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Published: Jan 15, 2016
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Paying for college is difficult enough. The fact that financial aid offices have a language all their own doesn't make it any easier.

Even the term "financial aid" can be confusing. Basically, it refers to any money you receive to help pay for college. The money can come from federal, state, or local governments; colleges; or private organizations. Not all financial aid is created equal, though: The term includes work study, loans (which you have to pay back), and grants and scholarships (which you don’t).

We’ve created this list of basic terms to help you speak the language like a pro. Want more background? You’ll notice some terms have links to stories that expand on the topic.

Let us know at college@moneymail.com if there are other terms you'd like to see defined, and we'll add them to the list.

Cost of attendance. The total price of going to a particular college. It includes tuition, fees, room, board, books, supplies, meal plan, and other living expenses, such as transportation.

Demonstrated need. The difference between your expected family contribution (see below) and the total cost of attendance.

Direct PLUS loan. Federal loans available to parents or to graduate/professional students. The interest rate is higher than other loans available to undergraduate students, and borrowing limits are much higher. They’re also frequently called Parent PLUS loans, and they're the only federal student loans that require a credit check.

Expected family contribution. A formula based on income, assets, and family size that estimates how much of a college’s price tag you can, in theory at least, afford to pay.

Grants. Money you don't have to pay back. Grants are generally based on financial need.

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Need-aware admission. A policy in which colleges consider applicants' ability to pay when admitting or rejecting them. Few colleges are completely need-aware or need-blind (see below).

Need-based aid. Money awarded to students when their family can't afford to pay the full price. Need-based aid may come in the form of grants or scholarships, but it can also be loans with lower interest rates.

Need-blind admission. A policy in which students are accepted without regard to their financial need. Unless a college is extremely wealthy and generous with its aid, though, this can mean that a student may be accepted but not have enough money to attend.

Net price. The amount you’ll actually pay for a college after tuition discounts, scholarships, and grants are accounted for. For private colleges, this is usually far less that the advertised price.

Merit aid/non-need-based aid. This is money awarded without regard to financial need. It can be based on academic achievement, artistic abilities, leadership skills, or any other characteristic.

Perkins loan. Federal loans that are reserved for low-income students. The interest rate is relatively low and the time before your first payments are due is longer than with other loan programs.

Scholarships. Money that doesn’t have to be repaid. Scholarships are usually awarded based on certain characteristics or qualities of the student and can be merit-based or need-based. Colleges or individual departments offer scholarships, as do thousands of nonprofit groups, businesses, and other organizations.

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Subsidized Stafford loan. Also known as a direct subsidized loan, these federal loans have slightly better terms, than the similar-sounding unsubsidized Stafford loans (see below). Subsidized loans are only for undergraduate students and are awarded based on financial need. Interest doesn’t start accruing until you enter repayment after leaving college.

Unsubsidized Stafford loan. Also known as a direct unsubsidized loan, these federal loans are available to undergraduate or graduate students, and there is no financial need requirement, so anyone can use them. Historically, interest rates on unsubsidized loans were slightly higher than those for subsidized loans, though the rates have been equal in recent years. Still, unlike subsidized loans, interest on unsubsidized loans starts adding up from the day you take out the loan.

Work study. A program in which students are given a job on campus to help pay for college bills. There’s the Federal Work Study program and some colleges also have their own programs.

Now that you know all the terms, check out these tips on how to read a financial aid letter.

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