The working vocabulary for this course — each term in plain English, with an example.
Some terms reflect internal loan servicing system codes and may differ from common financial or industry meanings.
Interest that has built up on the loan balance but has not yet been paid or added to principal.
Why it matters: It explains why an amount owed can grow between payments without new borrowing.
The schedule that shows how each scheduled payment is split between interest and principal until the balance reaches zero.
The funding still usable on a Line of Credit: the credit limit less amounts outstanding (and, in some models, less amounts committed).
Adding unpaid accrued interest to the principal balance, after which the borrower pays interest on that interest.
Why it matters: Future interest may be calculated on the higher principal balance.
A program-defined event or status change that causes eligible unpaid accrued interest to be added to principal.
Why it matters: The event must be authorized, correctly dated, calculated, communicated, and recorded because it can increase future interest.
The process of taking money received and applying it to the correct loans and buckets — fees, interest, then principal.
The loan amount a school confirms the student is eligible to receive for the enrollment period, where certification applies.
The maximum amount that may be funded against a Line of Credit during its effective period.
An extra payment applied directly to principal, beyond the required scheduled payment.
The status a federal loan reaches after an extended period of non-payment, typically 270 days delinquent, carrying severe consequences.
An approved, temporary postponement of payments for a qualifying reason such as enrollment, unemployment, or military service.
Why it matters: Eligibility, dates, documentation, and interest treatment affect billing and the borrower's total cost.
The state of an account when a scheduled payment is past due but the loan has not yet defaulted.
A federal Direct Loan generally for eligible undergraduate students with financial need, with a federal interest benefit during qualifying periods.
Why it matters: Its subsidy indicator changes interest treatment during important servicing statuses.
A federal Direct Loan for which the borrower is generally responsible for interest from disbursement, regardless of financial need.
Why it matters: Accrued interest can increase the amount owed and may capitalize when program rules permit.
The release of loan funds, usually paid to the school first and any remainder to the student.
The date a transaction is treated as having occurred for interest and delinquency purposes, which can differ from the date it posted.
A person who meets the requirements to receive a specific loan under that loan program's rules.
Why it matters: Borrower category can affect eligibility, limits, liable parties, repayment choices, and servicing requirements.
A temporary pause or reduction of payments, usually at the servicer's discretion under program rules, during which interest normally continues to accrue.
Why it matters: It can provide short-term relief while increasing the amount owed through continuing interest.
The set period after leaving school or dropping below half-time before repayment begins, commonly six months on Direct Loans.
The party that currently owns the loan and the right to repayment, which may differ from the original lender and from the servicer.
A family of federal repayment plans that set the monthly payment based on income and family size rather than balance.
The process of interest accumulating on a loan balance over time according to the rate and loan terms.
Why it matters: It explains balance growth, payment timing effects, payoff amounts, and the cost of payment pauses.
A funding facility that provides the capacity a lender draws on to originate or fund loans, carrying an identifier, funding source, limit, committed and funded amounts, availability, effective dates and status. Structure and accounting treatment vary by lender and program.
An organization-specific record of a loan application and its funding lifecycle — borrower, school, program, requested/approved/certified/disbursed amounts, statuses, dates, funding source, associated LOC and servicing loan identifier. Not a universal industry term.
Creating the serviceable loan in the servicing platform from origination and disbursement data, with links back to the application and funding records.
The binding conditions of a loan, including amount, rate, repayment period, payment rules, rights, and obligations.
Why it matters: Servicing actions must follow the promissory note, program rules, applicable law, and approved policy.
The portion of a Line of Credit that has been committed or funded, which rises on disbursement and may fall on repayment, sale, return or reversal.
A federal promissory note that can cover more than one eligible loan made under the applicable program during its permitted period.
Why it matters: It documents the borrower's repayment promise while loan-level records preserve each loan's amount, rate, and status.
The standard file format servicers use to report account status and payment history to the credit reporting agencies.
An internal servicing code for a miscellaneous fee charged to an account that is not principal or interest.
An internal servicing code for removing, refunding or correcting a previously assessed miscellaneous fee.
The rules that determine how money received above the amount due is applied — to interest, fees, future payments, or principal.
The method used to distribute an applied payment among loans and among permitted fees, accrued interest, principal, past-due amounts, and current amounts.
Why it matters: Allocation affects delinquency, future interest, payoff timing, and loan-level balances.
The act of posting received money to the correct borrower account using the correct amount and effective date.
Why it matters: A payment may be received correctly yet later allocated incorrectly; separating the steps helps identify errors.
The unpaid amount borrowed, adjusted by disbursements, principal payments, reversals, and any permitted capitalization.
Why it matters: Interest is commonly calculated from principal, so principal changes affect future cost and payoff timing.
The legal agreement in which the borrower promises to repay the loan according to the stated terms.
Why it matters: It is a primary source for borrower obligations, repayment provisions, rights, and servicing authority.
The periodic proof that loan-level detail, funding/LOC balances, general ledger entries and cash all agree, with every difference explained by a dated, evidenced transaction.
The company hired by the loan holder to bill, collect, record, disclose, and support the loan day to day.
Interest calculated each day on the outstanding principal: principal × annual rate ÷ 365.
A holding bucket for money that arrives but cannot yet be applied — for example an unidentified payment or a partial amount awaiting instruction.
The authoritative source for a given piece of account data; every report and letter must reconcile back to it.