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Financial Terms Glossary

Finance & Financial aid terms can be an alphabet soup of acronyms like FAFSA, SAR, SAP and EFC and technical terminology. It is almost like speaking a foreign language. This glossary defines the terms and acronyms that are most frequently used in basic finance or student financial aid.

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P.L.

Public Law

Package

A financial aid package is a collection of multiple types of financial aid from multiple sources to help the student pay for college. The financial aid package is described in the financial aid award letter.

Parent

A parent is the student’s adoptive or biological mother or father. If the student’s parents are divorced and the custodial parent has remarried, the federal definition of parent includes the stepparent.

Parent Contribution

The parent contribution is an estimate of the parents’ ability to contribute to the cost of attendance of a dependent student. Among the key components comprising the parent contribution are base year taxable and untaxed income, net value of assets as of the date of FAFSA submission, age of the older parent, family size, number of family members in college, and, possibly, any other documented extenuating or special family circumstances the college is willing to consider. The expected family contribution is the sum of the student contribution and parent contribution.

Partial Financial Hardship

A borrower is in a partial financial hardship when the monthly payment under income-based repayment is less than the monthly payment under standard 10-year repayment (i.e., the monthly payment under standard repayment is more than 15% of the borrower’s discretionary income). This generally occurs when the total debt is greater than the borrower’s annual income.

Past Due

A loan payment is past due when it is not paid by the due date.

Pay-as-You-Earn Repayment

Pay-as-you-earn repayment (PAYER) is a federal loan repayment plan where monthly payments are based on a percentage (10%) of the borrower’s discretionary income. Any remaining debt is forgiven after 20 years in repayment (240 payments). PAYER is available only for loans in the direct loan program.

Payoff Amount

The payoff amount is the amount that must be paid to pay off the debt in full, including the outstanding principal balance, accrued but unpaid interest, and any late fees and collection charges. The payoff amount may be greater than the current balance on the debt.

PBO

Principal Balance Outstanding

PC

Parent Contribution

PCA

Parent Contribution from Assets

PCI

Parent Contribution from Income

PCL

Primary Care Loan

Pell Grant

The Federal Pell Grant program is the largest federal grant program to help students pay for college.

PEP Test

The Proficiency Examination Program (PEP) is an academic test of college-level learning that is administered by American College Testing (ACT).

Per Capita

Per capita is the portion attributable to each person.

Perkins Loan

The Perkins Loan is a fixed-rate federal student loan for undergraduate and graduate students with “exceptional financial need” as defined by the college or university.

Personal Identification Number

The Personal Identification Number or PIN is four-digit number used to electronically sign an online FAFSA, Renewal FAFSA or Master Promissory Note (MPN). It can also be used to make corrections to a FAFSA, add schools to a FAFSA, access that National Student Loan Data System (www.nslds.ed.gov) to review student loans received by the student, to access other federal sites. The PIN is obtained at www.pin.ed.gov.

Ph.D.

The Ph.D. is a doctoral degree, generally demonstrating proficiency in teaching and research.

PII

Personally Identifiable Information

Personal Identification Number

PJ

Professional Judgment

PLUS

Parent Loan for Undergraduate Students

Postsecondary

Education beyond high school.

Postsecondary Institution

A postsecondary institution is a college or university, or vocational or trade school.

Poverty Line

The poverty line is the minimum net income required to pay for basic living expenses. The poverty line, also referred to as the poverty guidelines, is published annually in the Federal Register by the U.S. Department of Health and Human Services. The poverty line is used to determine eligibility for various means-tested federal benefit programs.

PPY

Prior Prior Year

Predatory Lending

Predatory lending involves making a loan with unfair or abusive terms and conditions, such as unusually high interest rates and fees that the borrower cannot afford, where the lender coerces or deceives the borrower into accepting the loan. Examples of predatory lending may include payday loans, overdraft loans, tax refund anticipation loans, high interest auto loans, title loans and subprime mortgages that exploit low-income borrowers. Most predatory loans involve secured loans, where the lender can profit from seizing a valuable asset such as a car or property if the borrower defaults. Warning signs of a predatory loan may include prepayment penalties, balloon payments, negative amortization, capitalization of interest, high interest rates and fees, and mandatory arbitration clauses.

Preferential Packaging

Preferential packaging is the awarding of non-need-based aid as well as adjusting the mix of grants and loans in a need-based financial aid package. Typically, preferential packaging is used by colleges as a recruitment tool to attract academically or athletically talented students or wealthy students.

Premarital Agreement

A premarital agreement is a contract executed by a couple prior to getting married. The premarital agreement typically specifies spousal support and the division of property upon divorce. A premarital agreement may also be called an ante nuptial agreement or prenuptial agreement.

Prenuptial Agreement

A prenuptial agreement is a contract executed by a couple prior to getting married. The prenuptial agreement typically specifies spousal support and the division of property upon divorce. A prenuptial agreement may also be called an ante nuptial agreement or premarital agreement.

Prepaid Debit Card

A prepaid debit card or stored value card is a special version of a debit card for consumers who are “unbanked.” Prepaid debit cards are linked to a virtual bank account. Some prepaid debit cards are reloadable and some are not. Some government agencies use prepaid debit cards to disburse funds because they are less expensive than printing and mailing checks.

Prepaid Tuition Plan

A prepaid tuition plan is a form of college savings plan where an investor purchases shares that represent a fixed percentage of future college tuition.

Prepay

To prepay a debt is to make extra payments on the debt to accelerate repayment.

Prepayment Penalty

A prepayment penalty is a fee charged if a borrower makes a full or partial prepayment on the debt. There are no prepayment penalties on federal and private student loans.

Preponderance of Evidence

A preponderance of evidence occurs when there is more evidence in favor of a conclusion than against it.

Prime Lending Rate

The Prime Lending Rate is the interest rate at which banks lend to their best credit customers.

Principal Balance

The principal balance of a loan is the outstanding balance upon which interest is charged.

Principal Place of Residence

A family’s principal place of residence is the family’s home.

Prior Prior Year

Prior Prior Year (PPY) refers to the year before the prior tax year. Under current law, financial aid eligibility is based on income during the prior year, but not the prior prior year. Policymakers have considered proposals to shift the base year from the prior year to the prior prior year, since this would allow students to apply for financial aid before applying for college admissions, instead of afterward.

Prior Tax Year

The prior tax year is the tax year (usually a calendar year) that ends before the award year. For example, applications for financial aid for the 2014-2015 award year will be based on income and tax data from the 2013 tax year.

Prior Year

Priority Date or Deadline

The priority date or deadline is the date by which an application - whether it’s for college admission, student housing, financial aid or other college services - must be received to be given the strongest consideration.

Private Scholarship

A private scholarship is a form of gift aid, money that does not need to be repaid. Private scholarships are awarded by private organizations (e.g., foundations, corporations, associations, individual philanthropists and nonprofit organizations) based on some form of merit, such as academic, artistic or athletic talent, or activities, such as community service. Also called Outside Scholarships.

Private Student Loan

A private student loan or alternative student loan is a non-federal education loan made by a bank, financial institution or state. The terms of a private student loan are set by the lender, not the federal government, and the loan is not guaranteed against default by the federal government.

Private Student Loan Ombudsman

The Private Student Loan Ombudsman, which is part of the Consumer Financial Protection Bureau (CFPB), investigates complaints involving private student loans.

Procrastinate

To procrastinate is to delay or postpone taking action.

Professional Judgment

Professional judgment (PJ) is the process by which a college financial aid administrator reviews, on a case-by-case basis, documented special circumstances affecting a student’s ability to pay for college. During a professional judgment review, the financial aid administrator may decide to make an adjustment to the cost of attendance or to the data elements on the FAFSA that are used to calculate the student’s expected family contribution (EFC). Some colleges call PJ a special circumstances review or financial aid appeal.

Professional School

A professional school is a college or university offering advanced degrees in law, medicine, dentistry, veterinary medicine, pharmacy, optometry, podiatry, osteopathic medicine, chiropractic medicine or business.

PROFILE

The CSS/Financial Aid PROFILE is a financial aid application created by the College Scholarship Service of the College Board. The PROFILE is used by more than 400 colleges, universities and private scholarship programs to award their financial aid funds.

Promissory Note

A promissory note is a legal document in which a borrower promises to repay a loan. The promissory note lists the terms of the loan, including the amount borrowed, the interest rate and the repayment term.

Proprietary School

A proprietary school is a for-profit college or university.

PSAT/NMSQT

Preliminary SAT/National Merit Scholarship Qualifying Test

PY

Prior Year