Holder - The owner of a loan.

Income-Sensitive Repayment - Loan repayment that is based on the borrower’s income. Payments increase as income rises.

Interest - A charge for the use of money. Interest is calculated as a percentage rate of the loan principal. The interest rate charged can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case, it changes periodically. The percentage rate may be tied to one of several indexes such as the Prime Rate or the U.S. Treasury Bills.

Lender - The bank, savings and loan, credit union, or other approved entity from which the borrower obtains a loan.

Loan Period - The academic year or portion thereof for which the applicant is enrolled and is seeking one or more loans.

Origination Fee - A processing fee that is calculated on the principal amount borrowed and is charged to the student by the lender. This fee is normally deducted from the amount of the loan proceeds.

Principal - Principal refers to the total amount borrowed plus any capitalized fees and interest.

Promissory Note - A legal document signed by the borrower when obtaining a loan. It lists the conditions under which the loan is made and the terms under which the borrower agrees to repay the loan.

Repayment Disclosure Statement - A statement of repayment terms of the loan which is required to be sent to the borrower prior to the due date of the first payment of the loan.

Repayment Schedule - A plan which sets forth the principal and interest due in each installment, the number of payments required to pay the loan in full, the interest rate, and the due dates of the first and subsequent payments.

Secondary Market - A lender, agency, or institution that buys education loans from the originating lenders or other holder. Lenders sell education loans to secondary markets to replenish and generate capital for their continuing operations, including making additional loans.

Servicer - Many lenders and secondary markets hire companies that specialize in student loans to handle billing, collections, deferments, etc. Student loan accounts are often assigned to a servicer.

Terms - The specific conditions of a loan, including the requirements governing receipt and repayment of a loan. It is often used more specifically to refer to the charges for the loan, such as interest rate and fees.

The above terms have been generously provided by and are reprinted with permission from The Access Group. This topic is one of several in the Access Group’s Personal Finance and Debt Management Series. The Access Group is a nonprofit organization dedicated to providing access to education through affordable financing and related services.

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