What is the Borrowing Limit for Federal Student Loans?
Students aren’t allowed to borrow as much as they’d like to borrow from federal student loan sources. Instead, they’re required to adhere to very strict limits on the amounts they can borrow, and once they hit those limits, they just can’t borrow any more money from the U.S. Department of Education.
Current Federal Student Loan Limits
Loan limits are set by the U.S. Department of Education, and they cannot be customized to meet the needs of specific families. These are the limits that apply to all students, per the organization’s website:
- Undergraduate Perkins Loans: Up to $5,500 per year
- Graduate Perkins Loans: Up to $8,000 each year
- The Subsidized and Unsubsidized Direct Loans aggregate amount for dependent, undergraduate students is $31,000 ($5,500 the first year, $6,500 the second year, and $7,500 the third and fourth years).
- The Subsidized and Unsubsidized Direct Loans aggregate amount for independent, undergraduate students is $57,500 ($9,500 the first year, $10,500 the second year, and $12,500 the third and fourth years).
- Parent PLUS Loan maximums are dependent on the cost of college minus the amount of aid received and generally cover the entire cost of higher education.
Some of the loan types listed above are based on a student’s financial health and ability to pay for school, so students might not be provided the maximum amount available per borrowing limits.
Using the Limits Wisely
Students who are provided with the maximum loan amounts available to them through the federal program aren’t required to accept the full amount of the loan. They might find that they can cut costs by working or by changing their living arrangements, and if they reject a loan disbursement before it arrives at the school, they won’t be responsible for paying that money back. Students who don’t need the full amount of the loan should be wise and reject the amounts they don’t need.
But students who need every dime of assistance they can get would be wise to use up all of their federal student loan options before they delve into the private loan marketplace. Federal loans come with a variety
of protections that just aren’t available in private loans, including flexible repayment options and balance forgiveness for certain borrowers. Students should accept all of the federal funds they can, so they can take advantage of these benefits before diving into the private loan marketplace and accepting loans that might be a little less favorable.
If you’ve hit these limits, and you do need to look into the other options you can use in order to pay for school.