What's Next?

Listed below are the definitions of some basic loan terms that will help you to understand the loan summaries that are provided in this section.

  • Capitalization - The practice by lenders of adding any accrued (accumulated) and unpaid interest to the principal of a borrower's loan, which increases the loan balance and causes the principal to grow significantly.
  • Default - Usually occurs when a borrower is 180-270 days late in making a payment and is also reported to all credit bureaus (such a report remains on the borrower's credit report for up to seven years).
  • Deferment - A period of time when the borrower is not required to make any payment on the loan (similar to a grace period); however, the borrower must apply annually for a deferment which can be loan specific (tied to the terms of the promissory note) or borrower specific (tied to the date that the borrower received the first disbursement of a Federal Stafford/Direct loan).
  • Delinquency - Occurs when a borrower is late in making payments on a loan obligation and is reported to credit bureaus (such a report remains on the borrower's credit report for up to seven years).
  • Fixed interest rate - An interest rate that remains the same throughout the life of the loan.
  • Forbearance - A period of time (six months to no more than one year at a time) when 1) a borrower is not required to make payment on the loan, or 2) the scheduled payment will be reduced. Interest accrues on all loans during forbearance.
  • Grace period - A period of time when the borrower is not required to make payment on the loan (length of time is tied to the terms of the promissory note).
  • Institutional loan - The Emergency Loan Program (ELP) loans offered to students at Southern College of Optometry based on a variety of criteria that may or may not include financial need.
  • Interest cap - A set limit on the interest rate (e.g. the interest rate cannot exceed 8.25% for the Federal Stafford/Direct loan).
  • Loan fees - Costs associated with the processing and collection of the loan that are usually deducted from the loan prior to disbursement and vary according to the type of loan.
  • Private loan - Usually an unsubsidized loan that is not insured and is used to supplement other less expensive loan programs (also referred to as an alternative loan).
  • Subsidized loan - Loans that have no interest cost to the borrower during school, the grace period, and any deferment periods for which the borrower might qualify.
  • Unsubsidized loan - Loans that begin to accrue interest immediately upon disbursement. The interest that has accrued and is unpaid is eventually capitalized.
  • Variable interest rate - An interest rate that changes periodically (i.e. annually, semi-annually) throughout the life of the loan.