Important Definitions

Below are definitions that may assist you in understanding loans. Capitalization – Adding interest that has accrued onto the principal balance. Subsequent interest then begins to accrue on the new principal. Capitalization occurs primarily with unsubsidized loans where the borrower has the option to pay on the interest while in school or have the interest capitalized when the loan goes into repayment. Consolidation – Combining one’s loans by the process of selling and transferring all loans to one holder. Default – Status assigned to a loan when monthly payments are more that 270 days overdue. This status will significantly affect credit status and will make students ineligible for future Title IV funding. Deferment – Period of time (under specific conditions) to postpone repayment of student loans without cost or penalty. Guarantee Agency – A state or private non-profit agency that administers a student loan insurance program. Guarantee Fee – A fee charged for guaranteed student loans that is actually default insurance and is deducted from the loan amount.  This fee will not exceed 1%. Forbearance – Period of time when loan payments can temporarily cease due to hardship, but interest will continue to accrue. Most forbearances are granted at the discretion of the lender or service agency. Grace Period – Six to nine-month period from the date of graduation, withdrawal, or a drop below half-time status to the beginning of the repayment period. Master Promissory Note – a note that is good for 10 years at CSU –Pueblo from the time the note is signed. The amount of loan you borrow each year will be indicated on your award letter and each loan will require certification by our office. Ombudsman Office – An office created by the Department of Education to assist student loan borrowers to resolve loan disputes and problems. May be contacted by calling 1-877-557-2575 or visit their Web site at http://ombudsman.ed.gov. Origination Fee – This fee may be charged to borrowers by the lender. The lender is required to pay this free to the federal government to help reduce the costs of the program. The percentage is determined by federal law, and is currently 3 percent. Repayment Options – Loans are typically required to be repaid within 10 years; however, you may contact your loan servicer to inquire about other repayment options. Servicer – The entity designated to track and collects a loan on behalf of the lender.