Financial Literacy Terms: Understanding Student Aid and Loans, Exams of Nursing

Download Financial Literacy Terms: Understanding Student Aid and Loans and more Exams Nursing in PDF only on Docsity! Financial Literacy Terms Questions and answers Adjustable-rate mortgage (ARM) - CORRECT ANSWERS✅ An adjustable rate mortgage is a long-term loan you use to finance a real estate purchase, typically a home. The interest rate on an ARM is adjusted, or changed, during its term. Annual percentage rate (APR) - CORRECT ANSWERS✅ What credit costs you each year, expressed as a percentage of the loan amount. Asset - CORRECT ANSWERS✅ Assets are everything you own that has any monetary value, plus any money you are owed. Award Letter - CORRECT ANSWERS✅ The award letter is sent by the Office of Financial Aid and provides information on the types and amounts of aid offered as well as specific program information, student responsibilities and the conditions that govern the award. Award Year - CORRECT ANSWERS✅ The Hope College Award Year includes the fall and spring semesters and the subsequent summer sessions. Bankruptcy - CORRECT ANSWERS✅ Bankruptcy means being insolvent, or unable to pay your debts. In that case, you can file a bankruptcy petition to seek a legal resolution. Financial Literacy Terms Questions and answers Beneficiary - CORRECT ANSWERS✅ A beneficiary is the person or organization who receives assets that are held in your name in a retirement plan, or are paid on your behalf by an insurance company, after your death. Bond - CORRECT ANSWERS✅ Bonds are debt securities issued by corporations and governments. Budget - CORRECT ANSWERS✅ A budget is a written record of income and expenses during a specific time frame, typically a year. Capital - CORRECT ANSWERS✅ Capital is money that is used to generate income or make an investment. Capital gain - CORRECT ANSWERS✅ When you sell an asset at a higher price than you paid for it. Capital loss - CORRECT ANSWERS✅ When you sell a capital asset for less than you paid for it. Financial Literacy Terms Questions and answers Compound interest - CORRECT ANSWERS✅ When the interest you earn on an investment is added to form the new base on which future interest accumulates. Consumer price index (CPI) - CORRECT ANSWERS✅ The consumer price index (CPI) is compiled monthly by the US Bureau of Labor Statistics and is a gauge of inflation that measures changes in the prices of basic goods and services. Cost of Attendance - CORRECT ANSWERS✅ Your cost of attendance includes tuition, activity fee, room/board charges, and allowances for books/supplies, transportation, and other miscellaneous expenses. Cost-of-living adjustment (COLA) - CORRECT ANSWERS✅ A wage or benefit increase that is designed to help you keep pace with increased living costs that result from inflation. Credit rating - CORRECT ANSWERS✅ A credit rating is an independent evaluation of the credit risk, or likelihood of default, posed by an issuer of debt or by a specific debt issue. Financial Literacy Terms Questions and answers Credit risk - CORRECT ANSWERS✅ Credit risk is the possibility that the issuer of a debt security will default, or fail to meet its obligation to make interest payments and repay principal to investors. Credit score - CORRECT ANSWERS✅ Your credit score is a number, calculated based on information in your credit report, that lenders use to assess the credit risk you pose and the interest rate they will offer you if they agree to lend you money. Debit card - CORRECT ANSWERS✅ A card that allows you to make point-of-sale purchases by swiping the card through the same type of machine you use to make credit card purchases. Debt - CORRECT ANSWERS✅ A debt is an obligation to repay an amount you owe. Debt-to-equity ratio (D/E) - CORRECT ANSWERS✅ An indication of the extent to which the company is leveraged, or financed by credit. Calculated by dividing total long-term debt by total assets minus total debt. Default - CORRECT ANSWERS✅ When a borrower responsible for repaying a loan or making an interest payment fails to meet that obligation on time. Financial Literacy Terms Questions and answers Deferment - CORRECT ANSWERS✅ A period of time during which students are not required to make loan payments, such as while enrolled at least half-time (six hours or more). Federal Direct Unsubsidized Loans do have interest accruing during periods of deferment (see Unsubsidized below). Dependent Student - CORRECT ANSWERS✅ A student who does not qualify as a self-supporting/independent student by federal definition and whose parental income and asset information is used in calculating the Expected Family Contribution/EFC (see independent student). Disbursement - CORRECT ANSWERS✅ The process by which your financial aid funds are applied to your account as credits to offset your billing charges. Typically, one-half of your financial aid award is credited to your fall semester charges and the other half is credited to your spring semester charges. Disclosure - CORRECT ANSWERS✅ A document explaining how a financial product or offering works. It also details the terms to which you must agree in order to buy it or use it, and, in some cases, the risks you assume in making such a purchase. Financial Literacy Terms Questions and answers FICO score - CORRECT ANSWERS✅ Based on the information in your credit report, is calculated weighing the amount of debt you carry relative to your available credit, the timeliness of your payments, the type of debt you carry, and a great many other factors to assign you a credit score between 300 and 850. Finance charge - CORRECT ANSWERS✅ The total dollar amount you pay to borrow that includes the interest that's charged plus any fees for arranging the credit, if they apply. Financial Aid Package - CORRECT ANSWERS✅ An offer of financial aid made to a student that is comprised of a combination of different forms of financial aid (scholarships, grants, loans, employment). Financial Need - CORRECT ANSWERS✅ The difference between the school's cost of attendance (COA) and the family's ability to pay (or EFC). Can be expressed using the following formula, COA minus EFC = Financial Need. Financial plan - CORRECT ANSWERS✅ A document that describes your current financial status, your financial goals and when you want to achieve them, and strategies to meet those goals. Financial Literacy Terms Questions and answers Fixed-rate mortgage loan - CORRECT ANSWERS✅ A long-term loan that you use to finance a real estate purchase, typically a home. Forbearance - CORRECT ANSWERS✅ Permitting the temporary halting of loan repayments, allowing an extension of time for making loan payments, or accepting smaller loan payments than were previously scheduled. Foreclosure - CORRECT ANSWERS✅ When your lender repossesses your home because you have defaulted on your mortgage loan or home equity line of credit by failing to pay interest and repay the principal you owe on time. Fulltime Enrollment - CORRECT ANSWERS✅ Enrolling for 12 or more credit hours in a given semester. Gift Aid - CORRECT ANSWERS✅ Normally refers to scholarships and grants that are non-repayable forms of financial aid. Some of these awards have grade point renewal criteria while others do not. Financial Literacy Terms Questions and answers Grace period - CORRECT ANSWERS✅ The number of days between the date a card issuer sends your billing statement and the date your payment is due. By law, it must be at least 21 days. The grace period on a student loan allows you to defer repayment so that the first installment isn't due until six or nine months after you graduate or are no longer enrolled at least half time. The timing depends on the type of loan. There's also a grace period in which to pay an insurance policy premium before the policy is canceled. It may be as long as one month after the due date. Grant - CORRECT ANSWERS✅ A type of financial aid that does not have to be repaid; usually awarded on the basis of financial need. Gross domestic product (GDP) - CORRECT ANSWERS✅ The total value of all the goods and services produced within a country's borders is described as its gross domestic product. Identity theft - CORRECT ANSWERS✅ Identity theft is the unauthorized use of your personal information, such as your name, address, Social Security number, or credit account information. Financial Literacy Terms Questions and answers Line of credit - CORRECT ANSWERS✅ A revolving credit arrangement you establish with a lender. The lender sets the credit limit, which is the most you can borrow under the arrangement. Loan - CORRECT ANSWERS✅ A form of financial assistance that requires repayment, generally after the student graduates or ceases to be enrolled at least half-time (six hours or more). Loan Cancellation - CORRECT ANSWERS✅ Forgiveness from repaying a portion of a specified student loan based on the student entering an identified profession or volunteer organization or because of other qualifying circumstances. Master Promissory Note/Direct Loans - CORRECT ANSWERS✅ This document acts as a student's promise to repay Federal Direct subsidized and unsubsidized loans. The master note feature allows the student to sign only once for her/his first loan proceeds, and continues to bind the student to repay all future amounts borrowed under the program. Master Promissory Notes are made available online and can be electronically signed using a PIN. Master Promissory Note/PLUS Loan - CORRECT ANSWERS✅ A document with a promise to repay that parents must sign the first time they borrow for each child Financial Literacy Terms Questions and answers under the Federal Direct PLUS loan program. Parents submit an application to the college and, if approved by the Department of Education, the Master Promissory Note is made available online and can be electronically signed using a PIN. Matching contribution - CORRECT ANSWERS✅ Money your employer adds to your retirement savings account, such as a 401(k). Money market - CORRECT ANSWERS✅ A continual buying and selling of short- term liquid investments including treasury bills, certificates of deposit (CDs), commercial paper, and other debt issued by corporations and governments. Mortgage - CORRECT ANSWERS✅ A temporary right to the real estate that you are buying with a loan to lender who has given you the loan. The property serves as collateral, or security, that you will repay what you borrowed plus interest. Mutual fund - CORRECT ANSWERS✅ A professionally managed investment product that sells shares to investors and pools the capital it raises to purchase investments typically buys a diversified portfolio of stock, bonds, or money market securities, or a combination of stock and bonds, depending on the investment objectives of the fund. Financial Literacy Terms Questions and answers National Student Loan Data System (NSLDS) - CORRECT ANSWERS✅ A U.S. Department of Education web database that allows students to access their federal grant and loan information with use of a PIN (see below). Need Analysis - CORRECT ANSWERS✅ A congressionally mandated formula that analyzes students' and their parents' household and financial information reported on the FAFSA, to determine a family's estimated ability to contribute to the cost of education. Schools use the resulting EFC (see above) to determine aid eligibility based on the cost of attendance. Net income - CORRECT ANSWERS✅ The amount of money a corporation has earned after subtracting all of the expenses of producing its goods or services from the income or revenue it has realized from sales of those goods or services. Net worth - CORRECT ANSWERS✅ The value of the assets you own (including cash, securities, personal property, real estate, and retirement accounts) minus your liabilities (what you owe in loans and other obligations). Note - CORRECT ANSWERS✅ A debt security that promises to pay interest during the term that the issuer has use of the money, and to repay the principal on or before the maturity date. Financial Literacy Terms Questions and answers Price-to-earnings ratio (P/E) - CORRECT ANSWERS✅ The relationship between a company's share price and its earnings. It is calculated by dividing the current price per share by the earnings per share. Prime Interest Rate - CORRECT ANSWERS✅ A financial index to which many adjustable rate loans are tied when they have short-term adjustment periods. Principal - CORRECT ANSWERS✅ An amount of money you invest, the face amount of a bond, or the balance you owe on a debt, distinct from the finance charges you pay to borrow. Profit - CORRECT ANSWERS✅ Also called net income or earnings, is the money a business has left after it pays its operating expenses, taxes, and other current bills. Promissory Note/Perkins Loan - CORRECT ANSWERS✅ Students who borrow under the Federal Perkins Loan program are required to sign a promissory note documenting their loan along with their promise to repay upon graduation or less than half-time enrollment (less than six hours). Student borrowers are able to secure a PIN number via the Web and to sign their notes electronically. Financial Literacy Terms Questions and answers Rate of return - CORRECT ANSWERS✅ Income you collect on an investment expressed as a percentage of the investment's purchase price. Repayment Schedule - CORRECT ANSWERS✅ A calculated list of monthly loan payments over a certain period of time based on the student's total amount borrowed and the interest rate in effect at the time of repayment. Return - CORRECT ANSWERS✅ The profit or loss you have on your investments, including income and change in value. Risk - CORRECT ANSWERS✅ The possibility one will lose money if an investment you make provides a disappointing return. All investments carry a certain level of risk, since investment return is not guaranteed. Roth IRA - CORRECT ANSWERS✅ An individual retirement arrangement (IRA) to which you make after-tax contributions and withdraw earnings tax free any time after you turn 59 1/2, provided your account has been open at least five years. Satisfactory Academic Progress - CORRECT ANSWERS✅ Federally required minimal standards of academic progression toward a degree that student aid applicants must meet to remain eligible for financial aid funds. Financial Literacy Terms Questions and answers Savings account - CORRECT ANSWERS✅ A deposit account in a bank or credit union that pays interest on your balance -- though some institutions require that you have at least a minimum amount in the account to qualify for earnings. Scholarship - CORRECT ANSWERS✅ A form of student assistance based on academic achievement or some other form of talent or accomplishment. Scholarships usually do not have to be repaid. Self-Help Assistance - CORRECT ANSWERS✅ Loans and work-study funds. Spending plan - CORRECT ANSWERS✅ A plan that can help you manage your money more effectively, live within your income limits, reduce your reliance on consumer credit, and save for the things you want. Student Aid Report (SAR) - CORRECT ANSWERS✅ A paper summary of the information provided on the FAFSA that the CPS sends to federal aid applicants. (Applicants that give an email address on the FAFSA receive an eSAR instead, see above). The SAR includes an acknowledgement letter and a section that may be used to make corrections if necessary. Corrections can also be made electronically at www.fafsa.ed.gov using the federal PIN.