10 Key Financial Terms To Know Before You Graduate
Categories: Blog, For Students, For College Students, For High School Students, For Grad Students
Transitioning out of school can be overwhelming and often comes with many changes. Whether it’s graduating from high school, moving into a dorm room, or finding your way in the workplace, a new adventure awaits. Not only are your surroundings brand new, but sometimes you’ll run into unfamiliar words and phrases. When it comes to your finances, it’s important to feel confident in those conversations surrounding money and be fully informed so you can set yourself up for success.
Below, we’ve included 10 key financial terms to understand before your next big life endeavor.
Student Aid Terms
FAFSA®: Let’s start with the big white whale of student finance vocabulary. The FAFSA (aka Free Application for Federal Student Aid) is just a tool to help you and your college find out what financial aid you are eligible to receive.
Grant: An award of monetary value. Typically, grants do not have to be paid back. You can find which grants you may be a fit for by filling out the FAFSA.
Loan: This term is one you may run into a lot. A loan is a sum of money you borrow, often agreeing to a set of conditions–including a plan to pay back what you borrowed eventually.
You’ve probably heard of phrases like loan forbearance, meaning your payments on a loan may be temporarily paused or reduced for a certain amount of time. Loan deferment is a term used when payments are momentarily halted to ease economic hardship on you. In contrast, loan forgiveness means that, for whatever reason, you are no longer expected to pay either all or a portion of your loan.
Subsidized vs. Unsubsidized: If you investigate financial aid options, you’ll run into loans described as subsidized or unsubsidized. However, they are similar in name, but the differences are huge! When taking out an unsubsidized loan, you will accumulate interest from the moment the loan is disbursed. With a subsidized loan, however, you will not be responsible for any interest you accrue while in school or in times of deferment.
Interest: You can sometimes think of interest as a fee for the money you borrow. This is another reason why making credit card purchases and taking out loans should always be done with great care. On the flip side, interest can be a reward for saving money, such as the small portion of the funds accumulated as your savings account grows.
Credit Score: Your credit score is a three-digit number to determine whether you’re a reliable candidate to lend money. Factors such as payment history, the amount of debt you have, the length of time you’ve been borrowing, etc., can impact your ability to borrow money in the future.
(Guess what? We’ve got some incredible blogs to educate you more on credit cards and credit scores.)
W-2: During tax season, many letters and numbers may come up, but one you should especially become familiar with is a W-2. This may be a document you’ve filled out when starting a new job, inquiring about your income and the amount of taxes taken out of each paycheck.
Dependent: The term “dependent” can help identify anyone in your household who is reliant on you and your income. This is typically a child, younger sibling, or stepchild. For a full list of possible dependents and an in-depth analysis of who may qualify, you can see here.
Tax Return: A tax return is a series of documents you complete once a year to help configure your income and how much in taxes has already been taken out.
Tax Deduction: Some expenses you may have could be considered tax deductions, which can be subtracted from the total income tax you owe.
Knowing even a portion of the language regarding your finances can be a huge step toward freedom and confidence when managing your money. For more insight and great tips for your financial well-being, check out our blog!