Money words, in plain English

Aid Refund

Money left over after your financial aid pays tuition, fees, and housing. The school sends it to you to cover books, food, transit, and other costs.

Cost of Attendance (COA)

The school's official estimate of one year's total cost — tuition, fees, housing, food, books, transportation, and personal expenses.

Your aid can never exceed the COA. It's also the number to compare between schools — sticker tuition alone hides housing and food costs.

EFC (Expected Family Contribution)

The old name for the SAI. You may still see it on older articles — same idea: a number schools use to determine aid eligibility.

FAFSA

Free Application for Federal Student Aid — the form that opens the door to federal grants, loans, and most school + state aid.

Free to file at studentaid.gov. You should file every year you're in school. Most aid is first-come, first-served — earlier is better.

Federal Work-Study

A part-time job funded through your aid package, usually on campus, with hours built around your class schedule.

You're paid like any job (a paycheck, not a tuition credit), and the earnings don't count against you as heavily on next year's FAFSA.

Financial Aid Award Letter

The school's offer listing your grants, scholarships, work-study, and loans for the year. Grants are free; loans must be paid back.

Always subtract only the free money (grants + scholarships) from the cost of attendance to see your real out-of-pocket gap.

Grant vs. Scholarship

Both are free money you don't repay. Grants are usually need-based (from the government or school); scholarships are usually merit-, talent-, or identity-based.

Pell Grant

Federal grant money for undergraduates with high financial need. It does NOT have to be paid back.

You qualify by filing the FAFSA — there's no separate application. Awards depend on your SAI, cost of attendance, and enrollment status.

SAI (Student Aid Index)

A number from your FAFSA that schools use to figure out how much aid you qualify for. It replaced the old EFC. Lower = more aid.

Stipend

A fixed payment for living costs — from a research program, fellowship, or internship. It's income, so budget it across the whole term.

Verification

When your school asks for documents (tax forms, IDs) to confirm what your FAFSA says. Being selected is routine — not an accusation.

Respond fast. Aid is usually frozen until verification is done, and slow paperwork can cost you first-come, first-served money.

Capitalized Interest

Unpaid interest that gets added to your loan principal. After that, you pay interest on the interest.

Example: $10,000 with $900 of unpaid interest becomes a $10,900 balance. Every future payment is now calculated on the bigger number.

Cosigner

Someone who signs a loan with you and is legally on the hook if you don't pay. Late payments hit their credit too.

Debt-to-Income Ratio (DTI)

Your monthly debt payments divided by your monthly gross income. Lenders use it to decide if you can take on more debt.

A common student-loan rule of thumb: keep total borrowing under your expected first-year salary, so payments stay under about 10% of your income.

Deferment

An approved pause on student loan payments. On subsidized loans the government usually covers interest during a deferment.

Direct Loan

A student loan made directly by the U.S. Department of Education. These are the standard federal loans with fixed rates and borrower protections.

Forbearance

A temporary pause on payments where interest keeps growing on all loans. Use it for short emergencies, not as a long-term plan.

Grace Period

The 6 months after you graduate, leave school, or drop below half-time before student loan payments start.

Unsubsidized loans still collect interest during grace. Paying even a little then keeps that interest from being added to your balance.

Income-Driven Repayment (IDR)

Federal repayment plans that set your monthly payment as a share of your discretionary income instead of your balance.

Payments can be as low as $0 in a hard year, and you must recertify your income annually. Remaining balances can be forgiven after 20–25 years.

Loan Servicer

The company that bills you and collects your student loan payments. You don't choose it, and it can change — keep your contact info current.

Origination Fee

A fee taken off the top when a loan is disbursed. Borrow $5,000 with a 1% fee and about $4,950 actually reaches your school account.

Parent PLUS Loan

A federal loan a parent takes out for their child's education. The parent — not the student — legally owes it, and the rate is higher.

Private vs. Federal Loan

Federal loans come with fixed rates, income-driven plans, and forgiveness options. Private loans come from banks and usually have none of those protections.

Exhaust federal loans first. Private loans may advertise a lower rate, but it's often variable and requires strong credit or a cosigner.

PSLF (Public Service Loan Forgiveness)

Forgives the remaining balance on federal Direct Loans after 120 qualifying payments while working full-time for a government or nonprofit employer.

That's about 10 years of payments. Submit the employment certification form every year so your qualifying payment count stays accurate.

SAVE Plan

An income-driven repayment plan for federal loans. Rules and availability have changed recently — always confirm current terms on studentaid.gov.

Standard Repayment

The default 10-year federal plan with fixed monthly payments. Highest monthly cost, but the least total interest paid.

Subsidized Loan

A federal student loan where the government pays the interest while you're in school at least half-time. Cheaper over time.

Unsubsidized Loan

A federal student loan where interest builds up the whole time — including while you're in school. More expensive than subsidized loans.

APR (Annual Percentage Rate)

The yearly cost of borrowing money, shown as a percent. On credit cards, it's how much extra you pay when you carry a balance.

If your card has a 24% APR and you carry $1,000 unpaid for a year, you'd owe about $240 extra in interest. Pay the full statement balance each month and you owe $0 in interest.

Authorized User

Being added to someone else's credit card. Their good payment history can help your score without you being legally responsible for the bill.

Autopay

An automatic monthly payment from your bank account. Set it to at least the minimum so a busy week never becomes a late payment.

Compound Interest

When the interest you earn (or owe) starts earning interest itself. Tiny amounts snowball over time — great for investing, painful for credit-card debt.

Credit Freeze

A free lock that stops new accounts from being opened in your name. Strongest protection against identity theft; unfreeze anytime.

Credit Limit

The maximum you can charge on a card. Student cards often start at $300–$1,000 and grow with on-time payments.

Credit Report

The detailed file behind your score: accounts, balances, payment history, and inquiries. Get it free at annualcreditreport.com.

Credit Score

A number (usually 300–850) that predicts how likely you are to pay back borrowed money. Built by paying bills on time and using credit wisely.

Credit Utilization

How much of your credit limit you're using. Aim to keep it under 30% — under 10% is even better for your score.

Debt Avalanche

Pay off your highest-interest debt first. Mathematically cheapest, though it can feel slower at the start.

Debt Snowball

Pay off your smallest balance first for quick wins, then roll that payment into the next debt. Best for motivation.

FICO Score

The most widely used credit scoring model. Payment history (35%) and amounts owed (30%) matter most.

Hard vs. Soft Inquiry

A hard inquiry happens when you apply for credit and can dip your score a few points. A soft inquiry (checking your own score, pre-qualification) does not.

Interest

Extra money paid for borrowing — or earned for saving / investing. On debt it's a cost. In a savings or investment account it's growth.

Minimum Payment

The smallest amount you can pay to stay current. It keeps you out of late fees but stretches the debt out for years of interest.

Principal

The original amount of money you borrowed (or invested), before interest. Interest is calculated on the principal.

Secured Credit Card

A starter card where you put down a refundable deposit that becomes your credit limit. Easiest way to build credit from zero.

Statement Balance vs. Current Balance

The statement balance is what you owed at the end of the billing cycle. Pay that in full by the due date and you're charged $0 interest.

The current balance includes charges made after the cycle closed. Paying it early is fine, but only the statement balance is required to avoid interest.

VantageScore

A competing credit score model, often the free one shown in banking apps. Same 300–850 range, slightly different math than FICO.

50/30/20 Rule

A simple budget split: 50% needs, 30% wants, 20% savings and debt payoff. A starting point, not a law — adjust to your real rent.

Direct Deposit

Your paycheck sent straight into your bank account. Usually faster than a paper check and often waives monthly account fees.

Emergency Fund

Cash set aside only for surprises — a car repair, a flight home, a lost shift. Start with $500; that alone prevents most credit-card spirals.

Inflation

The slow rise in prices over time, which shrinks what a dollar buys. It's why cash sitting still quietly loses value.

Net Worth

Everything you own minus everything you owe. It's normal — and temporary — for students to have a negative net worth.

Overdraft Fee

A charge (often $25–$35) when you spend more than your account holds. Turn off overdraft coverage so the card declines instead.

Sinking Fund

Money saved a little each month for a known future cost — textbooks, a flight home, car insurance. It turns a big bill into a small habit.

Zero-Based Budget

Give every dollar a job until income minus planned spending equals zero. Nothing is 'leftover' — savings gets assigned on purpose.

401(k)

A retirement account offered through your job, funded automatically from your paycheck — often with an employer match.

529 Plan

A tax-advantaged account for education costs. Growth is tax-free when used for qualified expenses like tuition, fees, and books.

Indiana adds a state tax credit of 20% on contributions (up to $1,500/year), which is an immediate return you won't find elsewhere.

APY (Annual Percentage Yield)

How much a savings account earns in a year, including compounding. Higher APY = more free money on the same balance.

$1,000 at a 0.01% APY big-bank account earns about 10¢ a year. The same $1,000 at 4% APY earns about $40.

Brokerage Account

A regular investment account with no contribution limits and no withdrawal rules — but you owe taxes on gains and dividends.

Capital Gains

The profit when you sell an investment for more than you paid. Held over a year, it's taxed at a lower long-term rate.

Diversification

Spreading money across many investments so one bad company or industry can't sink you. One index fund does this instantly.

Dividend

A share of a company's profits paid out to shareholders, usually quarterly. Reinvesting dividends speeds up compounding.

Dollar-Cost Averaging

Investing the same amount on a schedule (say $25 a month) no matter the price. It removes the pressure of timing the market.

Employer Match

Free retirement money your job adds when you contribute — often 50–100% of the first 3–6% of your pay. Always contribute enough to get the full match.

ETF (Exchange-Traded Fund)

A basket of investments that trades like a single stock. Most index funds are available as ETFs, often with no minimum to start.

Expense Ratio

The yearly fee a fund charges, as a percent of your money. 0.03% costs $3 per $10,000; 1% costs $100 for the same thing.

High-Yield Savings Account (HYSA)

An FDIC-insured savings account paying far more interest than a typical big-bank account. Best home for an emergency fund.

Index Fund

A fund that owns a whole slice of the market at once (like all 500 S&P companies) instead of trying to pick winners. Low cost, broadly diversified.

Risk Tolerance

How much short-term drop you can stomach without selling. Money you need in under 5 years shouldn't be in the stock market.

Roth IRA

A retirement account you fund with money you've already paid taxes on. Growth and retirement withdrawals are tax-free.

You need earned income to contribute. Your own contributions (not earnings) can be withdrawn anytime without penalty — a real perk for students.

S&P 500

An index tracking 500 of the largest U.S. companies. Often used as shorthand for 'how the U.S. stock market did'.

Target-Date Fund

A one-fund portfolio named for the year you'll need the money. It automatically shifts from stocks toward bonds as that date nears.

Traditional IRA

A retirement account funded with pre-tax dollars — you may deduct contributions now and pay taxes when you withdraw in retirement.

Usually better when your tax rate is high today. Most students earn little, so a Roth is typically the stronger choice.

Vesting

The waiting period before employer contributions or stock grants are truly yours. Leave early and you may forfeit the unvested part.

Certified Pre-Owned (CPO)

A used car inspected and warrantied by the manufacturer. Costs more than a regular used car but includes real coverage.

Collision & Comprehensive

Collision covers your car in a crash; comprehensive covers theft, hail, and other non-crash damage. Lenders require both on a financed car.

Deductible

What you pay out of pocket on an insurance claim before coverage kicks in. A higher deductible lowers your monthly premium.

Depreciation

The value a car loses over time. New cars lose roughly 20% in year one — the single biggest cost of buying new.

Down Payment

Cash you pay upfront. A bigger down payment lowers your loan, your monthly payment, and the total interest you'll pay.

GAP Insurance

Pays the difference if your car is totaled and you owe more than it's worth. Worth it with a small down payment or long loan.

Liability Coverage

Insurance that pays for damage or injuries you cause to others. Required by law in nearly every state — it does not repair your own car.

Loan Term

How many months you'll make payments. Longer terms look cheaper monthly but cost much more in total interest.

Anything past 60 months on a used car is a warning sign — you can end up owing more than the car is worth.

MSRP

Manufacturer's Suggested Retail Price — the sticker price. It's a starting point for negotiation, not the price you must pay.

Out-the-Door Price

The real total you pay: vehicle price plus tax, title, registration, doc fees, and add-ons. Always negotiate this number, not the monthly payment.

Pre-Approval

A loan offer from your bank or credit union before you shop. It sets your real budget and gives you a rate the dealer has to beat.

Premium

What you pay for insurance each month or every six months. Student drivers under 25 usually pay the highest premiums.

Title & Registration

The title proves you own the car; registration is the state fee and plates that make it legal to drive. Both are part of your out-the-door cost.

Base Salary

Your guaranteed yearly pay before bonuses, overtime, or benefits. It's the number that raises and future offers build on.

Counteroffer

Your respectful ask for better terms after receiving an offer. Asking almost never loses the offer — most employers expect it.

Equity / RSUs

Company stock granted as part of your pay, released over a vesting schedule. Valuable at public companies, uncertain at startups.

FSA (Flexible Spending Account)

A pre-tax account for medical or dependent care costs. Unlike an HSA, you usually lose whatever you don't spend by year-end.

Gross vs. Net Pay

Gross is what you earn before deductions; net is what actually lands in your bank account after taxes and benefits.

Expect roughly 20–30% to disappear between the two. Always budget with net pay, never the salary on the offer letter.

HSA (Health Savings Account)

A tax-free account for medical costs, paired with a high-deductible health plan. The money rolls over every year and can be invested.

PTO (Paid Time Off)

Days you can take off while still being paid. Ask how many days, whether it rolls over, and whether sick time is separate.

Relocation Package

Money or services to help you move for the job — movers, travel, temporary housing. Ask what's covered and whether it's taxed.

Signing Bonus

A one-time payment for accepting an offer. It's often easier to negotiate than base salary, but it doesn't repeat next year.

Tax Credit vs. Tax Deduction

A credit cuts your tax bill dollar-for-dollar; a deduction only lowers the income being taxed. A $1,000 credit beats a $1,000 deduction.

Total Compensation

Everything an offer is worth: salary plus bonus, retirement match, health coverage, PTO, and relocation — not just the headline number.

W-2

The January statement showing what you earned and what was withheld last year. You need it to file your taxes.

W-4

The form you fill out when hired that tells your employer how much tax to withhold. You can update it anytime your situation changes.

Withholding

The taxes your employer takes out of each paycheck and sends to the government for you. Too much withheld = a refund; too little = a bill.