E
Easy-access credit – short-term loans granted regardless of credit history, often for very short periods and at high interest rates.
Electronic Funds Transfer (EFT) – the shifting of money from one financial institution account to another without the physical movement of cash.
Emergency fund – money set aside for unexpected expenses or for living costs in case of job loss.
Employer-sponsored retirement savings plan – tax-deferred investment programs, such as 401(k) plans for corporate employees and Section 457 plans for state and local government employees, which provide, in some cases, employer-matching funds.
Equal Credit Opportunity Act – a federal law that forbids lenders from discriminating against loan applicants based on gender, race, marital status, religion, national origin, age, or receipt of public assistance.
Equity – stock ownership in a corporation.
Escrow Account – funds held by a third party for future use by the borrower; funds are for special purposes and may be paid out or returned to the borrower only under certain conditions. With mortgages, monthly house payments may include payments for insurance and taxes that are placed in a special account to meet those obligations.
Estate – the assets and debts that a person leaves at death.
Expected family contribution (EFC) – the amount a student and his or her family are expected to pay toward college expenses for one academic year. This amount is calculated based on the information supplied by the student and parents on the Free Application for Federal Student Aid (FAFSA).
F
Federal Family Education Loan Program (FFELP) – a program authorized by Congress, through which education loans are provided by private lenders and guaranteed by the federal government. The guarantee agency, or guarantor, administers and insures FFELP loans against default, bankruptcy, disability, or death of borrowers. Subsidized and unsubsidized Federal Stafford loans and PLUS loans are included in the FFELP program.
Federal PLUS loan (parent loan) – a non-need-based student loan available to parents with a good credit history to help pay educational expenses of a dependent, undergraduate student who is enrolled on at least a half-time basis.
Federal Stafford loan (subsidized) – a need-based student loan for which interest is paid by the federal government during the in-school, grace and deferment periods.
Federal Stafford loan (unsubsidized) – a student loan that is not based on need, and for which interest is not paid by the federal government. Borrowers are responsible for all interest accrued on unsubsidized loans.
FICA – Federal Insurance Contributions Act. See Social Security.
FICO – the most commonly used credit score. The name comes from the Fair Isaac Corporation, which developed the scoring model. They are used to predict the likelihood that a person will pay his or her debts. The scores use only information from credit reports.
Finance company – a type of financial institution that makes consumer loans; generally, such loans are made to individuals with less than perfect credit ratings at higher interest rates.
Financial adviser – a person who provides financial information and advice. Examples include employee benefits staff, bank and credit union employees, credit counselors, brokers, financial planners, accountants, insurance agents, and attorneys.
Financial aid – money provided to the student and/or parents to help pay for the student’s education. Major forms of financial aid include gift aid (grants and scholarships) and self-help aid (loans and work-study).
Financial literacy – the ability to use knowledge and skills to manage one’s financial resources effectively for lifetime financial security.
Financial plan – a report that identifies a person’s financial goals, needs, and expected future earning, saving, investing, insurance, and debt management activities; it typically includes a statement of net worth. Ongoing thinking process to develop an orderly program or blueprint for handling all aspects of one’s money, including spending, credit, saving, and investing.
Fixed rate mortgage – a mortgage in which the interest rate and the amount of each payment remain constant throughout the life of the loan.
Foreclosure – a repossession of property by a legal process due to default on terms of mortgage by the borrower. This property is sold at a public auction, the proceeds of which are used to settle mortgage debt.
Free Application for Federal Student Aid (FAFSA) – a federal form required to apply for federal student aid. Forms can be completed online at
Front-end load – a sales charge paid when investments are purchased and sometimes when dividends are reinvested.
G
Garnishment – a court-sanctioned procedure that sets aside a portion of an employee’s wages to pay a financial obligation.
Grace period – a transition period (generally six months following the date a borrower leaves school or drops below half-time status) during which the borrower is not required to make loan payments. This period is designed to help the borrower prepare for repayment.
Grants – money for college that does not have to be repaid, which is based on a student’s financial need. Eligibility for federal grants is determined when a student applies for federal student aid through the FAFSA (Free Application for Federal Student Aid).
I
Identity theft – the crime of using another person’s name, credit or debit card number, Social Security number, or another piece of personal information to commit fraud.
Individual Retirement Account (IRA) – an investment with specific tax advantages. A traditional IRA defers taxes on earnings until withdrawal and, under certain circumstances, allows the deduction of some contributions from current taxable income. A Roth IRA requires after-tax contributions only, but allows tax-free withdrawals under certain rules.
Insurance – a risk management tool that protects an individual from specific financial losses under specific terms and premium payments, as described in a written policy document. Major types include:- Auto – provides liability and property damage coverage under specific circumstances.
- Disability – replaces a portion of income lost when a person cannot work because of illness or injury.
- Health – covers specific medical costs associated with illness, injury, and disability.
- Homeowners – provides property damage and liability coverage under specific circumstances.
- Liability – protects the insured party from others’ claims of loss due to the insured’s alleged or actual negligence or improper actions.
- Life – protects dependents from loss of income, debt repayment, and other expenses after the death of the insured party.
- Long-term care – covers specific costs of custodial care in a nursing facility or at home.
- Renters – protects from losses due to damage to the contents of a dwelling rather than the dwelling itself.
Insurance deductible – a set amount an insured person must pay per loss before the insurance company will pay a claim.
Insurance premium – the payment a person makes to an insurance company in exchange for its promise of protection and help.
Interest – payment for the use of someone else’s money; usually expressed as an annual rate in terms of a percent of the principal (the amount owed).
Interest income – money that financial institutions, governments, or corporations pay for the use of investors’ money.
Interest rate – the percentage rate of interest charged to the borrower or paid to a lender, saver, or investor.
Investing – purchasing securities such as stocks, bonds, and mutual funds with the goal of increasing wealth over time, but with the risk of loss. Setting aside money for future income, benefit, or profit to meet long-term goals; using savings to earn a financial return.
