How much financial aid will the government give?
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When it comes to paying for college, thereâs a good chance youâll need to use multiple strategies to cover the costâand that may include taking loans to help you cover any shortfall. If you end up needing to borrow money to pay for a college education, just remember that thereâs a limit to how much you can take in federal student loans.
Key Points
- The student federal loan limit is set by the government, no matter what your income level.
- Income doesnât limit your eligibility for federal student loans, but financial need determines whether you qualify for subsidized loans.
- You can still get federal loans if you have scholarships and/or money in a 529 college savings plan.
What are the federal student loan limits?
The amount you can borrow in student loans depends on whether youâre an undergraduate or graduate student and how many years youâve been in school. For undergraduate students, you also need to determine whether youâre considered an independent student.
Table 1 shows the annual and aggregate federal student loan limits for undergraduate, graduate, and professional students.
| Year | Dependent students | Independent students |
|---|
| First-year undergraduate annual loan limit | $5,500. No more than $3,500 of this amount may be in subsidized loans. | $9,500. No more than $3,500 of this amount may be in subsidized loans. |
| Second-year undergraduate annual loan limit | $6,500. No more than $4,500 of this amount may be in subsidized loans. | $10,500. No more than $4,500 of this amount may be in subsidized loans. |
| Third year and beyond undergraduate annual loan limit | $7,500 per year. No more than $5,500 of this amount may be in subsidized loans. | $12,500. No more than $5,500 of this amount may be in subsidized loans. |
| Graduate or professional student annual loan limit | Not applicable. (All graduate and professional degree students are considered independent.) | $20,500 for graduate students.
$50,000 for professional students. |
| Subsidized and unsubsidized aggregate loan limit | $31,000. No more than $23,000 of this amount may be in subsidized loans. | $57,500 for undergraduates. No more than $23,000 of this amount may be in subsidized loans.
$100,000 for graduate students; $200,000 for professional students. The graduate aggregate limit includes all federal loans received for undergraduate study. |
| Table 1: THATâS ALL YOU GET. The annual loan limit increases as you progress through college and into graduate studies. The limit is higher for independent students. Note that, in addition to an annual limit, thereâs also an aggregate limit. Source: Federal Student Aid, an Office of the U.S. Department of Education: https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized. |
Is there a student loan income limit?
There is no income limit when taking federal loans. However, you must demonstrate financial need to qualify for Direct Subsidized Loans.
With subsidized student loans, the government pays your interest while youâre in school and during your grace period. This can save you money on interest in the long run. However, eligibility is based on financial need as determined through the Free Application for Federal Student Aid (FAFSA).
Subsidized vs. unsubsidized loans
When you fill out your FAFSA, the financial information you provide about you and your parents will be used to determine whether you qualify for subsidized loans. Your eligibility must be determined each year, and the total amount you can borrow in subsidized loans will be limited according to the federal loan program.
What about student loan limits for private loans?
If you need to borrow more money beyond federal student loan limits, you might need to turn to private loans. Private student loan limits vary by lender, but you typically canât borrow more than your schoolâs cost of attendance minus any other financial aid you have (including federal student loans).
What about getting both a student loan and scholarships?
One concern about getting a scholarship or having money in a 529 education savings plan is that it might affect your federal financial aid.
Your familyâs assets, including whatâs in a 529, can have an impact on your ability to receive grants and other need-based aid, they wonât change the federal student loan limits themselves. Because Direct Subsidized Loans are need-based, however, your financial aid package can affect how much of your federal loan eligibility is subsidized.
Your scholarships and 529 account balance, as well as your federal student loans, might impact how much you can borrow from private lenders. If you apply for private student loans, make sure you understand how they determine what you can borrow.
How can I pay for college without using student loans?
Itâs not always necessary to get student loans to pay for college, but getting through university debt-free requires early planning. Some of the strategies you can use to avoid student loans include:
- Save up. You can contribute to a 529 or Coverdell education savings account to save ahead of time. These accounts can help you set aside money and let it grow tax-free as long as the funds are used for qualified education expenses. Itâs also possible to use traditional savings and investment accounts to pay for college.
- Apply for scholarships. Look into need-based and merit-based scholarships. Consider applying for scholarships from schools, governments, organizations, and other sources to get money for school.
- Accept need-based aid if you qualify. If you meet income requirements, you can apply for need-based aid, such as grants. Federal and state governments offer grants, as do other organizations.
- Work. Another solution is to earn money by working while youâre in school. You may also qualify for Federal Work-Study when you fill out the FAFSA.
- Attend a less expensive school. If you can spend less in the first place, you might be able to reduce your need for student loans. For example, you might go to a community college first, saving money and paying out of pocket, then transfer to a four-year school to finish. Compare the cost of attendance and determine whether it makes sense for you.
Thereâs a good chance youâll need to combine more than one strategy if you hope to avoid using student loans to pay for college.
When it comes to paying for school, your best bet is early planning and combining different strategies to reduce your reliance on debt. However, if you do need to take out loans, start with federal student loansâsubsidized loans first, if you qualifyâbefore turning to private loans.
Federal student loans are available without the credit and underwriting requirements of private loans, and income doesnât determine whether you can receive an unsubsidized loan. Carefully consider your options and plan ahead so that you can borrow as little as possible and avoid drowning in debt after you graduate.
This article was most recently revised and updated by Miranda MarquitThis article was most recently revised and updated by Nancy Ashburn
