How Are Student Loans Limits Determined?
Is there a maximum amount that I am eligible to borrow as a college student? What are the different loan packages that graduates and undergraduates are eligible for? The cost of college education isn’t the same and is not a blanket figure if you look at different schools across the country. One needs to understand that there are private and federal student loans, which is where the question ‘is there a limit on student loans?’ finds its answer.
The purpose of the government in providing financial aid is to ensure that every student can access higher education. This is the primary aim of federal aid. Private lenders, on the other hand, understand that there exists a need in the market to provide funds for students and families who cannot afford to cater for their own education costs and they stand in to fill that gap. Therefore, there might be a rate cap on student loans based on interests, but the principal amounts will vary based on whether the loans are federal or private.
The government considers the EFC, which is the Expected Financial Contribution that you and your family can put forward to pay for your educational costs. This holds for a certain level of income, usually $60,000 per annum, anything below which the EFC doesn’t hold true. Private lenders, like banks and credit unions, however, will look at your creditworthiness and other factors such as your debt to income ratio. What does your credit history or that of your parents look like? These are the varying factors that will shift the maximum amounts that you can get for different types of loans.
Since millions of students are applying for federal loans, there is a general need to regulate the maximum amounts that students can get from these packages, regulating both principal and interest.
Is There A Cap Limit On Student Loans?
The maximum federal student loans and their limits depend on the type of loan that you are applying for and whether you are a graduate or undergraduate student. The main factor to be considered when giving out any loan is the minimum it costs to attend a certain institution, meaning your school has to determine both the tuition and other costs. You may also receive other types of funding like grants, scholarships, and your EFC, and deduct these from the minimum cost of attending the institution. The balance is what a federal loan will cover, other factors considered. There are three main types of federal loans:
- Stafford loans: these are need-based loans and are popular because of the low interest levied on them. They may be subsidized or unsubsidized, depending on what you need. Is there a limit on Stafford loans? The maximum that undergraduates can borrow is:
-$5500 for first-year students, of which only $3500 can be subsidized
-$6500 for students who’ve completed their first year, of which only $4500 can be subsidized.
-$7500 for subsequent years, if the remainder of the program is at least one year, and only $5500 of which can be subsidized.
The maximum amount also changes for undergrads who are independent students or dependents whose parents are not able to apply for a PLUS loans as follows:
-$9500 for option 1, with only $3500 as a subsidy
-$10500 for option 2, with a maximum subsidy of $4500
-$12500 for option 3, with a maximum subsidy of $5500
The max student loans for graduate school under Stafford loans are:
-$20500 for independent students, with no subsidies.
-$31000 for dependent students with no more than $23000 as subsidies.
-$57500 for independent students, with no more than $23000 as subsidies.
- Perkins Loans: These are federal loans made available through your school. The maximum amount allowed for undergraduates is $27500, with a maximum of $5500 for each year of undergraduate study. The maximum for graduate studies is $60000, which includes Perkins loans you took as an undergraduate. The maximum per year is $8500.
- Plus loans: There is no definitive loan limit on these loans. The interest rates are higher than other federal loans, and it is open to parents of dependents taking out these packages. What will be considered is the Cost of Attendance less any other financial aid received by the student. There is usually a tendency to apply for more than one needs seeing as there are no caps on the principal amounts.
What Do Financial Aid Loans Limits Depend On?
The borrowing limits depend on whether the loan is subsidized or unsubsidized, and any graduate limits include that from similar packages in undergraduate school. If you manage to clear your loan balance, your aggregate limit may be refreshed, so you need to pay so that you can borrow more. These figures on financial aid student loans maximum give you a rough idea of what you should go for first, which is obviously the Stafford option. The department of education federal loans limit may change annually subject to Treasury reviewing benchmark rates and other monetary influences. Student loans by year change depending on where you are as an undergraduate, and you should have a pretty good idea of what it costs to attend school once you’ve begun your education.
Aggregate limit for student loans from private lenders usually ranges from $75000-120000 for undergraduates, although these figures vary greatly from lender to lender and school to school. Programs like Law and Medicine generally have higher limits than others. Private loans constitute the greater majority of no limit loans.
Can I increase my federal student loans? Yes, as long as you haven’t exceeded the amount the school deems that you can borrow. Do loans count as federal student aid? Yes, because these loans are usually subsidized, and they have lower interest rates as compared to more commercial loan products.