What is the Dollar Amount Limit for Student Loans?
There are many different types of student loans available, with most of them falling either under the umbrella of a federal student loan or a private student loan. Each of these loans has different terms, stipulations, interest rates, and maximum borrowing amounts. Federal student loans generally have lower, fixed interest rates while private student loan rates can fluctuate with the market but can also have larger borrowing amounts.
Loan Limits by Type
Federal students loans are considered Direct Loans as the federal government is your lender, setting the rates and limits. These loans are either subsidized, where the government pays the interest while you attend school, or unsubsidized, where you the borrower are responsible for the interest even while attending college. Student loan limits differ whether or not you are a dependent of your parents or independent and borrowing money also. Federal loans are available for parents as well and called Parent PLUS Loans. Private loan terms are set by the individual financial institution lending the funds.
Loan maximums for undergraduates by type are:
- The Subsidized and Unsubsidized Direct Loans aggregate amount for dependent 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 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.
- Private loans limits are set by the individual lender and can also be the cost of college attendance minus other aid received.
- Federal Perkins Loans are offered to students in dire financial need with an aggregate maximum amount of $20,000 ($4,000 per year).
Schools also have a say in the amount of money you can borrow, and most of the time the amount you borrow cannot exceed your actual financial needs. Student loan limits may also be dependent on your grade level.
Many times the cost of college is more than what is covered by one loan, and students can take out more than one loan at a time to cover these costs. For example, if you have filled out your FAFSA, received your financial award letter, and realize that this is not enough funding, you can seek out a private lender to cover the additional costs. Be careful with this, however, as multiple loans can make getting out of debt after college more difficult and possibly take longer. You can browse our website for more information on the different options and types of loans available to you.
Is Taking Out the Maximum Amount a Good Idea?
Just because you are offered the maximum dollar amount of a loan does not mean you should borrow the full amount. Borrowing the maximum amount increases your debt long-term and can increase the amount of time it takes you to pay off the loan. You should instead borrow only what you need and seek out alternatives to borrowing.
Alternatives to Loans
Before applying to borrow money via a student loan, consider your other options. Fill out your FAFSA to see what types of aid are available to you. Grants are funds that do not have to be paid back like loans do, and oftentimes students are eligible for multiple grants. The U.S. Department of Education offers the Pell Grant to students demonstrating financial need. Many scholarships and other grants also exist. Contact your financial aid office for more information on these and more alternatives, and continue browsing our site to see what is available.