There are limits to almost everything in life, including how much you can borrow on student loans. Student loan limits are based on a variety of factors, including the type of loan (federal or private), your year in school, and how much it costs to attend your school of choice.
- The four main types of student loans are federal direct subsidized, federal direct unsubsidized, federal direct PLUS, and private.
- Loan limits are based on type of loan, year in school, and cost of attendance.
- Annual and cumulative limits both impact the amount you can borrow.
It’s important to keep in mind that the maximum amount you can borrow isn’t necessarily the amount you should borrow. You should only borrow as much as you can expect to be able to pay back under the terms of the loan—and the interest rate is part of that calculation. All this makes for a tricky landscape, which starts with knowing what’s available.
Note that as a result of the 2020 economic crisis, the U.S. Department of Education has suspended loan payments, waived interest, and stopped collections. They are expected to resume in mid-2023.
How Much Can You Borrow?
In addition to private loans, there are three main types of federal student loans: direct subsidized, direct unsubsidized, and direct PLUS.
First, consider a direct subsidized loan. Subsidized federal loans are simple to obtain, usually less expensive than PLUS or private loans, don’t require a credit check or cosigner, and have built-in protections and repayment options that unsubsidized, PLUS, and private loans don't have. Subsidized federal loans are available for undergraduate students only. Unsubsidized federal loans can be taken out by both undergrads and graduate/professional students.
Federal Direct Student Loans
The table below shows the breakdown of the maximum amount you can borrow when taking out direct subsidized loans and direct unsubsidized loans. Note that the total for each year, and cumulatively, includes both subsidized and unsubsidized federal loans. If, for example, your subsidized loan total in year one as a dependent undergrad is $3,500, you are limited to $2,000 in unsubsidized loans for that year. If your subsidized total is less than $3,500, the difference between that and $5,500 can be unsubsidized loans.
The amount you can borrow each year and cumulatively as an undergrad is also affected by your parents' eligibility to help you by taking out a direct PLUS loan. If they are eligible, the amount you can borrow in your own name is less. If they are ineligible, due to poor credit, for example, you can borrow more. Amounts for independent undergrads also reflect lack of parent support—as do amounts for graduate and professional students, who are always considered to be independent.
|Dependent Undergrads (parents eligible for PLUS loans)||Subsidized||Total|
|Year 3 and above||$5,500||$7,500|
|Dependent Undergrads (parents not eligible for PLUS loans) & Independent Undergrads||Subsidized||Total|
|Year 3 and above||$5,500||$12,500|
Source: U.S. Department of Education.
The aggregate total for each class of borrower includes all unpaid loan balances for all federal student loans taken. This includes subsidized and unsubsidized FFEL (Stafford) loans, which are no longer available, in addition to subsidized graduate level loans dispersed before July 1, 2012.
To apply for federal student loans, you'll need to submit the Free Application for Federal Student Aid (FAFSA).
Federal Direct PLUS Loans
Federal direct PLUS loans are available to parents of dependent undergraduate students as well as to graduate or professional students enrolled in school at least half time. PLUS loans do not have a cap on the amount that can be borrowed, but you can't borrow more than the cost of attendance at the specific school you—or your child, if you're the parent—are attending. Cost of attendance is defined as tuition and fees, room and board, books, supplies and equipment, transportation, and miscellaneous expenses.
Unlike federal direct loans, PLUS loans do require a credit check but not a specific credit score. Borrowers cannot, however, have an adverse credit history unless someone agrees to be an endorser (cosigner) on the loan or they can prove extenuating circumstances for the adverse credit history. Apply for a federal direct parent PLUS loan here and a federal direct graduate PLUS loan here.
Private Student Loans
Private student loans come from banks, credit unions, and other financial institutions. The limits vary by lender but generally max out at the total cost of attendance at the school you or your child attends. In addition, most private lenders have a maximum loan amount that can’t be exceeded no matter how costly your school is. To apply for a private student loan, contact the lender directly.
When it comes to student loans, don’t borrow what you can—borrow what you can pay back.
Annual and Aggregate Loan Amounts
An important limiting factor when it comes to student loans is the total amount you borrow each year and in the aggregate over the course of your college career. Usually, your aggregate limit as a graduate or professional student includes amounts borrowed (but not yet repaid) as an undergrad. Likewise, aggregate loan limits for private loans usually consider amounts borrowed through federal loans.
Federal direct aggregate limits are affected by your status (dependent or independent) as well as your parents' eligibility to take out a federal direct parent PLUS loan. If they are ineligible, your annual and aggregate limits are higher. The amount of any parent PLUS loan is not subtracted from your federal direct loan limit. Your limit is affected by whether your parents are eligible or not. Keep in mind that aggregate limits are not lifetime limits. As you pay down your student loan debt, your cumulative limit is refreshed.
Loan Eligibility by Type
While a good rule of thumb is to max out federal direct subsidized loans, followed by federal direct unsubsidized loans before turning to parent PLUS or graduate PLUS loans, with private student loans last, you must be eligible for each type of loan in order to apply.
Federal direct subsidized loans are available to students with demonstrated financial need who are enrolled in school at least half time. The formula is as follows: Demonstrated Financial Need = Cost of Attendance (COA) – Expected Financial Aid (EFA) – Expected Family Contribution (EFC).
Thanks to the 2021 Consolidated Appropriations Act, beginning in July 2023, the term "student aid index" (SAI) will replace EFC on all FAFSA forms. In addition to some changes in the way the SAI is calculated, the change attempts to clarify what this figure actually is—an eligibility index for student aid, not a reflection of what a family can or will pay for post-secondary expenses.
If the COA, for example, is $20,000, the EFA is $10,000, and the EFC is $5,000, your demonstrated financial need is $5,000 ($20,000 – $10,000 – $5,000 = $5,000). No matter your need, you can only borrow up to the limit listed in the table above based on your year in school. If you need more money, you can turn to an unsubsidized, parent PLUS, or private loan.
Federal direct unsubsidized loans are available to undergrad or graduate level students regardless of financial need. You can borrow up to your limit but no more than the result of subtracting the cost of attendance from any financial aid you are receiving.
PLUS loans are available to parents or graduate students regardless of financial need. An adverse credit history can impact your ability to get a PLUS loan unless you have an endorser (cosigner) or can show extenuating circumstances for the adverse credit history.
Private student loans are available to anyone—undergrad, graduate, or parent—who can meet the requirements of the lender, which typically includes a credit check.
What are the three main Types of federal student loan?
The three types of federal student loans: direct subsidized, direct unsubsidized, and direct PLUS. The first two have limits on how much can be borrowed, while direct PLUS loans have no limit. Subsidized direct loans to undergraduates max out at $23,000.
What are PLUS loans?
These are federal direct loans that are made to parents of dependent undergraduate students, in addition to graduate or professional students enrolled in school at least half time. PLUS loans don't have a cap on the amount that can be borrowed, but you can't borrow more than the cost of attendance at the specific school you—or your child, if you're the parent—are attending. This kind of loan does have drawbacks, so research them carefully.
What about private student loans?
These come from banks, credit unions, and other financial institutions. The limits vary by lender but generally max out at the total cost of attendance at the school you or your child attends. In addition, most private lenders have a maximum loan amount that can’t be exceeded no matter how costly your school is. Contact lenders directly to apply.
The Bottom Line
Borrowing for college in many regards is like borrowing for a car or a home or any other purpose, meaning the consumer has got to research the subject thoroughly in order to do what's best for themselves and their family. Every borrower has to know how much they will need and what's within their budget. They need to decide if the student will chip in and if grant money is available to augment available financial resources. Remember that some loans are more family-friendly than others, meaning that for some people a private loan may be better than a federal loan.
Federal Student Aid. "COVID-19 Emergency Relief and Federal Student Aid."
U.S. Department of Education. "Federal Student Loans for College or Career School Are an Investment in Your Future."
U.S. Department of Education. "The U.S. Department of Education Offers Low-Interest Loans to Eligible Students to Help Cover the Cost of College or Career School."
U.S. Department of Education. "Direct Plus Loans Are Federal Loans That Parents of Dependent Undergraduate Students Can Use To Help Pay for College or Career School."
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