The Chip-tionary: What Deferment, Forbearance and Other Weird Student Loan Words Mean

The man doesn’t make it easy, am I right? We spend literally decades going to school and still graduate with little to no understand of how student loans actually work. Luckily, that’s where Chipper comes in. We make chipping away at your student loan debt easy. But, we know that’s not the only thing on your mind…

Knowledge is power. Use this Chip-tionary when you get any kind of notice from your student loan provider. It will help the words on the page become the English language in your brain.


A period during which your monthly loan payments are temporarily suspended or reduced. Your lender may grant you a forbearance if you are willing but unable to make loan payments due to certain types of financial hardships.


A temporary postponement of payment on a loan that is allowed under certain conditions. Depending on the type of loan you have, interest may still accrue during deferment.


Interest is paid to a lender as a cost of borrowing money. Interest is calculated as a percentage of the unpaid principal amount.


Capitalization is the addition of unpaid interest to the principal balance of a loan. Generally, during periods when you are making payments on your federal student loans, your monthly loan payment will cover all of the interest that accrues (accumulates) between monthly payments, and you won’t have any unpaid interest. However, unpaid interest can accrue under certain circumstances like during forbearance.

Direct Subsidized Loans:

Loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.

Direct Unsubsidized Loans:

Loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.

Direct PLUS Loans:

Loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.

Direct Consolidation Loans:

Loans that allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer.


Unsubsidized Loans:

A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.