Glossary of Personal Finance and Student Loan Terminology

Financial Education


Retirement account plan where employees make contributions with pre-tax dollars. Within the 401(k), employees can typically select from a range of mutual funds chosen by the employer or plan provider. Many employers will match a percentage of contributions. 



Comparable to a 401(k) but for employees at tax exempt organizations, certain employees of public schools, and certain ministers.


Account Issuer

Government, corporation, trust, or other legal entity that offers or distributes accounts, funds, credit cards or other financial products to consumers.


Accrued Interest

Interest that accrues on the loan and is payable by you during in-school, grace and deferment periods.


After-Tax Yield

See tax equivalent yield calculation.


Amount Owed

Debt that still needs to be repaid to lenders.


Annual Income

Total amount of money received via work and investments per year.


Annual Premium

Fee paid to insurance company each year for an insurance policy; can be paid monthly, quarterly, semi-annually or annually.



A fixed income to be paid to a recipient in the future, or a form of insurance or investment with a future periodic payment.



Annual Percentage Rate; amount charged for borrowing or earning on an investment shown as a yearly percentage.



Funds awarded to a graduate student for part-time teaching or research to assist with expenses related to the degree.


Balance Calculation

Credit card accounting method that determines how interest is calculated. Possibilities include balance at the end of the month or on a particular date each month, an average of the daily balance, or the balance at the end of the previous billing period.


Balance Transfer

Moving a debt owed from one borrowing vehicle (like a credit card or loan) to another.



Investment where you lend money to an organization at a specified interest rate for a specific period of time.  



The process by which accrued interest (and potentially fees) on a loan is added to the principal balance. Both then become part of the principal balance and begin to accrue interest.


Car Loan

Money lent by a lender to a borrower to buy a car, often for 2-5 years, at an agreed-upon interest rate and with additional fees and taxes. 


Cash Advance

Using your credit card to withdraw cash, up to a certain limit. Typically incurs fees and a different interest rate than normal use of the card.


Certificate(s) of Deposit

A savings vehicle with a fixed maturity date and interest rate. Often referred to as a CD. Until the maturity date, the funds in a CD usually cannot be accessed, or cannot be accessed without penalty.


Certified Public Accountant

A CPA is an accountant who has passed a test and other requirements administered by the American Institute of Certified Public Accountants. They can be very useful in navigating taxes and estate planning.


Checking Account

Type of bank account where the depositor can withdraw funds using checks, debit cards and teller visits. Typically non-interest bearing.


Compound Interest

Earning interest on interest. Adding interest to the principal such that future interest accrual is on the increased balance. In the case of investments, this will increase your overall returns, and when borrowing will increase your overall costs. 


Consumer Reporting

An agency that compiles, maintains and distributes credit and personal information to creditors. This information may include your payment habits, number of credit accounts, the balance of those accounts, place of employment, length of employment and records of credit transactions. Lenders check with consumer reporting agencies to learn whether a potential customer seeking a loan is likely to repay based on the way other obligations have been handled in the past.


Cost of Attendance

The amount of money a school estimates it will cost to attend their school for a specified academic year (often 9 months). It covers expenses you are likely to incur for your education, including tuition, fees, room, board, transportation and more. It will not include outside costs, such as credit card debt or other personal expenses unrelated to school.


Coverage Limits

Maximum amount an insurance company will pay. Often broken down into categories such as liability, medical, personal property and more. 


Credit Card

Issued by a financial company, this payment card allows consumers to borrow from a revolving line of credit.


Credit Card Perks

Rewards, cash back, discounts and other benefits provided to a credit card holder by the issuer based on the credit card agreement and terms.


Credit Issuer

Legal entity that offers or distributes accounts, funds, credit cards or other financial products to consumers.


Credit Limit

Maximum amount a borrower can use on a specific account such as a credit card.


Credit Mix

Variety of types of credit accounts on a credit report, including revolving credit (such as credit cards) and installment loans (such as mortgages, student loans or car loans).


Credit Report

A summary of your credit history. It is maintained by an authorized consumer reporting agency and sent to potential creditors when requested. Credit reports include information such as current and recent addresses, employer information, payment performance, type of debt you have and the lending institution for each account, available credit and current balances.


Credit Score

A number between 300-850, based on your credit report, that represents your creditworthiness.


Credit Utilization Ratio

Percentage of available credit used by a borrower. If you have a $1000 limit and you've used $300, then your credit utilization ratio is 30%. Strongly affects credit score. To maximize your credit score, keep this ratio below 35%.


Current Balance

Amount you owe on an account such as a credit card, line of credit or student loan.


Daily Expenses

Costs you incur routinely, such as food, rent, dining out and more.


Debit Card

Used to withdraw funds from a bank account like a checking account. Can be used at cash registers and ATM machines.


Debt-to-Income (DTI) Ratio

Measures your ability to repay the money you have borrowed. It is calculated by the percentage of your gross pay that goes to repay your debts each month. 



Amount you will pay out of pocket before your insurance will begin to pay.



The failure of a borrower either to make installment payments for a specified period of time, when due or to comply with other terms of the promissory note. If a borrower is 270 days late on a federal education loan, the loan is considered to be in default. This causes the loan to become due in full immediately and the school, lender, state and federal government may take legal action against the borrower to recover defaulted loan funds. This may involve garnishing wages or withholding income tax refunds. Defaulting on a federal loan makes the borrower ineligible for future federal financial aid unless an acceptable repayment schedule is arranged. Defaulted loans may adversely affect a person's credit rating.



A period during which the repayment of the principal amount of the loan is suspended as a result of the borrower’s meeting one of the requirements established by law and/or contained in the promissory note. During this period, the borrower may or may not have to pay interest on the loan.


Deferred Interest

Interest that accrues, but on which payment is delayed until a later date. Such deferred (accrued) interest may be capitalized.



Sustained decrease in price levels across the economy.


Disclosure Statement

A statement of the actual loan costs, including the interest rate and any additional fees, which is presented to the borrower at the time the loan is made. Your disclosure statement should list your lender and servicer for the purposes of a federally guaranteed student loan.


Education Loan

Funds borrowed from a lender to pay for school tuition and related expenses.


Effective Tax Rate

Tax rate that reflects what you actually paid.


Emergency Fund

Money set aside for unexpected expenses, or as a cushion in case an unexpected financial problem occurs, such as the delay or loss of expected income.


Employee Benefit

Employment compensation other than salary. Often includes medical insurance, retirement assistance and more. 



A signer in addition to the principal signer for Federal PLUS Loans for those borrowers who do not meet the minimum credit requirements. The endorser signs a promissory note and agrees to repay the loan in the event the borrower does not.


Estate Plan

Arrangements for your finances and property after your death. These documents can include wills, trusts, power of attorney documents and medical directives such as living wills.


Estimated Taxes

Taxes filed throughout the year (often quarterly) to ensure that you are paying taxes as you earn money. Often paid by self-employed individuals and on income from investments including dividends, capital gains and interest.



The Free Application for Federal Student Aid (FAFSA) is a form that all students must complete to apply for federal financial aid. This free application is produced, distributed and processed by the U.S. Department of Education and is the only device used to determine your eligibility for federal funds.


Federal Consolidation

A program that allows many federal education loans to be combined into a single new loan, often with an extended repayment term.


Federal Direct Loan

There are two types, subsidized and unsubsidized. Graduate and professional students are eligible for unsubsidized loans, which are not based on need and begin accruing interest at disbursement.


Federal Direct PLUS

It is an unsubsidized federal education loan. Parents of undergraduate students can borrow the PLUS loan on behalf of their undergraduate child, while graduate and professional students can borrow it themselves. An amount up to the cost of attendance less any other financial aid can be borrowed in a given academic year. There are currently no aggregate borrowing limits in this program.


Federal Perkins Loan

A need-based federal loan for students, which is issued by a participating school.


Federal Work-Study 

Part-time job offered as part of a financial aid package, where students can work for the university to earn money toward expenses.


Fees (credit card)

Charges assessed on a credit card account by the issuer, including fees for purchases, foreign transactions, cash advance, balance transfer, late payment, returned payment, annual fees and more.



Funds paid to a graduate student, or post-graduate student, for study or research. 


FFEL (Federal Family Education Loan Program)

A loan program offering Stafford and PLUS loans financed by private lenders and guaranteed by the federal government. (please note: loans are no longer being made under this program)


FICO score

A brand of credit score, the Fair Isaac Corporation, that is used heavily by lenders.


Filing Status

Your tax status, based on your family situation and marital status. Includes single, married filing jointly, married filing separately, head of household and qualifying widow(er).


Financial Goals

Short, medium and long-term planning on milestones you and your family want to achieve with your money.  


Financial Personality

How your experiences and disposition shape your approach to handling money.


Financial Planner

A professional who helps individuals with their finances. When selecting a financial planner, be sure to understand how their compensation is structured to best understand the advice they will be giving you.



An agreement to accept a temporary cessation of loan payments, smaller payments than were previously scheduled, or an extension of time for making payments. Forbearance may be given for circumstances not covered by deferment that adversely affect a borrower's ability to meet loan payment obligations, such as economic hardship.


Foreign Transaction Fee

Additional charge that occurs when using a credit card in a foreign currency.


FSA – Federal Student Aid

Federal Student Aid, a part of the U.S. Department of Education, is the largest provider of student financial aid in the nation. The office of Federal Student Aid, with 1,200 employees, provides more than $150 billion in federal grants, loans and work-study funds each year to more than 15 million students paying for college or career school.


Grace Period (credit cards)

Window during which you can pay off new credit card purchases before interest is assessed.


Grace Period (student loans)

A period of time that begins when you graduate, leave school, or your enrollment status drops below half-time – whichever comes first – and ends when your first loan payment is due.


Graduated Repayment

Loan repayment that is lower at the beginning of repayment and increases incrementally during the repayment period.



Funds awarded to be used for education. These funds do not need to be repaid.


Guaranty Agency

A state agency or private, nonprofit institution or organization that insures lenders against losses due to a borrower’s default, death, disability or bankruptcy.


Head of Household

A US Tax filing status for single or unmarried taxpayers who paid more than half the cost of upkeeping a home for the year, and has a qualifying person living with them. Allows for a lower tax rate and higher deductions.



The lender, institution or agency that originated the loan and holds its legal title, or a lender or secondary market that purchased the loan from the original holder.


Home Equity Loan

A loan where a borrower uses the value in their home as collateral to withdraw funds for larger financial expenses.


IBR – Income Based Repayment

IBR is designed to reduce monthly student loan payments as a way to assist with making student loan debt manageable by basing the payment in part on the borrower’s annual income.


ICR – Income Contingent Repayment

For Direct Loans, ICR repayment amounts are based on the borrower’s adjusted gross income, family size and the total amount of outstanding student loan debt.


Identity Theft

Fraudulent use of someone's personal information or account numbers, typically for financial gain. Examples include credit card charges that you don’t recognize, calls or letters about things you didn’t buy, new credit cards or statements for accounts that you didn’t open, denials of credit for no apparent reason, and information on your credit reports you don’t recognize.



Money earned, usually periodically, from work, investments, business, etc.



Sustained increase in price levels across the economy.


Installment Account

Type of credit account with fixed payments for a fixed period of time, such as car loans or mortgages.


Institutional Grant

Funds awarded by a college or university to be used for education, and which do not need to be repaid.


Institutional Loan

Some schools may offer student loans to certain borrowers.



A charge for the use of borrowed 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 variable rate may be tied to one of several indexes such as the Prime Rate, LIBOR or U.S. Treasury Bills.


Interest Rate

Percentage of the amount borrowed, charged to the borrower as the cost to borrow. Typically expressed annually.



Assets acquired for the purpose of increasing their value or gaining income in the future.


Irregular Expenses

Periodic expenses which occur at different times throughout the year, such as taxes, car repairs, gifts, shopping, medical bills and any other expenses that don’t repeat every month.


ISR – Income Sensitive Repayment

Available to low-income borrowers who have Federal Family Education Loan (FFEL) Program loans, ISR repayment amounts increase or decrease based on the borrower’s annual income.



Legal entity that offers or distributes accounts, funds, credit cards or other financial products to consumers.



Contract between a lessor and the lessee that details the agreement for a lessee to use something belonging to the lessor for a specified cost and duration, often a car or property.



The bank, savings and loan, credit union or other approved entity from which you can borrow a loan.


Length of Credit History

Age of the oldest credit record on your credit report.


Liquid Assets

Assets which are held in cash or cash-equivalents (assets that can be converted into cash quickly and with minimal impact to their value). Examples: Cash on hand, Checking or Savings account funds, Money market account funds.


Liquidity Ratio 

Measures the time in months for which you can meet your expenses with liquid assets. Liquidity Ratio = Liquid Assets ÷ Monthly Expenses


Living Will

Also known as a medical advance directive, this legal document dictates your preferences for medical treatment if you become incapacitated.


Loan Fee

A fee calculated as a percentage of the principal amount borrowed; it is deducted from each disbursement of the loan and remitted to the federal government to offset the costs of administering the federal student loan program.


Marginal Cost

The increase in expense to acquire more of a product or service.  


Marginal Tax Rate

Tax rate paid on the last dollar of earned income.


Marginal Utility

Additional satisfaction gained from consuming additional product(s) or service(s).


Minimum Finance Charge

Minimum monthly interest charge on a credit card, often $1 or $1.50. If you have a low balance in a month that is assessed interest, and that interest would be less than the minimum, the charge is increased to the minimum.


Minimum Monthly Payment

Smallest amount that an account holder must pay to the lender each month to keep the account in good standing, often a percentage of the balance.


Money Market Funds

Investment in typically safe, short term, lower-return assets such as government or corporate borrowers. Some may be tax-exempt. Not the same as a money market mutual fund.



Loan from a creditor to finance a real estate purchase over a fixed period of time at a fixed rate, with the real estate as collateral.


Mutual Funds

An investment vehicle with groups of stocks, bonds, and other assets, purchased with funds from investors.



A thing that is essential or required; not having the item would cause problems or deficits.


Net Wages

Amount of money you receive after deductions and taxes are taken out of your gross pay (aka 'take home pay').


Net Worth, Personal

The difference between what you own (your assets) and what you owe (your liabilities)— is an indicator of your financial strength at a particular moment in time.


New Credit

Credit accounts that have been opened recently. Too many new accounts opened at once can negatively affect your credit score.


NSLDS – National Student Loan Data System

The U.S. Department of Education's central database for student aid. It receives data from schools, agencies that guaranty loans, the Direct Loan program, and other U.S. Department of Education programs.


Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen



Includes receiving a loan application, entering that record into a records database, processing the loan application and sending loan funds (money) to the borrower.


Origination Date

Day on which your loan is funded.


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.


PAYE – Pay as You Earn

For borrowers with partial financial hardship, high debt and low income, this is another income-based repayment plan.


Payment History

Your track record of making payments due on your accounts.


Penalty APR

Higher Annual Percentage Rates that credit cards can use to assess more interest when you miss a deadline.


Personal Net Worth Statement

A measurement of your financial assets less liabilities.


Personal Property

Assets that are not fixed permanently to one location (like a house or land). Includes things like cars, boats, furniture, jewelry, etc.).


Power of Attorney

Legal document that allows you to appoint someone to manage your finances if you are or become incapacitated.



Principal refers to the total amount borrowed (or invested) plus any capitalized fees and interest.


Private Loan

Loan issued from bank or third party lender, other than the government, for costs associated with education including tuition, room and board, transportation, etc. Compare private loans to federal loans carefully before choosing a private loan.


Promissory Note

A promissory note (or loan agreement) is a legal document signed by you when obtaining a loan. It lists the conditions under which the loan is made and the terms under which you agree to repay the loan. Borrowers should keep copies of their promissory notes so you know what you agreed to for each loan.


PSLF – Public Service Loan Forgiveness

The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.


Rate of Return 

Amount of money gained or lost on an investment over time, shown as a percentage.


Refinance Costs

Expenses incurred to refinance a loan, such as transaction fees or penalty fees.



Paying off your old loan(s) by opening a new loan (or loans) with different terms, such as interest rate, length of time to repay, and more.


Repayment Schedule (Amortization)

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.


Repayment Term

Length of time agreed upon by lender and borrower to repay a debt borrowed.


Retirement Account

Funds set aside in savings vehicles for the time when you'll stop working and earning income. Some common retirement account types include 401(k), 403(b), IRA and Roth IRA.


Revolving Account

Type of credit account with a variable monthly payment, calculated based on your balance.


Room & Board

A component of Cost of Attendance, Room & Board refers to rent and food bills.


Roth IRA

A type of Individual Retirement Account where contributions are not tax deductible. This allows you to invest money with post-tax dollars, and you won't be taxed when you withdraw funds.  



Money set aside for future financial goals and not spent.


Savings Account

Type of bank account where interest is paid on the funds the depositor has in the account. May have limits on the number of times funds can be withdrawn from the account.



Funds awarded to be used for education, typically based on achievement, academic or otherwise. These funds do not need to be repaid.



Companies that specialize in handling billing, collections, deferments, etc., for student loans.



A desired result which includes specific, measurable, achievable, realistic and timely elements.


Spending Plan

Strategy for determining your cash flow, broken out into income and expenses.


State Loan

Some states offer student loans to certain borrowers, sometimes with caveats such as requiring you to work in a certain field or stay in the state after graduation. They may have more appealing interest rates to entice certain behaviors. Read fine print carefully.



Owning a share in a company, which usually entitles you to a share of the earnings (dividends) and to vote on certain company decisions. 


Student Loan Fees

Percentage charged on each federal student loan you borrow. These fees typically occur up front (before you receive the funds) and differ from the interest that accrues.


Tax Credits

Reduce your tax liability directly (dollar for dollar) and are not based on tax rates.  So, a $1,000 tax credit would reduce your tax liability by $1,000.  And, tax credits can be either refundable or nonrefundable. If the tax credit is refundable, you can receive a tax refund if the tax credit exceeds your tax liability; if the tax credit is nonrefundable, you cannot reduce your tax liability below zero. 


Tax Deductions

Qualifying expenses which reduce your taxable income—and their value depends on the taxpayer’s marginal tax rate. So, if you were in the 25% marginal tax bracket, a $1,000 tax deduction would reduce your tax liability by $250. 


Tax Equivalent Yield Calculation

Calculates the rate of return that is required on a tax-deferred account to make it equal to the rate of return on a tax-exempt account. For example, if a tax-exempt account has a yield of 6% and your marginal tax rate is 28%, a tax-deferred account would need a pretax yield of 8.3% (6% / 72%) in order to be considered an equivalent investment.


Tax Withholding 

Money held back from income you may receive from an employer, or other sources such as gambling winnings, paid to the IRS in your name. If you do not have taxes withheld, you will have to pay estimated taxes throughout the year.


Tax-Deferred Account (TDA)

Contributions are made with pre-tax dollars so taxes are assessed upon withdrawal; generally preferred for retirement purposes. You can minimize your current tax burden by investing in these. Examples include retirement accounts (traditional IRAs and employee-sponsored retirement plans) and insurance products such as annuities.


Tax-Exempt Account (TEA)

Contributions are made with after-tax dollars so they are exempt from federal taxes upon withdrawal; generally preferred for investment purposes. You can access these funds and any capital growth at any time without being taxed on them; accessing them later in life will not affect your tax bracket. Examples include municipal bonds and certain money market funds.


Term life insurance 

Pays a benefit in the event of the death of the insured during a specified term; generally less costly. 


Traditional IRA

A type of Individual Retirement Account where contributions are tax deductible (up to a certain adjusted gross income). This allows you to invest money with pre-tax dollars, and you will be taxed when you withdraw funds.  


Universal life insurance

Provides the protection of term insurance and the cash-value buildup of whole life insurance.


Variable universal life insurance

Form of universal life insurance that gives the policyholder some choice in the investments made with the cash value.



A desire to own something or experience something; something you merely want, or would like to have as opposed to a need.


Whole life insurance

Life insurance that pays a benefit on the death of the insured and also accumulates a cash value.



Legal document that dictates preferences on distributing your personal possessions and money after your death.