Glossary

Accrued interest is the interest that accumulates on a loan's outstanding principal balance over time, calculated using the loan's interest rate, before that interest is either paid by the borrower or capitalized (added to the principal). Understanding how much interest is accruing, and how often, is a key part of understanding the true cost of a loan over its lifetime.

Related: Capitalization (interest), Principal

Capitalization is what happens when interest that has accrued but has not been paid gets added to a loan's outstanding principal balance. After capitalization, interest is calculated on this new, larger principal amount rather than the original amount borrowed, which means the total cost of the loan can grow faster than if interest were paid as it accrued. Capitalization commonly occurs at points such as the end of a grace period, the end of a deferment or forbearance period, or when a borrower changes repayment plans, depending on the loan type and servicer rules.

Related: Accrued interest, Principal, Grace period

Deferment is a period during which a borrower can postpone making loan payments, generally requested for specific qualifying reasons defined by the loan program (such as returning to school or certain hardship situations). Whether interest continues to accrue during deferment depends on the loan type. This glossary defines the general concept only — it does not determine or claim any individual borrower's eligibility for deferment.

Related: Forbearance, Grace period, Accrued interest

Forbearance is a temporary arrangement where a loan servicer allows a borrower to pause or reduce payments, generally for a limited time. Interest typically continues to accrue during forbearance regardless of loan type, which can meaningfully increase the total cost of the loan if used for an extended period. This glossary defines the general concept only — it does not determine or claim any individual borrower's eligibility for forbearance.

Related: Deferment, Accrued interest, Capitalization (interest)

A grace period is a defined period of time after a borrower graduates, leaves school, or drops below half-time enrollment, during which regular loan payments are not yet required to begin. The specific length of a grace period and whether interest continues to accrue during it depend on the loan type. A grace period is not the same as deferment or forbearance, which can be requested later in repayment for different reasons.

Related: Deferment, Forbearance, Subsidized loan

Principal is the base amount of a loan that interest is calculated against. It starts as the amount originally borrowed (disbursed) and can grow over time if unpaid accrued interest is capitalized (added to it). Payments toward a loan are typically split between reducing the principal and covering currently accrued interest, depending on the loan's terms.

Related: Capitalization (interest), Accrued interest

A subsidized federal student loan is a type of loan where interest generally does not accrue (build up) while the borrower is enrolled in school at least half-time, during the grace period, and during deferment. Eligibility and availability depend on the borrower's individual financial-need determination and current federal program rules, which this glossary does not track in real time. Compare with an unsubsidized loan, where interest accrues the entire time the loan is outstanding.

Related: Unsubsidized loan, Capitalization (interest), Accrued interest

An unsubsidized federal student loan accrues interest from the day it is disbursed, including while the borrower is enrolled in school, during the grace period, and during any deferment or forbearance. If that accrued interest is not paid as it accrues, it is typically added to the loan's principal balance (capitalized) at certain points, such as the end of the grace period, which increases the amount future interest is calculated on. Unlike a subsidized loan, eligibility for an unsubsidized loan does not depend on demonstrated financial need.

Related: Subsidized loan, Capitalization (interest), Principal

In this app's scenario planning, the cautious scenario uses more conservative assumptions than the expected scenario — for example, a lower starting salary, slower raises, or higher costs — to illustrate a less favorable end of a plausible range. It is not a prediction of what will actually happen; it is one illustrative point among several to help compare how a plan might respond to different assumptions.

Related: Expected scenario, Strong scenario, Confidence level

A confidence level is a label attached to an estimate in this app describing how well-supported that estimate is, based on factors like how directly its source data applies and how recent it is. Values range from high to medium to low, with an explicit unavailable state used when there is not enough reliable data to produce an estimate at all — the app is designed to show this unavailable state honestly rather than filling the gap with an invented number.

Related: Cautious scenario, Expected scenario, Strong scenario

In this app's scenario planning, the expected scenario uses the assumptions considered most representative or central, sitting between the cautious and strong scenarios. Like the other scenarios, it is an illustrative estimate built from stated assumptions, not a prediction of actual future results.

Related: Cautious scenario, Strong scenario, Confidence level

In this app's scenario planning, the strong scenario uses more favorable assumptions than the expected scenario — for example, a higher starting salary or faster raises — to illustrate a better end of a plausible range. Like the cautious and expected scenarios, it is illustrative only, not a prediction that outcomes will reach this level.

Related: Cautious scenario, Expected scenario, Confidence level

Cost of attendance is an estimate a school publishes each year covering the full cost of attending, including tuition and fees, housing and food, books and supplies, transportation, and other estimated personal expenses. It is generally higher than the tuition sticker price alone and is used as the starting point for calculating financial aid eligibility and any resulting net price.

Related: Net price

The FAFSA (Free Application for Federal Student Aid) is the standard form the U.S. Department of Education uses to determine eligibility for federal student aid, and that most states and schools also use to determine eligibility for their own aid programs. It collects financial and household information to calculate a student's aid eligibility.

Related: Cost of attendance (COA)

Net price is the cost of attendance minus grants and scholarships that do not need to be repaid (it does not subtract loans, which must be repaid). Net price is often a more useful figure for comparing what attending a particular school might actually cost than the published sticker price alone, since two schools with very different sticker prices can end up with a similar net price depending on the aid offered.

Related: Cost of attendance (COA)

Amortization is the process of paying down a loan through a series of scheduled payments over a set term, where each payment generally covers some interest and some principal. Early in a standard amortization schedule, a larger share of each payment typically goes toward interest; later payments typically shift toward covering more principal, though the exact pattern depends on the loan's specific terms and repayment plan.

Related: APR (annual percentage rate), Principal, Accrued interest

APR (annual percentage rate) expresses the yearly cost of borrowing as a percentage. Depending on the type of loan, APR can include certain fees in addition to the base interest rate, which is meant to make it easier to compare the cost of different loan offers. Always check whether a specific rate you are looking at is described as an interest rate or an APR, since they are not always the same number.

Related: Amortization