAid.gov account (FSA ID): Your username and password for StudentAid.gov. You and each FAFSA contributor need one to sign the FAFSA, and you’ll use it to sign loan documents and track your aid. It used to be called the FSA ID.
Subsidized loan: A federal Direct Loan for undergraduates with financial need. The government pays the interest while you’re in school at least half time, during the grace period and during deferment.
T
Tiered Standard Repayment Plan: A fixed-payment federal plan launched July 1, 2026. Your repayment period depends on how much you owe: 10 years for under $25,000, 15 years for $25,000 to $49,999, 20 years for $50,000 to $99,999, and 25 years for $100,000 or more.
Title IV aid: Federal student aid programs authorized under Title IV of the Higher Education Act, including Pell Grants, FSEOG, Federal Work-Study and Direct Loans. Schools must be approved to offer them.
Tuition: The price a school charges for instruction. Your total cost of attendance also includes fees, tools, books and living costs.
U
Unmet need: The part of your financial need your aid offer doesn’t cover. You might cover it with savings, a payment plan, scholarships or loans.
Unsubsidized loan: A federal Direct Loan that doesn’t require financial need. Interest builds up from the day it’s paid out, including while you’re in school. You can pay the interest early to avoid capitalization.
V
Variable interest rate: An interest rate that can rise or fall over the life of a loan based on a market index. Some private loans have variable rates; federal student loans don’t.
Verification: A process where your school checks that your FAFSA information is accurate. If you’re selected, you’ll be asked for documents. Answer quickly, because your aid can’t be paid until verification is done.
W
WIOA (Workforce Innovation and Opportunity Act): A federal law that funds job training through local American Job Centers. If you qualify, WIOA can pay for approved training programs, including many trade programs, and doesn’t have to be repaid. It’s separate from the FAFSA.
Workforce Pell Grant: A Pell Grant for short job-training programs of 150 to 599 clock hours (8 to 15 weeks), starting July 1, 2026. Programs must be approved by the state and meet completion and job placement rates of at least 70%. You apply through the FAFSA. See our Pell Grants guide.
Work-study: See Federal Work-Study.
Last reviewed: October 2026