Student Loans Glossary: Learn The Basics

Student Loan Terminology

This easy-to-reference glossary is designed to help you better understand your private student loan agreement—from interest rates and repayment terms to cosigners and disbursements—so you can borrow with confidence.

• Cosigner

  Cosigner

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  Definition:

  A cosigner is someone—usually a parent or close relative—who agrees to take equal responsibility for repaying a private student loan if the primary borrower cannot. Their credit history and income are considered during the loan approval process.

  Example:

  If you don’t have a long credit history or steady income, a cosigner with good credit can help you qualify for a lower interest rate. If you miss a payment, the lender will expect the cosigner to pay.

  Questions to ask:

  • Do I need a cosigner to qualify for a loan?

  • Who would be willing and able to cosign with me?

  • How would this loan affect their credit and financial responsibilities?

  • Can the cosigner be released from the loan later?

  • Would adding a cosigner help me obtain a better interest rate on the loan?

  How to prepare:

  • Check your credit score and eligibility to see if a cosigner is necessary.

  • Talk openly with your potential cosigner about repayment plans and risks.

  • Review the lender’s cosigner release policy, if available.

  • Make a plan to stay on top of payments to protect both credit profiles..

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• Interest Rate

  Interest Rate

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  Definition:

  The interest rate is the percentage charged by the lender on the amount you borrow. Private student loans can have fixed or variable interest rates, and the rate you receive depends on your creditworthiness (or your cosigner’s).

  Example:

  A fixed rate stays the same throughout the life of the loan, while a variable rate changes based on market conditions. For this reason, a variable rate may start lower but change over time, increasing the total cost of the loan if rates rise.

  Questions to ask:

  • Is the interest rate fixed or variable?

  • What is the current market trend for interest rates?

  • How does my credit (or my cosigner’s) impact the rate I’m offered?

  • What’s the total interest I’ll pay over the life of the loan?

  How to prepare:

  • Compare interest rates from multiple lenders.

  • Use a student loan calculator to estimate total repayment under different rate scenarios.

  • Decide whether a fixed or variable rate works best for your financial situation.

  • Consider how long you’ll take to repay the loan and how rate changes could affect you.

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• APR (Annual Percentage Rate)

  APR (Annual Percentage Rate)

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  Definition:

  APR includes the interest rate and most loan fees, giving you a clearer picture of the total cost of borrowing. It’s the best number to compare across lenders because it reflects what you’ll actually pay over time.

  Example:

  Two loans may offer the same interest rate, but if one has an origination fee, its APR will be higher. That means you could end up paying more overall despite a similar monthly payment.

  Questions to ask:

  • What is the APR, and how does it compare to just the interest rate?

  • Are there any hidden fees (e.g., origination or late fees)?

  • How does the APR affect my total repayment amount?

  • Am I comparing “apples to apples” when looking at different loan offers?

  How to prepare:

  • Read the full loan disclosure to understand what’s included in the APR.

  • Use lender comparison tools that list both the interest rate and APR.

  • Ask the lender directly if any fees are not reflected in the APR.

  • Compare multiple lenders before choosing a loan.

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• Repayment Term

  Repayment Term

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  Definition:

  The repayment term is the length of time you have to pay back your loan—typically ranging from 5 to 15 years for private student loans. It affects both your monthly payments and the total cost of the loan.

  Example:

  A 5-year loan term will usually mean higher monthly payments but less total interest paid. A 15-year term may lower your monthly payment but result in paying more interest over time.

  Questions to ask:

  • What repayment term options does this lender offer?

  • How will different terms impact my monthly payment and total interest?

  • Am I comfortable with higher monthly payments to save on interest?

  • Can I change my repayment plan later?

  How to prepare:

  • Estimate your post-graduation income and budget.

  • Use a loan calculator to see how different terms affect payments and costs.

  • Decide what balance of affordability vs. long-term savings works for you.

  • Ask your lender about flexibility in adjusting repayment terms if needed.

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• Deferment

  Deferment

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  Definition:

  Deferment is a temporary pause on loan payments, usually offered while you’re enrolled at least half-time in school. Interest may or may not accrue during this period, depending on the lender.

  Example:

  If you’re in school and your lender offers in-school deferment, you may not need to make payments until six months after graduation. However, if interest accrues during deferment, your total loan balance could grow.

  Questions to ask:

  • Does this loan offer in-school or post-graduation deferment?

  • Will interest accrue while payments are paused?

  • Are there other options if I return to school or face financial hardship?

  • How does deferment affect my repayment timeline and total cost?

  How to prepare:

  • Confirm the deferment policy before borrowing.

  • Ask whether you can make interest-only payments while in school.

  • Track how much interest accrues during deferment, if any.

  • Make a plan to resume full payments when deferment ends.

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