Paying for college can seem overwhelming – and trying to decipher the jargon that goes along with paying for college can be even more confusing. The Federal Student Aid Information Center is a good source of information for all things financial aid and the many terms you may encounter, but we’ve outlined a few of the most common terms below.

Accrue – To accumulate interest on a loan.

Annual Percentage Rate (APR) – The actual yearly cost of borrowing money reflected as a percentage rate.

Award Letter – A document issued by a school’s financial aid office that explains the total amount of financial aid a student is eligible to receive.

Cost of Attendance (COA) – The total amount it will cost a student to go to school, usually expressed as a yearly figure. It includes tuition and fees, room and board, allowances for books and supplies, transportation, and personal and incidental expenses.

Credit Score – A number reported by credit bureaus and used by lenders to determine whether to lend you money, and what interest rate to charge you.

Deferment – A benefit of certain student loans that allows you to temporarily stop making payments. Interest may still accumulate during this time.

Financial Need – The gap between what it costs to attend a school and what your family is expected to pay.

Grace Period – A period of time that generally begins on the day after a borrower graduates, leaves school, or drops below half-time enrollment and usually ends six to nine months later.

Interest – The cost to borrow money. Interest is calculated as a percentage of the outstanding (unpaid) principal balance.

Interest Rate – The percentage charged when you borrow money. See also Annual Percentage Rate (APR).

Loan Servicer – An entity that collects payments on a student loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a student loan on behalf of a loan holder.

Principal – The initial amount of money borrowed in a loan or put into an investment, not including interest or fees.

Repayment – To pay back money you borrowed by making scheduled payments to a loan holder or servicer.

Student Aid Index (SAI) previously called Expected Family Contribution (EFC) – Your SAI is the number that’s used to determine your eligibility for federal student aid – it is not the amount of money you are expected to pay. This number results from the financial information you provided in your FAFSA.

Student Loan – A type of loan designed to help students pay for post-secondary education and associated fees, such as tuition, books, supplies, and living expenses.

Need more help? Connect with our College Counselor to get all of your financial aid and student loan questions answered!

This article was updated June 5, 2026.