Financial Terms For College Students

By Genevieve Carlton

Published on July 28, 2021

Financial Terms For College Students is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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Applying for Financial Aid, Grants, and Scholarships

College students make financial decisions that can shape their future. This financial glossary includes terms related to financial aid, credit, and taxes. By learning financial vocabulary and studying financial literacy for college students, learners can graduate in a healthy financial position.

On average, students receive over $18,000 in financial aid each year. Over 86% of undergraduates receive financial aid, but $2 billion in aid goes unclaimed every year. All students should apply for financial aid, regardless of their expected award. If students do not receive aid after applying, they can appeal their financial aid decision. This section includes definitions for common financial aid-related terms.

Glossary for Financial Aid, Grants, and Scholarships


The FAFSA qualifies students for federal grants, loans, and work-study programs. The federal student aid program uses the FAFSA to distribute $120 billion in student aid each year.

Expected Family Contribution (EFC)

Based on FAFSA data, the expected family contribution lists the amount a student or their family can contribute toward their educational expenses. Colleges use the EFC to determine financial aid needs.

Student Aid Report

A student aid report contains FAFSA information and provides details about the filer's expected family contribution and eligibility for federal aid.

PELL Grant

The Pell Grant program awards up to $6,495 to undergraduates who meet financial need requirements. Recipients do not need to repay the grant.


A grant awards money to students for educational expenses. Many grants take financial need into account. States, the federal government, and private organizations offer grants. Grants typically do not require repayment.

Adjusted Gross Income (AGI)

Adjusted gross income indicates a tax filer's total income minus certain deductions, such as student loan interest and retirement contributions.

CSS Profile

Adjusted gross income indicates a tax filer's total income minus certain deductions, such as student loan interest and retirement contributions.


During the financial aid process, students may submit a tax return transcript to verify their income, a college transcript showing their grades, or a financial aid transcript listing their total borrowing.

529 Savings Plans

A 529 Savings Plan offers tax benefits for people saving for educational expenses. Students can choose from around 100 different 529 plans, including plans offered by states.

Student Loans

College graduates incur an average of $28,800 in student loan debt. Understanding student loans and associated financial vocabulary can help students minimize their debt.

Glossary for Student Loans

Direct Subsidized Loan

Direct Subsidized Loans offer subsidized interest rates for undergraduates who meet financial need requirements. The government pays interest on subsidized loans while students attend school.

Direct Unsubsidized Loan

Direct Unsubsidized Loans offer multiple repayment options and do not take financial need into account. Undergraduates and graduate students qualify for these loans.

Parent PLUS Loan

Parents and guardians can take out a Parent PLUS Loan through the federal student loan program to pay for their child's educational expenses.

Loan Deferment

Loan deferment temporarily pauses payments and interest on a student loan. Borrowers must meet requirements to place their loan in deferment.

Loan Forbearance

Loan forbearance temporarily halts or reduces student loan payments for up to 12 months. Unlike loan deferment, interest continues to accrue on the loan.

Loan Forgiveness

Loan forgiveness programs discharge the remaining balance on a loan for qualified borrowers. Common loan forgiveness programs include public service loan forgiveness and income-driven repayment plans.

Loan Consolidation

Loan consolidation combines several loans into a single loan. Borrowers can consolidate their student loans to eliminate multiple monthly payments and qualify for lower interest rates.


The principal represents the amount borrowed on a loan. When making loan payments, borrowers pay down the principal plus interest owed on the loan.


Borrowers must pay interest on their loans. The interest, calculated based on a percentage of the loan, accumulates over time.

Capitalizing Interest

Interest capitalization in student loans adds unpaid interest to the loan. Lenders capitalize interest during periods when interest accrues but the borrower does not pay interest, including during school in the case of an unsubsidized loan.


Establishing credit helps college students qualify for loans and achieve financial independence. Learn more about credit cards for college students after reviewing the financial credit terms below.

Glossary for Credit Terms

Credit Score

A credit score ranks a person's likelihood of repaying debt. Credit bureaus assign a credit score between 300-850 based on the borrower's credit history.

Credit Report

A credit report lists an individual's credit, debt, and history of paying their bills. People should review their credit report regularly to correct any errors.

Annual Fee

Certain credit cards come with an annual fee, particularly those with lots of benefits and perks and credit cards for borrowers with a limited credit history. However, many credit cards do not charge an annual fee.


An APR, or annual percentage rate, determines how much interest borrowers pay for their credit card charges. Borrowers who pay their full balance by the due date do not pay interest.

Credit Bureau

Credit bureaus collect data on people's debt and credit history and assign them a score based on it. The major credit bureaus include FICO, Equifax, Experian, and TransUnion.

Minimum Payment

Credit card companies set a minimum payment, or the smallest amount borrowers can pay, every month. Borrowers who do not pay the minimum may face late fees and other penalties. Interest continues to accrue when borrowers only make the minimum payment.


Maximizing credits and deductions helps filers save on their taxes. This financial glossary introduces common tax terminology, another important aspect of financial literacy for college students.

Glossary for Tax Terminology

Tax Credit

Tax filers can subtract tax credits from the amount they owe. Common tax credits include the child tax credit, the American opportunity tax credit, and the lifetime learning credit.

Tax Deduction

A tax deduction lowers a filer's taxable income. Common tax deductions include student loan interest, business expenses, charitable donations, and mortgage interest.

Tax Return

A tax return lists income and other financial information to determine the amount of taxes owed for a year. The IRS collects federal tax returns by April 15th every year.


Tax filers can claim dependents, or people they support financially, on their tax returns. Students claimed as dependents must provide parental information on the FAFSA.


The IRS used to accept form 1040-EZ for simple tax returns. However, recent changes to tax law eliminated the 1040-EZ form; most taxpayers now submit a 1040 form.


A 1099 lists income not covered on a W-2, including self-employed earnings, interest, and royalties. Recipients must file 1099 forms to pay tax on their earnings.


A W-2 lists an employee's income and any withholdings, including federal taxes, Medicare taxes, and state taxes.


A 1098-T lists tuition expenses for a student. Colleges provide the form, which students can use to claim an income adjustment or tax credit on their tax return.


A 1098-E lists student loan interest. Borrowers who paid interest on federal student loans can use form 1098-E to deduct part of their interest on their tax return.

American Opportunity Credit

The American opportunity credit awards up to $2,500 in tax credits for the first four years of college. The credit covers qualified education expenses.

Lifetime Learning Credit

The lifetime learning credit offers up to $2,000 in tax credits for undergraduate and graduate students. Recipients must meet income eligibility requirements and attend an eligible institution.

Portrait of Genevieve Carlton

Genevieve Carlton

Genevieve Carlton holds a Ph.D. in history from Northwestern University and earned tenure as a history professor at the University of Louisville. An award-winning historian and writer, Genevieve has published multiple scholarly articles and a book with the University of Chicago Press. She currently works as a freelance writer and consultant.

See articles by Genevieve

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