Basic Student Loan Glossary
Student loan glossary
| Term | Definition | Example |
|---|---|---|
| Direct Loan | Federal student loan borrowed directly from U.S. Department of Education | Direct Subsidized or Unsubsidized Loan |
| Subsidized | Government pays interest during school, grace, deferment | Subsidized loan: balance doesn’t grow during school |
| Unsubsidized | Interest accrues immediately from disbursement | $25,000 borrowed grows to $28,000+ at graduation |
| Grace Period | 6-month window after graduation before repayment starts | Graduate May 2025; first payment November 2025 |
| Forbearance | Temporary pause in payments; interest still accrues | 3-month forbearance; $500 in new interest capitalized |
| Deferment | Pause with subsidized interest protection | Economic hardship deferment — subsidized loans don’t grow |
| Capitalization | Unpaid interest added to principal balance | $2,000 accrued interest becomes part of loan balance |
| IDR | Income-Driven Repayment — payment based on income | SAVE, IBR, PAYE, ICR plans |
| PSLF | Public Service Loan Forgiveness | 120 payments at qualifying employer → forgiveness |
Repayment Plan Questions
Q: What is the SAVE repayment plan? SAVE (Saving on a Valuable Education) is the newest and most favorable IDR plan. Payments are 5% of discretionary income for undergraduate loans. If payments don’t cover monthly interest, the government covers the difference (no negative amortization). Forgiveness at 20 years (undergrad) or 25 years (grad).
Q: What is the difference between deferment and forbearance? During deferment, interest doesn’t accrue on subsidized loans (it does on unsubsidized). During forbearance, interest accrues on all loan types and capitalizes at forbearance end. For subsidized loan holders, deferment is always preferable to forbearance when both are available.
Forgiveness and Refinancing Questions
Forgiveness and refinancing quick reference
| Question | Answer |
|---|---|
| When should I not refinance? | If PSLF-eligible, if income is unstable, if DTI > 1.0 and IDR may be needed |
| Can I switch from standard to IDR later? | Yes — anytime with no penalty |
| Does IDR forgiveness show on credit? | No — forgiveness doesn’t affect credit score |
| Can I consolidate and keep PSLF count? | Maybe — consolidation restarts PSLF count unless PSLF buyback applies |
| What if my employer stops qualifying for PSLF? | Payments made while qualified still count; must find new qualifying employer or accept the count to date |
Every federal student loan borrower should have an active StudentAid.gov account. It shows all your federal loans, balances, servicers, repayment plan status, and PSLF payment count. Log in at least annually to verify your information is accurate and your repayment plan is still optimal for your situation.
Get Your Questions Answered With Numbers
Enter your specific loan balance and income — see the exact answer to your repayment question.