Student Loan Terms You Should Know

By Rachel Seitz

Student Loan Terms to Know

Here's a not-so-fun fact: 44% of graduates don’t know the difference between federal and private student loans. (And if you’re one of them, don’t worry—we’ve got you covered there.) Understanding your loan and how it works is key to making the best financial decisions for you, and here at Climb we’re dedicated to making sure you really know your loan and your finances as a whole. So, we’ve gathered some common student loan terms you definitely want to be familiar with throughout every part of your student loan process!*


To know before you borrow:

What Is a Co-Borrower


Someone (relative, spouse, friend, or anyone!) who signs onto a loan with the main borrower and agrees to make payments if the borrower becomes unable to do so.

What Is Origination


On the lender’s side, the process of a loan application. This includes the application’s submission, loan underwriting, processing any documentation you’ve submitted, and sending the loan funds.


What Is an Origination Fee

Origination Fee

The fee lenders charge for processing a loan application. Depending on the lender, this can be paid as an upfront cost, or it can be added to the total amount of the loan and paid back monthly as part of the loan payments. (At Climb, our origination fees are added to the loan and paid back over time).

What Is Debt-to-Income Ratio

Debt-to-Income (DTI)

Your monthly debt payments compared to your monthly income.


What Is a Loan Principal


The amount that  you currently owe out of the original amount you borrowed. If you take out a $10,000 loan, your principal at the beginning will be $10,000. Then, the principal will be reduced as you pay back the original amount you borrowed and the additional interest on the loan!

What Is Interest Rate

Interest Rate

The amount you are charged to borrow money. This is usually expressed as a percentage of the principal amount you pay over the course of a year, typically in monthly installments

What Is Annual Percentage Rate

Annual Percentage Rate (APR)

The amount you’re charged annually to borrow money. Like interest rate, this is expressed as a percentage, but unlike interest rate, it takes any additional loan fees into account.


To know as you pay back:

What Is Loan Disbursement



When a lender sends the funds for a loan.

What Is a Loan Servicer

Loan Servicer

A company used by the lender to handle payments and billing after a loan is funded.


What Is Deferment/Forbearance


A temporary reduction or pause in your student loan payments. While these differ in the case of federal student loans, with private student lenders availability and terms vary and interest always accrues during the deferment/forbearance period. You may also need to provide documentation showing your need of assistance.


With these terms in mind, you’ll be well-prepared to stay on top of your student loans. And of course, you can always reach out to a company representative for even more information!

*These are how these terms are typically used. You should check the specific definitions in any loan documents before you sign them and consult an attorney or other advisor if you aren't sure what any specific terms means.


Rachel Seitz

Marketing Associate,
Climb Credit