Student loan glossary: every term used on this site, defined plainly

A quick reference for every term used across the calculators and guides on this site — no jargon left undefined.

Standard loan terms

• Principal — the amount actually borrowed, before any interest. Paying down principal is what reduces the balance; paying interest doesn’t.
• Interest rate / APR — the annual percentage rate charged on the outstanding balance. This site uses it as a nominal annual rate divided by 12 for monthly compounding — see the how it works page for the exact formula.
• Term — the length of time (in months or years) a loan is scheduled to be fully repaid over, assuming only the required payment is made.
• Amortization — the process of paying down a loan through fixed payments, where each payment covers that period’s interest first and puts the remainder toward principal.
• Amortization schedule — a table showing, period by period, how much of each payment went to interest versus principal, and the resulting balance.
• Deferment / moratorium period — a stretch of time (often while studying) during which no payment is due. See the full deferment and capitalization guide.
• Capitalization — adding accrued-but-unpaid interest to the principal balance, after which future interest is calculated on the new, larger balance.
• Extra payment — any amount paid beyond the required monthly payment; it goes entirely toward principal, which is why it shortens the loan and reduces total interest. See the extra payments guide.
• Total interest — the sum of every interest charge over the life of the loan; what the loan costs beyond the amount borrowed.
• Refinancing — replacing one or more existing loans with a new loan, usually from a private lender, ideally at a better rate. See the refinancing guide.
• Consolidation — combining multiple loans into one, often without changing lender or losing existing protections.

Income-driven / income-contingent terms

• Income-driven repayment (IDR) — a US term for repayment plans where the monthly payment is calculated from income rather than the loan balance.
• Income-contingent repayment — the UK/Australia-style equivalent: your payment is a percentage of income above a threshold, collected automatically (often via the tax system).
• Discretionary income — income above a defined threshold; income-driven payments are calculated as a percentage of this figure, not of total income. See the income-driven repayment guide.
• Income threshold — the income level below which no payment is due on an income-driven or income-contingent plan.
• Negative amortization — when a payment is smaller than the interest accruing that period, so the difference is added to the balance instead of reducing it. Common early in income-driven repayment; not an error.
• Forgiveness / write-off — clearing a remaining balance after a set condition is met (commonly a number of years of payments), rather than requiring it to be paid in full. See forgiveness and write-off by country.
• Indexation — used instead of a conventional interest rate in some income-contingent schemes (notably Australia’s HECS-HELP); the balance is adjusted periodically to account for inflation or a similar measure rather than accruing interest in the traditional sense.

Loan type terms

• Federal / government-backed loan — a loan issued or guaranteed by a government program, generally with fixed policy-set rates and built-in hardship options. See government vs. private loans.
• Private loan — a loan from a bank, credit union, or dedicated lender, priced by credit risk and governed by its own contract rather than government policy.
• Subsidized loan — a loan (typically government-backed) where interest doesn’t accrue, or is paid by the program, during deferment.
• Unsubsidized loan — a loan where interest accrues during deferment regardless, and is usually capitalized once repayment begins.