Dictionary page on word Income getting highlighted with green highlighter

Financial Aid Terms You Need to Know After Graduation

Financial aid can feel like another language. Use this guide to learn all the key financial aid terms you need to know when you're ready to pay back your loans.

When you first apply to college, you also go through the process of filing the FAFSA and applying for financial aid. You have to fill out the FAFSA each year you attend college—and if you take out student loans, they might be at the back of your mind the whole time. But after you graduate, you need to stay on top of your loans. (And it doesn’t hurt to know what you’re getting into and what repayment options you have before you sign on, either!) So here are all the financial aid terms you should know before you have to start paying your loans back, including a recap of the important terms you should know when you first apply for aid. It may not be the most fun topic, but it’s important nonetheless!

A recap of financial aid terms you should know

If you’re a FAFSA veteran, these are the key financial aid terms you likely already know. But in case you forgot or are new to the process, here are the terms you need to remember most after you graduate.

Free Application for Federal Student Aid (FAFSA)

The FAFSA is the basic form you fill out for federal and state financial aid. You should file the FAFSA the year before you first enroll in college and each year you attend thereafter (as close to October 1 as possible). You’ll still need your last one or two filled-out FAFSA forms for tax purposes after you’ve graduated.

Master Promissory Note (MPN)

This is a legal document you sign upon completing your FAFSA if you borrow student loans. The MPN lays out the rights, responsibilities, terms, and conditions for loan repayment and can be referred back to for any questions or concerns about your upcoming loan repayments.

Loan

Your loans are the money you receive from a state or federal government or a private lender that must be repaid, typically starting six months after you graduate from college. Loans collect interest the longer they need to be paid back and are most often paid back on a monthly schedule.

Direct subsidized loan

This type of loan typically does not require a borrower (you, the student) to pay interest on the loan while they’re still in school or in a grace or deferment period.

Direct unsubsidized loan

This type of loan typically offers students a low fixed rate of interest and often come with more flexible repayment plans. Borrowers do not need to demonstrate financial need to receive this loan.

Direct PLUS loan

If the usual direct loans still don’t cover the cost of your education, a parent is legally allowed to take out this type of loan in their name to help their student pay for school.

Related: Parent PLUS Loans and Covering College Costs

Financial aid terms you need to know after graduation

You may not hear much about these terms when you first apply for financial aid, but it’s helpful to know what they mean before you need to start paying back any student loans.  

Debt collection

You’ll only have to worry about debt collectors if you’re not consistent in making your loan payments. Collectors will pursue the required payments from you, the borrower, often after a few missed payments.

Debt consolidation

It’s usually easier to make one loan payment a month rather than multiple, so you may consider consolidating your loans. This requires taking out one additional loan to pay off all the others, then making payments on the one new loan.

Related: Don't Fret the Debt: 5 Ways to Conquer Student Loans

Default

Defaulting is the official term used for failing to repay your loan as outlined in your MPN. Typically, defaulting will occur if a payment hasn’t been paid in more than 270 days.

Exit counseling

Much like entrance counseling that’s required before you take out a loan, exit counseling will prepare you with all the relevant information you need to be prepared to repay your loans. If financial exit counseling doesn’t give you all the information you need, taking additional financial awareness counseling can fill in the blanks.

Extended Repayment Plan

If you meet the eligibility requirements, this payment plan will allow you to repay your loans over an extended period of 25 years.

Forbearance

After graduation, your loans will fall into a six-month grace period called forbearance in which you can forgo payments. While you don’t have to repay, your loans will still be collecting interest, which adds to your principal balance. It’s often recommended to start making repayments as soon as you’re financially able to, even if your forbearance is not up.

Graduated Repayment Plan

If you signed up for a Graduated Repayment Plan, you’ll start off with lower payments after graduation that will increase every two years. With this plan, payments will be made for up to 10 years, or 10­–30 years for consolidated loans.

Related: 8 Ways to Pay Off Student Loans Faster and Save Money

Income-Based Repayment (IBR) Plan

Some but not all of your loans may qualify for you to receive an IBR Plan, meaning your payments will be based on your income and reasonable for you to be able to meet them.

Interest

Interest is an expense charged for borrowing your loans that collects over time until you are able to fully pay off the cost of your loan. It’s calculated based on your principal balance.

Lender

A lender is the organization you received your loans from that you are making payments to.

Loan forgiveness

Under certain types of employment—most often with nonprofit and education careers—a student loan holder may qualify to have the remainder of their loans waived after a certain number of years.

Pay As You Earn (PAYE) Plan/REPAYE

These repayment plans set up a borrower to make monthly repayments that are most often equal to 10% of the borrower’s discretionary income; the percentage won’t ever be higher than the standard 10-year repayment plan.

Principal balance

This term refers to the total money lent without accounting for the interest that begins to accrue after the borrower graduates.

Public Service Loan Forgiveness (PSLF)

This forgiveness plan allows your student loans to be waived after 10 years of payments through a qualifying repayment plan if you are working full-time in a “public service” career.

Standard repayment plan

This is the most common repayment plan for federal loans, in which borrowers make monthly, fixed payments for up to 10 years, or between 10­–30 years for consolidated loans.

Student loan debt burden

Your burden is considered to be the percentage of your monthly income that has to be paid to your student loans; the smaller the percentage, the less debt burden you’ll have.

Related: How Your Degree May Determine Student Loan Payments

Now that you know these terms, you’ll be ready for the responsibility of maintaining and paying off your loans. Getting into student loan debt isn’t ideal, but knowing all the facts and terms can ensure a better future of financial responsibility for you—and at least a little less stress as you journey into your adult life and career.

Not in college yet? Check out All the Important Financial Aid Terms You Need to Know for what you should learn before you enroll!

Like what you’re reading?

Join the CollegeXpress community! Create a free account and we’ll notify you about new articles, scholarship deadlines, and more.

Join Now

Join our community of
over 5 million students!

CollegeXpress has everything you need to simplify your college search, get connected to schools, and find your perfect fit.

Join CollegeXpress
Daniel Ogunlokun

Daniel Ogunlokun

High School Class of 2022

When I started looking at colleges in the beginning of my senior year, I was conflicted about which ones I wanted to attend based on safety, tuition costs, location, academic rigor, and prestige. Searching the internet and getting more questions than answers, I came across CollegeXpress, which made all the steps I had taken look like a minor issue. Everything was summarized and detailed, and I couldn't be more thankful and appreciative.

Cameron Lee

Cameron Lee

High School Class of 2022

I used CollegeXpress to search for colleges. It helped me narrow down the schools on the West Coast and which schools had Construction Engineering programs. I made my decision to go to OSU and I am so excited about it.

Monica

Monica

High School Class of 2023

Being a sophomore in high school, I never really worried about college. I thought it wasn't important to worry about until senior year. Through this program opportunity I came across, I realized how important it is to start looking at colleges early and start planning ahead. CollegeXpress has opened my eyes to what colleges require, what colleges are near me, and what they offer. The daily emails I get from CollegeXpress really help me look at the different options I have and what colleges I fit into. Without this website, I would not be taking the time out of my day to worry about what my future will be nor what opportunities I have. I could not be more grateful for such an amazing and useful website. It's thanks to CollegeXpress that not only me but my family now know how much potential I have in to getting into these colleges/universities that we thought were out of my reach.

Katie

Katie

High School Class of 2019

My favorite feature of CollegeXpress is the scholarship search. As someone going out of state for college, I needed all the financial help I could get, and CollegeXpress helped me easily find scholarships I could apply for to help fund my education.

Carlie Cadet

Carlie Cadet

High School Class of 2019

CollegeXpress has helped me learn about an abundance of scholarships available to me and my situation. I was able to do research for colleges in my best interest with your website. I've had multiple colleges email me and offer me multiple scholarships and things of that nature because of this website! Thank you so much for uploading scholarships I didn’t even know existed, even if my life took a huge turn and I wasn’t able to go to college straight out of high school. CollegeXpress helped me a lot in high school to be even more motivated to get into my dream college (which I did, by the way). I'm looking forward to using the materials CollegeXpress has kindly provided me for free to look for scholarships to help pay for college.

College Matches
X

Colleges You May Be Interested In

Sterling College

Sterling, KS