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Glossary of Terms for US Financial Aid at Otago

Students on the steps of the Information Services Building

Accrued Interest

If you choose not to make interest payments while in university, in your grace period, or during an authorized period of deferment, the interest will accumulate, and be added to your principal amount at repayment.

Award Letter

This is an official document issued by the Financial Aid Section. It lists all of the amounts, and types (subsidized and unsubsidized) of aid in your financial aid package for the relevant award year.

The Award Letter also includes the terms and conditions of your financial aid.

Award Year

Our default Award Year mirrors the Calendar Year during which you attend university, and for which your aid has been awarded.

If you are applying for aid at the beginning of Otago’s calendar year and if you have received financial aid in the June-December period of the preceding year, this amount will be deducted from the first instalment of your financial aid entitlement while you are studying at Otago. 

Academic Year in the US

If you are beginning study during the second semester (July commencement) at Otago and wish to access financial aid, the amount that you draw down in semester two will impact on your aid eligibility for semester one (February commencement) of the following year. These figures are pro-rated for less than full time enrolment and for mid-semester commencement.

Budget Control Act, 2011

Important Information for Graduate Students

How does the Title V of the Budget Control Act (BCA) of 2011 affect me?

Effective for loans made for periods of enrollment (loan periods) beginning on or after July 1, 2012, graduate and professional students are no longer eligible to receive Federal Direct Subsidized Loans. The terms and conditions of Direct Subsidized Loans received by any student for loan periods beginning before July 1, 2012, for either graduate or undergraduate study, are not affected by this change.
The annual loan limit for graduate and professional students remains unchanged at $20,500 ($47,167 for certain health professions students), but this amount will now be limited to Direct Unsubsidized Loans, as shown in the following chart:

Annual Loan Limits for Graduate / Professional Students

Loans for loan periods beginning before July 1, 2012Loans for loan periods beginning on or after July 1, 2012
Subsidised Loan Maximum: $8,500.00Subsidised Loan Maximum: $0.00
Unsubsidised Loan Maximum: $20,500.00 less any subsidised amount receivedUnsubsidised Loan Maximum: $20,500.00

The aggregate loan limit for graduate and professional students remains unchanged at $138,500, not more than $65,500 of which may be in subsidized loans.

The elimination of subsidized loan eligibility for graduate and professional students does not affect undergraduate student borrowers, who remain eligible to receive Direct Subsidized Loans.

Also, the BCA clarifies that borrowers who are receiving Direct Loans for preparatory course work necessary for admission into either an undergraduate program or a graduate/professional program, or for course work required for teacher certification or recertification, remain eligible for Direct Subsidized Loans. Students enrolled in preparatory course work or course work required for teacher certification are considered undergraduate students for purposes of annual loan limits.


The process by which interest is added to the principal loan amount if you choose not to make interest payments while in university or in forbearance. (See Question 9 on the MPN, Question 10 on the PLUS MPN). This process increases the amount that must be repaid and will make your monthly payment larger.

Cost of Attendance (COA)

These expenses include tuition, room and board, books and supplies, course related costs, fees and the student's living costs while attending university. The COA is determined by the University, using federal guidelines.

Cohort Default Rate

The percentage of University of Otago students who borrowed money under the Direct Loan program and defaulted before the end of the fiscal year in which they entered repayment on their loans. The US Department of Education calculates this rate annually to determine the default experience of students who attended a particular school during a particular period of time.


The failure of a borrower to make installment payments when due or to meet other terms of the promissory note or other written agreement(s) with the lender under circumstances where US Department of Education or the guarantor of the loan reasonably concluded that the borrower no longer intended to honor the borrower's obligation to repay a loan, provided that this failure persists for the most recent consecutive 270 day period or the most recent 330 day period.


A period during which repaying loan principle is suspended as a result of the borrower meeting one or more of a number of situations or categories established by law.
The borrower does not pay interest on subsidized loans during deferment; interest continues to accumulate during deferment of an unsubsidized loan.


The status of a loan when payment is late. Delinquency may be reported to a credit bureau after 30 days.


Direct Graduate PLUS Loan (Grad PLUS)

Beginning July 1, 2006, graduate and professional students are eligible to borrow through the Federal Direct PLUS Loan program. Previously this loan was only available to parents of undergraduate students.

Graduate students may borrow this Direct Loan on their own behalf, to cover the difference between COA and all other awarded aid, after applying for other Direct Loans. Although the new legislation authorizing this change is in place, most references to the program on the federal web sites and official notices still refer to the PLUS Loan being a program for parents of undergraduate students.

This loan does go through a federal credit check process. This review looks for bad credit only. You do not have to meet other financial standards as with other private alternative loans.

Direct Loan (Subsidized)

A Direct Loan that provides federally subsidized, low interest loans to students in undergraduate, graduate or professional programs. (From July 1, 2012 Graduate students will not be eligible to access Direct Loan (Subsidised) under the Budget Control Act 2011.) Subsidized loans are awarded on the basis of financial need.

Direct Loan (Unsubsidized)

A Direct Loan that provides low interest loans to students in undergraduate, graduate or professional programs. Unsubsidized loans are not awarded on the basis of financial need.


The payment of loan funds to the University. Funds are received electronically and deposited to students’ tuition account. Disbursement is usually made in two installments during the award period. It takes approximately 10 calendar days after the funds have been authorised for release before they can be drawn down by the Student Finance Office.

Exchange Rate

Figures are listed in US dollar amounts and will be converted to NZ dollar amounts using the exchange rate in effect at the time of the delivery/return of funds.

Revisions will NOT be made to reflect any changes in the currency exchange rate.

Expected Financial Assistance (EFA)

The Expected Financial Assistance is the amount of all other awards, scholarships, sponsorships etc that a student (or the parents on behalf of the student) may be in receipt of.

This amount is included in the Cost of Attendance (COA) calculations. Also included in this are any Study Link Loans and Allowances (if applicable).

Expected Family Contribution (EFC)

The Expected Family Contribution is the amount that a student and family (if required) are expected to contribute toward the Cost of Attendance (COA). This amount is based on the student's or the family's income and assets.

Federal Family Education Loan Program (FFELP)

With effect from July 1, 2010, Federal Family Education Loan Program was replaced by William D Ford Direct Loan (Direct Loan) Program.

Financial Aid Section

The staff at the University of Otago who work with you and your parents to determine eligibility based on federal guidelines for different types of financial aid, Otago scholarships, loans and more. The Financial Aid Section also certifies or approves your Direct Loan application and the amount you can borrow. The FA section contact details are available elsewhere on this page.

Financial Need

The difference between the student's Cost of Attendance (COA) and the Expected Family Contribution (EFC) plus the student's Estimated Financial Assistance (EFA).


The process by which a repayment schedule can be restructured under certain conditions. The amount of the monthly payment may be temporarily reduced or suspended, or months may be added to the repayment term. You must contact your lender directly to receive forbearance.

Free Application for Federal Student Aid (FAFSA)

This is the application that a student must file to apply for financial aid.

The FAFSA is printed and distributed free of charge by the U.S. Department of Education.

Grace Period

A feature of Direct Loans that gives you six months after you leave university or drop below half-time status before you must start making monthly payments on your loan.


Is the amount of aid to which you are eligible prior to the deduction of the origination fee, rebate and bank charges.


The fee that is charged by the lender in exchange for lending the money, the interest rate, usually expressed as a percentage of the loan amount, may stay the same for the term of the loan (fixed rate) or it may change periodically (variable rate).

Master Promissory Note (MPN)

A legally binding document between the borrower and the lender that obligates him or her to repay the loan according to its terms.

Origination Fee

A fee charged by the federal government and deducted from the loan funds prior to disbursement. The fee is used to offset administrative costs.

Parent PLUS Loan

The PLUS Loan is a federal loan and is available to the parents of dependent undergraduate students. It features low interest rates that change annually and long-term repayment options. While parents of all income levels are eligible, a credit-worthiness evaluation is done by the Federal Loan Servicer.

Parents may borrow up to the Cost of Attendance minus any other aid received by the student annually.

PLUS Repayment

The interest rate on PLUS Loans is a variable rate that changes annually. Interest rates are reset each July 1 by the government. The interest rate cannot exceed 9%. Effective July 1, 2007, the interest rate on PLUS Loans will be a fixed rate of 8.5%.

The minimum monthly payment on a PLUS Loan is $50 per loan, but could be higher depending on the amount you borrow.

Repayment of the PLUS Loan is not deferred until after the student graduates. Repayment begins 60 days after the PLUS Loan is fully disbursed (60 days after the second disbursement).


The amount borrowed. This is the amount to which interest is charged.

Student Aid Report (SAR)

The report sent directly to a student from the US Department of Education's Central Processing System (CPS) that summarizes information submitted on your FAFSA. It also provides figures used in financial-need calculations, including the student's EFC.

Satisfactory Academic Progress (SAP)

The achievement of required Grade Point Average (GPA) within the defined time frames, to ensure continued access to Financial Aid.


A servicer is a company which handles the administrative aspects of the loan such as collection of payments, correspondence with borrowers, address changes, loan status updates and more. It is important to know the name of your servicer since quite often all communication regarding your loan will be with the servicer.

William D Ford Direct Loan Program

On 30 March President Obama signed the Health Care and Education Reconciliation Act 2010, which introduced significant changes to the federal student loan program. With effect from July 1, 2010, Federal Family Education Loans (FFELP) was terminated and students commencing their study at the University of Otago can only access loans through the William D Ford Direct Loan (Direct Loan) Program.

Contact Us

For all enquires about US Financial Aid at the University of Otago, please email: