Capitalization

Adds unpaid interest to the principal balance of a loan.

This can increase your monthly payment amount and the total you pay over the life of the loan.

Consolidation

Combines multiple loans into a single new loan.

Co-signer

A person who also agrees to repay a loan.

Co-signers are legally obligated to pay the loan if the original borrower falls behind on payments. Some loans allow the release of a co-signer after certain terms are met. A co-signer should carefully decide if they are willing to take on the potential financial risks if the student borrower does not repay the loan.

Default

When a borrower fails to pay their loans on time.

Most federal loans go into default after 270 days of nonpayment. Defaulting on a loan will affect your credit score and can have legal consequences. Contact your loan servicer immediately if you are unable to make payment to prevent default.

Deferment

Temporarily pauses payment on your student loans.

Federal student loans allow for deferment for a variety of circumstances. Interest will continue to accrue on federal direct unsubsidized loans during deferment. It will not accrue on federal direct subsidized loan. Private lenders are not required to offer deferment. Contact your private lender to see if they offer deferment.

Federal Direct Loan

A federal student loan made directly by the U.S. Department of Education.

You will be assigned to a loan servicer who will manage the loan.

Forbearance

A temporary pause on student loan payments, often due to economic hardship.

Interest will accrue on all federal loans during forbearance. Private lenders are not required to offer forbearance; contact your private lender to see if they offer it.

Income-Driven Repayment (IDR) Plans

Plans that cap your monthly payments at a certain percentage of your discretionary income.

You must recertify your income every year to stay enrolled in an IDR plan.

Loan Rehabilitation

A way to get out of federal student loan default.

Visit the Federal Student Aid's Getting out of Default page for more information.

Loan Servicer

A company that collects payment, provides customer service, and handles day-to-day management of a loan on behalf of the federal government.

Public Service Loan Forgiveness (PSLF)

A program that forgives any remaining balance on your federal loans after you work for a qualified public service employer for 10 years.