Understanding Student Loan Limits
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Student loans backed by the Federal government are capped at amounts expected to pay for college costs, not for new sports cars or airline tickets to the beaches of Thailand. At the beginning of 2017, students in the United States owed $1.4 trillion dollars on their loans.
Federal regulations help ensure that students only borrow up to the total cost of their attendance at their degree program. If other financial aid is made part of the student’s overall support package, the loan amount will be reduced by the amount of other aid. Dependent students receive lower caps since their parents can apply for Direct Plus loans to offset tuition shortfalls. Let’s check out the different student loan limits and learn how much money you can borrow.
Federal Student Loan Limits
There are two types of federal student loans: direct subsidized and unsubsidized loans. To curb excessive borrowing, The U.S. Department of Education has established ceilings on all Direct Subsidized Loans and Direct Unsubsidized Loans it gurarantees. Federal Stafford Loans are regulated according to two limit categories:
- Annual Loan Limits. The maximum in terms of dollars a student may borrow for one academic year (9 months or 12).
- Cumulative/Aggregate Loan Limits. The maximum a student may borrow during their participation in loan programs during their total degree program. For graduate students, the aggregate total includes outstanding balances on Federal undergraduate loans.
The subsidized and unsubsidized aggregate loan limit for dependent students is $31,000, but no more than $23,000 of that amount can be subsidized (i.e. the government pays the interest on your loans while you are in school.)
For independent students, the subsidized and unsubsidized aggregate loan limit is $57,500 for undergraduates, with no more than $23,000 of that amount in subsidized loan. For graduate and professional students, that number goes up to $138,500, with no more than $65,500 of the amount being subsidized loans.
If you break this down into annual limits, dependent students can borrow $5,500 their first year, $6,500 their second year, and $7,500 their third year and beyond, while independent students can borrow $9,500 their first year, $10,500 their second year, and $12,500 their third year and beyond.
Thus, federal student loan limits are determined by your status as a dependent or independent student, the year you’re in school, and whether or not you’re an undergraduate or a graduate student. Federal student loan limits can also depend on whether or not your parents are able to obtain PLUS loans.
Perkins Loan Limits
Your ability to take out Perkins Loans depends on how much financial aid you get from other sources, your financial need, and whether or not your educational institution has funds they can offer you.
Perkins loans are great because they have low interest rates and help those who have financial need. The annual loan limit for undergraduate students is $5,500 a year. In total throughout your education, you cannot take out Perkins Loans in excess of $27,500.
Graduate and professional students, again who demonstrate financial need and attend a university that has funds to allocate, can take out larger amounts. Annually, they can get $8,000 per year and in total can receive no more than $60,000, inclusive of any Perkins Loans you took out as an undergraduate.
Direct PLUS Loan Limits
Students who have a positive credit history may be eligible to borrow Direct PLUS loans directly from the U.S. Department of Education for their graduate or professional studies.
For these loans, your loan limit is the cost of your attendance to go to school. This number is usually provided by your university. They will also take into account any other financial aid you may have received from other lenders.
Direct PLUS loans have fixed interest rates at 6.31% at the time of this writing. Keep in mind, that in order to receive these loans you have to be enrolled at least half-time and be attending a program that leads to a graduate degree or certificate. You can also take out these loans as a parent of a dependent undergraduate student. It is required that you meet all eligibility requirements.
Direct Consolidation Loan Limits
Consolidation loans are helpful for a few reasons. It allows you to combine all of your loans into one larger loan with an interest rate that is the average of your interest rates. Having a single monthly payment makes paying back your debt more streamlined, and you still are eligible for all repayment and forgiveness programs that federal loans offer.
If you have private student loans, they can not be consolidated under the direct consolidation loan program. Do not fret, even though direct consolidation loans are only offered for federal student debt, there are private student consolidation or refinancing options available.
According to the Federal Government’s website on direct consolidation loans, they do not list loan limits. Rather, they state you can combine existing federal loans into one loan. For more information, you can call the Loan Consolidation Information Call Center at 1-800-557-7392.
Private Student Loan Limits
Private student loans are different from federal student loans in a variety of ways. Typically, when it comes to limits for private student loans, a borrower can take out a loan equal to the amount of their tuition and expenses, minus any other financial aid they’ve been offered. Many private lenders can offer up to $225,000 to students, depending on their education level. For example, those who are enrolled in medical, dental, or law school can often qualify for higher limits. The limits will vary depending on your private lender.
In sum, private student loan limits are determined on a case by case basis and are dependent on the cost of your school, and the amount of other financial aid you’ve been offered.
Students Loan Limits Higher for Students Pursuing Health Care Degrees
Students attending medical schools will find higher Federal student loan limits to offset the costs of doctoral programs in fields such as Optometry, Dentistry, Veterinary Medicine, and other approved disciplines.
Students must be enrolled in colleges and universities in the United States to qualify. For a 9-month school year, participating students can borrow up to $40,500 each year, or $47,167 based on a 12-month program.
Caps are also higher in graduate healthcare disciplines of pharmacy, public health, chiropractics, and clinical psychology with Federal student loan limits of $33,000 (nine-month programs) or $37,167 (12-month programs).
Student borrowers should note that repayment on their loans begins with separation from college, whether they graduate or not. The first day after a missed payment, the loan becomes delinquent, with delinquencies of more than 90 days reported to the three major credit bureaus.