a response to a formal legal complaint. For more, see if a collector sues you

annual percentage rate/APR

a measure of interest rates (actually it also includes some fees) on an annual basis. How APR is measured is heavily regulated, since creditors try to make their prices look lower through techniques like dropping the interest rate and jacking up fees.


a privately judicial process that operates outside the court system. Many creditors (and other corporations) now include clauses in their contracts/promissory notes that require all disputes to be resolved by arbitration. That means you can't sue them in real court. And it usually means you can't file a class action.


amount that a debtor owed in the past but hasn't paid. "backpay"


any possession with value.

automatic stay

an order from a bankruptcy judge that stops all creditors from collecting on somebody who has filed bankruptcy.


the legal process by which a debtor who cannot pay all of their debts arranges to have them discharged and/or consolidated. For more see bankruptcy

bankruptcy trustee

an official appointed by a bankruptcy court to manage the assets of a debtor going through bankruptcy. For more see the bankruptcy process

borrower defense

see defense to repayment


an asset (anything worth money) that a debtor pledges to give to a creditor if they stop paying a loan. Also called "security" for a loan.


the document that announces a lawsuit. If a creditor (or collector) sues you, you will get a complaint in the mail. If you sue a creditor (or collector), you have to send a complaint to the court and to the creditor. For more, see if a collector sues you and if a collector violates the law.


taking out a loan to pay off other loans. Consolidation can be done to change interest rates and/or to turn multiple loans into a single loan. When it's just done to change interest rates (one loan is consolidated into another with a lower interest rate) rather than to turn multiple loans into a single loan, it's often called "refinancing". For consolidation in federal student loans, see consolidation of federal loans

##credit card a payment card that, when used, fronts you the money. For more, see debit, credit, and prepaid cards

credit limit

the amount that a creditor that offers a line of credit (usually in the form of a credit card) will allow you to borrow. For more, see how credit cards work


any person or company that lends money. Banks, financial companies, credit card issuers, retail stores with lines of credit, and the Department of Education's student lending division are all creditors.

debit card

a card connected to a bank account--any time you use it to pay or take out money from an ATM, that money is deducted from your bank account. For more, see debit, credit, and prepaid cards

debt collector

a company that makes money just by collecting on debts they did not lend. Some debt collectors are hired by creditors to collect on their loans; others buy debts from creditors and collect themselves. For more, see debt collectors.

defense to repayment/DTR

a discharge of federal student loans for student debtors whose school defrauded them. For more, see getting your loans cancelled


a temporary stop to loan payments. On federal student loan deferment, see avoiding payment


a cancellation of a debt. It can happen in bankruptcy or if a debt is declared illegitimate or if a creditor decides not to collect anymore.


a bank account created for a specific purpose to be managed according to specific rules. usually used in mortgage loans for servicers to set aside payments for insurance and taxes.


an asset or amount of income that a creditor is not allowed to force you to give up. These are relevant both if a creditor sues you and in bankruptcy. They depend on state law.

false certification

a discharge of federal students loans for student debtors whose school falsified records. For more, see getting your loans cancelled


one-time charges a creditor adds to a debtor's bill for some additional thing that happened besides lending. Traditionally, interest is meant to cover the overall cost of lending and fees are only for additional services. But fees have become a very broad category since creditors like to use them to hide costs. For more, see principal, interest, and fees

FFELP loan

a type of federal student loan. See types of student loans


the company that creates credit scores.


a temporary stop on loan payments while interest accrues. On federal student loan forbearance, see avoiding payment. Some private student loans also provide forbearance. For more, see avoiding payment on private loans


the process by which a creditor takes a debtor's asset (usually a house) when that debtor has defaulted on their loan. see resising foreclosure


when a creditor forcibly takes some of your income directly from your bank account or your paycheck. Private lenders need a court order to do this. For more, see if you are sued The Department of Education does not. For more see federal loan default.

grace period

for federal student loans, the 6 month period after school in which you don't have to begin repaying your loans. See avoiding payment

guaranty agency

under the FFELP loan program, a guaranty agency literally guarantees the profits of private lenders by buying the loans off of them at close to full price if a debtor defaults. For more, see types of federal student loans

income-based repayment/IBR

a repayment plan that determines payments based on a debtor's income. For more on federal student loans, see repayment plans

installment loans

a loan with regular payments. Car loans, mortgages, and student loans are all installment loans.


money a creditor charges for borrowing. Usually calculated as a percentage of principal. For more, see principal, interest, and fees


a decision of a court that a debtor owes a certain debt. A judgment is necessary for a creditor to be able to engage in forcible collection actions like garnishment, liens, and asset seizure.


when a creditor takes partial legal control over an asset that gives them the power to seize the asset if the debtor that owns the asset fails to pay.

minimum payment

a trick that creditors use to make you pay less per month so that you pay more in interest over the long term. For more, see how credit cards work


any loan backed up by an asset as a collateral. Most commonly used to talk about home loans. [more on housing debt coming soon]


for federal student loans, an offset is when the government automatically takes away your tax return or public benefits because you have defaulted on your loan. For more, see default on federal student loans

payday loan

a short-term loan for a relatively small amount of money, usually (but not always) due for payment on a debtor's payday. [more on payday loans coming soon]

payroll card

a type of prepaid card that is loaded by an employer. For more, see debit, credit, and prepaid cards

Perkins loan

a type of federal student loan. see types of student loans

prepaid card

a card that you have to put money on in advance in order to use it, but not associated with a bank account. For more, see debit, credit, and prepaid cards


the amount of money that a debtor has to pay down in order to eliminate a debt. Generally, the principal is the amount originally borrowed minus any amount already paid down. Sometimes fees and interest are added onto the original principal in a process called "capitalizing". For more, see principal, interest, and fees

promissory note

the contract a debtor is supposed to sign in order to take out most loans. Promissory notes contain the terms and conditions of the loan agreement and are generally required for a creditor to prove that a debtor owes them money in court. For more, see contracts.


see "consolidation"

revolving loan

a loan without a fixed number of payments and a flexible principal amount. In other words, a line of credit that you can draw down and repay on flexible terms. Credit cards are the most common form of revolving credit nowadays. Another example is a store that allows you to buy on credit without paying it off each month. For more, see credit cards

secured loan

a loan backed by collateral/security.


see collateral.


a company that contracts with a creditor to deal with with the billing and collection aspects of the lending process (i.e the parts that involve interacting with a debtor). A servicer is not the same as a debt collector. Unlike a debt collector, they can deal with loans that are not in default and they never own the loan. In fact, sometimes debt collectors hire servicers to deal with debtors. See a list of federal student loan servicers here

Stafford loan

a type of federal student loan. see types of student loans


information about a particular debt on a credit report. Each debt a debtor has has its own tradeline on a credit report. For more, see credit reports


the process by which a creditor determines whether they can make a profit by lending to you (creditors call this "creditworthiness"). Underwriting is used to determine whether or not to lend to you and on which terms (at what interest rate, etc.). For more, see underwriting.

unsecured loan

a loan without any collateral backing it up.