APR (Annual Percentage Rate). The effective interest rate when all finance charges and up-front fees are included. The APR on a loan can vary among lenders because of differences in up-front fees, deferment periods, capitalization of interest, loan terms, and repayment terms, even if the interest rates are the same.
Capitalization. A term used to describe a method of computing interest. To capitalize a loan means to add all interest that has accrued to the principal loan amount. Once a loan is capitalized, the new loan amount (both principal and interest) is the amount interest will accrue on.
Co-signer/Co-borrower. An additional applicant added to a loan to meet the creditworthiness guidelines, usually a parent but not always. A co-signer will have the same legal responsibility on the loan as the primary borrower.
Credit Agreement. The legal documentation of a loan, and the formal acceptance of the terms and conditions.
Credit-Based. Credit-based lending views past credit history and income to determine eligibility for a loan. Repayment history, delinquencies, and length of time accounts have been established are considerations in determining a borrower's ability to obtain a loan. The credit history of both the student (if he or she has a credit history) and the co-applicant will be reviewed.
Credit Score. Your credit score is a number based on the information in your credit file that shows how likely you are to pay a loan back on time — the higher your score, the less risk you represent.
Default. A serious matter. Loans are in default on the first day after a missed payment, and are usually reported to consumer reporting agencies as "late" after 30 days. And delinquency is a serious matter that can have a long-term, adverse effect on a student's credit score. If a student has defaulted on a student loan, he or she should contact the servicer of the loan to establish a satisfactory repayment arrangement.
Deferment. A time during which the borrower is not required to make payment. During deferment, interest will accrue on the loan, although the borrower is not obligated to make payment on the loan amount.
Disbursement. The physical act of sending funds to the borrower. In English, it's called "sending you the check."
Enrollment Status. Your educational institution's own classification of your attendance (as in "Bob's enrolled full-time" or "Mary's enrolled part-time"). Your enrollment status is important to your eligibility for a Monticello Student Loan. Students who do not know their enrollment status should contact their school's registrar's office.
Expected Family Contribution. A calculation representing the amount of money that a student and his or her parents will be expected to contribute to education costs in a given year. The expected family contribution is determined from information provided in the Free Application for Federal Student Aid.
Federal Loan. A federal loan is any educational loan guaranteed by the federal government. Federal loans are processed in accordance with the United States Department of Education regulations and often have different lending criteria compared to credit-based loans.
Forbearance. Creditors may grant forbearance of loan payment obligations in the event of certain hardships (such as severe medical problems). During any forbearance period granted by the creditor, the borrower is excused from making payments on the loan.
Grace Period. The length of time a borrower is granted before the first payment is due. Grace period may refer to the time between check disbursement and the first payment if immediate repayment is required, or the length of time from the end of a deferment period to the first payment.
Interest. Money paid for money borrowed. Most interest is computed using a percentage of the outstanding balance of the loan.
LIBOR. LIBOR means the London Interbank Offered Rate. LIBOR represents an average of the interest rates on dollar-denominated deposits, also known as Eurodollars, traded between banks in London. LIBOR is among the most common of benchmark interest rates indexes used to make adjustments to variable rate loans.
LIBOR Index. The LIBOR Index is a variable rate index used to calculate the interest rate on Monticello Student Loans. For each calendar month, the LIBOR Index equals the one-month LIBOR published in the “Money Rates” section of The Wall Street Journal (Eastern Edition) on the first business day of the preceding calendar month.
Loan. act of extending money to a borrower under predetermined conditions of repayment.
Need. A student's unmet financial requirements to attend an educational institution. Federal loans may limit the classification of need to the unmet cost of tuition only. The Monticello Student Loan Program classifies need more broadly: any unmet educational expense.
Origination Fee. The fee, charged by the lender, for services provided in connection with the origination and funding of the loan.
PLUS loans. Federal loans guaranteed by the federal government and processed according to DOE regulations. The Federal PLUS loan requires that the student be a dependent of the person filing for the loan.
Prepayment. The repayment of a loan before the full term of the loan. Many loans set a repayment term (length of time to repay the loan). Some types of loans may have a penalty for prepayment of the full amount before the repayment term has ended. Monticello Student Loans do not charge any penalty for early repayment; the borrower will only be charged the amount of interest that has accrued on the loan until the day the loan is paid off.
Principal. The full amount of the loan borrowed including any fees before interest is charged.
Private Loans. Loans that are not sponsored by the federal government. Private loans, funded by private companies, are not subject to the same restrictions as federal loans. Monticello Student Loans are private loans.
Repayment Terms. The length of deferment, grace period and length of time to repay the loan, and the specific requirements concerning the calculation of payment.
Simple Interest. A method of determining interest in which interest is computed by multiplying the outstanding principal amount by the interest rate. Simple interest does not include previous interest that has accrued on the loan.
Unsecured loan. Monticello Student Loans are unsecured. With an unsecured loan, nothing is held as collateral against the loan amount borrowed.
Variable Interest. An interest rate that has the ability to change depending on the terms of the loan. With Monticello Student Loans, the interest rate will vary each month: It will change each month to equal the LIBOR Index plus a margin.