Federal student loans have maximum amounts you can borrow on both an annual basis and a degree basis. In addition, loan limits vary based on the type of federal student loans borrowed.
Here’s what you need to know about federal student loan limits:
Types of Loan Limits
Annual loan limits are limits for one academic year only. You can get a new limit the following year.
Aggregate limits are limits for the total of your full degree. For instance, a student earning a master’s degree will have a different limit than a student earning an undergraduate degree.
Total cost of attendance is the limit for PLUS loans for graduate students and parents. This is the nearly all-inclusive amount listed on the school financial aid site for all expenses deemed necessary to attend that school. PLUS loans are fill-in-the-gap loans for the remaining cost of an education past the traditional student loan amounts and other financial aid such scholarships received.
How Are Loan Limits Calculated?
Most loans that are directly awarded to students have limits that are set at a national level, per year for a set amount for that year. The only time when your loan limit will be less than the maximum amount is if your school’s cost of attendance (the full cost of attendance including tuition, housing, etc.) is less than the total amount awarded.
For instance, in cases where loans are directly issued to students considered to be dependent on their parents, the current annual limit is $5,500 for first-year students and $7,500 for seniors. The cost of attendance would rarely be less than these limits. However, loan limits are higher for graduate students and independent students, as well as on loans issued to parents.
Subsidized and Unsubsidized Loan Limits
The most common types of loans issued directly to students are subsidized and unsubsidized loans.
Subsidized loans have a financial need restriction on eligibility because of the benefit of the interest being paid by the government while the student is still in school. Of the total limit of $5,500 annually for first year, dependent students who do qualify for subsidized loans, up to $3,500 is available as a subsidized loan.
Unsubsidized loans, loans where the government doesn’t pay interest while the student is attending school, make up the difference in federal student loans. The total limit for dependent undergraduates is $31,000 and $57,500 for independent undergraduates. Graduate students are eligible to receive up to $138,500, including the loans for their undergraduate degree.
Perkins Loan Limits
Perkins loans are a special type of loan awarded to students directly from the school based on a tougher standard of financial need and funds are limited from each individual school. Perkins loans have a slightly higher interest rate attached than subsidized loans or unsubsidized loans for undergraduates. However, they do have a better interest rate than PLUS loans and loans to graduate students. If you are a graduate or professional student, you may be eligible to receive up to $8,000 per year. The total you can borrow as a graduate student is $60,000, which includes amounts borrowed as an undergraduate. These loans also can be cancelled in certain circumstances for teachers. You’ll be told if you qualify after filling out the Free Application for Financial Aid (FAFSA).
It’s very important to remember loan limits are in no way an endorsement of what you should borrow. Have a discussion with your family about the types of federal student loans, how much to borrow and when so you know you can afford to pay back your loans.