Asset- Anything that has monetary value. Typical personal assets include cars, computers, real estate, stocks, jewelry, art, and bank accounts. Bond- An interest bearing or discounted debt security issued by corporations and governments. Bonds are essentially loans by the investor to the issuer in return for interest payments. Budget/Spending Plan- An itemized forecast of income and expenses commonly broken into monthly intervals and typically covering a one-ear period. Certificate of Deposit (CD)- An insured, interest-bearing deposit at a bank, requiring the depositor to keep the money invested for a specific length of time. Compound Interest- Interest paid on interest from previous periods in addition to principal. Essentially, compounding involves adding interest to principal and any previous interest in order to calculate interest in the next period. Compound interest may be figured daily, monthly, quarterly, semi-annually or annually. Deductible, Insurance - The individual's share of the cost to repair or replace the insured item. See payment. Deferment- Federal student loan repayment option that allows the borrower to temporarily postpone payment of the loan. During periods of deferment on subsidized loans, the principal payments are postponed and interest is billed to the government. When unsubsidized loans are deferred, only the principal payments are postponed and the borrower is responsible for the accrued interest. Diversification- Investing in separate asset classes (stocks, bonds, cash) and/or stocks of different companies in an attempt to lower overall investment risk. Earnings- Profit on an investment. Sometimes called return, growth, or interest. Expenses- Costs incurred. Includes living and food costs, transportation, debt payments, entertainment, etc. When attending school expenses also include tuition, fees and books. Extended Repayment- Loan repayment plan for borrowers (FFEL) who have a total education debt exceeding $30,000. This plan allows borrowers to repay their loans over a maximum term of 25 years, instead of 10 years, using either fixed or graduated payments. Available only to new borrowers (those who had no outstanding student loans as of October 7, 1998, or had no loans when they acquired new loans after October 7, 1998). Federal Loan Consolidation - To refinance one or more outstanding federal student loans and create a single new loan. The new loan includes a fixed interest rate, new terms and may have an extended repayment period of up to 30 years. Financial Planning- Process of creating a strategy for the future, which involves identifying goals, monitoring expenses and saving or investing money. Forbearance- Federal student loan repayment option that allows the borrower to temporarily postpone or reduce the monthly payment of the loan. Regardless of the loan type, interest continues to accrue during the forbearance period. Goals, Long-Term- Goals that take more than five years to achieve. Examples include: saving for children's college or retirement, sometimes saving for a home down payment. Saving for long-term goals is typically accomplished through investing. Goals, Short-Term- Goals that take less than five years to achieve. Examples include: buying a car, establishing an emergency fund, paying off small debts. Short-term goals are typically achieved through saving. Graduated Repayment- Loan repayment plan that calls for payment amounts to be lower at the beginning of the repayment period and increase over time. Borrower has up to 10 years to repay the loan. Growth- Profit on an investment. Sometimes called earnings, return or interest. Income- Money that an individual earns or receives, typically on a monthly basis. Sources may be salary, gifts, financial aid, etc. Holder- The lender, institution or agency that originated the loan and holds its legal title, or a lender or secondary market that purchased the loan from the original holder. Income-Sensitive Repayment- Loan repayment plan that is based on the borrower's income and the total amount borrowed. Payments increase as income rises. Repayment period will vary based on the income and loan amount. Insurance- Protection against possible financial losses. Individuals contract with insurance companies by paying a fee in order to be reimbursed in the event of a financial loss. See also premium, deductible, and payment. Interest (on loans)- A charge for the use of money. Interest is calculated as a percentage rate of the loan principal. The interest rate can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case it changes periodically. The percentage rate may be tied to one of several indexes such as the Prime Rate, LIBOR, or U.S. Treasury Bills. Interest (on savings or investments)- Profit on an investment. Sometimes called earnings, return or growth. Interest Deductibility- A government sponsored tax benefit for borrowers in repayment on their federal student loans. A borrower may be able to claim a tax deduction on the amount of interest he/she has paid during the year. Invest (Investment)- To commit money in order to gain profit. Types of investments include stocks, bonds, mutual funds, real estate, etc. Investing is typically used to achieve long-term goals. Lender- The bank, credit union or other approved entity from which a borrower obtains a loan. Liabilities- An individual's outstanding debts. Typical personal liabilities include home mortgages, credit card debt, car loans and student loans. Mutual Fund- The pooled cash of many shareholders that is invested according to a stated objective, as defined by the fund's prospectus. Mutual funds can provide diversification with minimal investment. Net Worth- The amount of wealth a person has in owned assets. Net worth is determined by subtracting liabilities (debts) from assets (property owned). National Student Loan Data System (NSLDS)- NSLDS is the U.S. Department of Education's central database for student aid records. NSLDS provides a centralized, integrated view of your federal Title IV education loans and grants, tracking from when they're approved through when you pay off your loans. May be accessed using a PIN. Web address: http://nslds.ed.gov. "Pay Yourself First"- Concept of saving for the future by putting money aside before paying regular monthly bills. Payment, Insurance - The insurance company's share of the cost to repair or replace the insured item. See deductible. Portfolio- All the savings and investments held by an individual, institution or mutual fund. Premium, Insurance - Payment made by the individual in return for insurance protection. Pre-tax Contribution- A contribution to a retirement account with money from your paycheck before the federal government takes its cut. Pre-tax contributions reduce your taxable income and, therefore, reduce the taxes withheld from your paycheck. Qualified Retirement Plan- A retirement plan sponsored by a business for its employees, such as a 401(k) or a 403(b). Contributions are pre-tax, and the earnings grow tax-deferred. Any withdrawals made before age 59 1/2 will usually be penalized. To be qualified, the plan must be open to all employees. Repayment Plan/Schedule- Federal Stafford loans offer several repayment plan options that vary in length of period, payment amount and total repayment amount. The borrower may choose the repayment plan that best fits his/her spending plan. For more information on the four plans, see also Standard Repayment, Graduated Repayment, Income-sensitive Repayment and Extended Repayment. Retirement Plan- See Qualified Retirement Plan. Return- Profit on an investment. Sometimes called earnings, growth, or interest. Risk- The uncertainty of future outcomes. In investing, risk is the possibility of losing money. The riskier an investment, the more money could be lost or made. To minimize risk, and to stabilize investments, it is important to diversify. See diversification. Saving- Placing money in a bank or credit union for a period of time in order to achieve short-term goals. See savings account for more information. Savings Account- Available at banks and credit unions. Typically used for achieving short-term goals, savings accounts have little or no risk and low returns. See certificates of deposit (CDs) for more information. Securities- A fancy name for shares of stock, bonds, or any kind of financial asset that can be traded. Standard Repayment- Loan repayment plan that provides for fixed annual payment over a fixed period of time. Borrower has up to 10 years to repay the loan. Stock- An ownership share in a corporation. Each share of stock is a proportional stake in the corporation's assets and profits, and purchasing a stock should be thought of as owning a share of the successes and failures of that business. Subsidized Federal Stafford Loan- Loans based on need. The interest on such loans is paid by the federal government while the student is in school, during the grace period and during eligible deferment periods. Tax Credit- A dollar-for-dollar reduction in the tax. Can be deducted directly from taxes owed. Tax Deduction- A part of a person's expenses that reduces income subject to tax. Tax-Deferred- Accounts in which taxes are not paid on investment growth or earnings until funds are withdrawn from the account, such as a Qualified Retirement Plan. Unsubsidized Federal Stafford Loan- Loans that are not based on need. The borrower is responsible for paying the interest.