Common student loan terms defined
Student loans can be confusing, especially if you don't know what the common student loan terms mean. Chase wants to make your life easier by briefly defining some of the most-used student loan terms:*
Capitalized:
This occurs when unpaid interest is added to the principal balance. When interest on a student loan is capitalized, it increases the principal amount due on the student loan. Then, your unpaid interest is earning interest, which increases the amount you need to pay back. If you're responsible for paying the interest on your student loan as it accumulates, make sure you do or you could end up paying more than you expected.
Default:
You are considered in default on a student loan when you fail to repay the loan according to the terms you agreed to when you signed the promissory note. Some student loan programs have more specific loan default regulations. If you default on a student loan, you could be reported to national credit bureaus, which means your credit report could be adversely affected for up to seven years.
Deferment:
Deferment is a set time period when no student loan payments are required. Interest on subsidized Stafford loans does not accumulate during this time. Certain eligibility requirements must be met to qualify for a federal student loan deferment.
Forbearance:
Forbearance is a reduction or postponement of your student loan payments for a set period of time agreed to by your lender or loan servicer. This is an option when you can't meet your student loan repayment schedule and are not eligible for deferment. Interest still accumulates during forbearance.
Grace period:
This is the period of time (usually six months) between your graduation or when you leave school or drop below half-time enrollment and when your student loan payments are due.
Interest:
Interest is the percentage charged to you by your lender for funding your student loan. It’s calculated based on your unpaid loan amount, which may include unpaid interest that has been capitalized.
Principal:
The total amount of money that makes up your student loan is known as the principal. Interest is charged on this amount.
Subsidized loan:
You are not responsible for paying the interest on a federally subsidized student loan while in school or during your grace or deferment periods. The government pays the interest on your student loan in those instances.
Unsubsidized:
You are responsible for paying all of the interest on an unsubsidized student loan regardless of the loan status. Interest accumulates on unsubsidized student loans from the date of disbursement until the loan is paid off.
To find a student loan that fits your needs, visit ChaseStudentLoans.com.
*Important Information: As you determine the best way to finance your education, you should consider the full range of student financial aid options available. Private loans, like the Chase SelectSM Private Student Loan, can be used when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of attendance.
This information was current as of 02/01/2010 and is subject to change. Contact Chase for the most up-to-date terms.
