4 Reasons the ‘Dependent Student’ Definition Affects Your Student Loans

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Some would say that moving out of your parents’ place means you’re ready to enter the real world. But regardless of where you live, the Department of Education might still see you as a dependent — meaning you would finance your education with dependent student loans.

Let’s look at how to determine whether you’re a dependent or independent student, and how it could affect the way you receive federal aid for college. Specifically, we’ll cover:

Independent and dependent student definitions
4 ways your dependency affects your financial aid
Special circumstances
Consider your student dependency status

Independent and dependent student definitions

You can’t consider yourself an independent student simply because your parents don’t claim you on their tax return, or if they say they won’t help you pay for school. Consider these factors to determine if you are a dependent or independent student.

To be deemed an independent student, you must fit into one of these buckets. If you answer no to all of these, then you’re a dependent student.

  • Are you 24 or older?
  • Are you married? (You count as being married if you are separated.)
  • Do you have, or will you soon have, children who receive more than half of their support from you during the financial award year?
  • Do you have dependents, other than your kids or spouse, who live with you and receive more than half of their support from you?
  • Are you a graduate or professional student?
  • Are you a veteran or a current member of the armed forces?
  • Are you an orphan, or a ward of the court, at any time since turning age 13?
  • Are you an emancipated minor or considered homeless, or were you self-supporting and at risk of being homeless, within the past year?

To receive financial aid from the federal government, filling out the FAFSA annually is a must. Your ability to receive government-funded grants, loans and work-study opportunities is partly decided by your dependency status. If you’re a dependent student, you’ll report your family’s income on the FAFSA, as it’s assumed you’ll have help paying for college. As an independent student, you’ll report only your financial information (and your spouse’s, if you’re married).

Because being an independent student might lead to greater access to federal aid, you’ll need to prove your filing status. You won’t be able to just self-identify and move on.

4 ways your dependency affects your financial aid

The requirements of being an independent student in the eyes of the government are pretty close to non-negotiable. So although you’re not in control of your dependency status, it’s important to be aware that how you’re classified affects how much federal aid you can receive.

Here are all four ways your status affects your finances:

1. Maximum borrowing amounts
2. Eligibility for grant aid
3. Qualifying for in-state tuition
4. Receiving a tax deduction

1. Maximum borrowing amounts

Federal student loan borrowing limits are decided by your dependency status and year in school. Freshmen and sophomore students who are categorized as independent, for example, can borrow $4,000 more in loans per year than their dependent peers. Upperclassmen independents can borrow $5,000 more.

If you are a dependent student, your parents may be able to take out a Parent PLUS Loan to help you pay for college. If you are a graduate student, meaning you are also an independent student, you may be eligible to take out a Grad PLUS Loan. If you’re a dependent student whose parents are ineligible to receive a Direct PLUS loan, you may be eligible for additional Direct Unsubsidized Loans.

Here are the maximums for federal loans:

YearDependent students (except students whose parents are unable to obtain PLUS loans)Independent students (and dependent undergraduate students whose parents are unable to obtain PLUS loans)
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 — 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 limitNot Applicable (all graduate and professional students are considered independent)$20,500 (unsubsidized only)
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.
$138,500 for graduate or professional students — No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study.

Credit: Federal Student Aid

It’s also important to point out that dependency status is not as much of a factor when it comes to private student loans. With that said, as an independent student, you might be hard-pressed to find a cosigner if your parents are out of the picture.

2. Eligibility for grant aid

Although your eligibility for federal grant aid isn’t mentioned in the Department of Education’s dependent student definition, there’s still a connection. After all, dependent students are often (although not always) assumed to have more financial support from home. With generally higher Expected Family Contributions (EFC) than those of independent students, they may be less likely to receive need-based aid.

Unlike loans, these grants are a form of gift aid, so they don’t need to be repaid. Work-study programs are based, in part, on financial need. Traditionally, grants are also need-based while scholarships are more often awarded for merit, such as high grades.

The federal government’s four key grants are all need-based:

  • Federal Pell Grant: This grant is awarded to undergraduate students with exceptional financial need. Award amounts change annually. For the 2021-21 award year, the maximum amount is $6,345.
  • Federal Supplemental Educational Opportunity Grant (FSEOG): You can receive between $100 and $4,000 annually, depending on your financial need, when you apply, the amount of other aid you get and the funds availability at your school.
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant: This grant program provides up to $4,000 per year for students planning to go into the teaching profession. Unlike the other grants, this one also has academic requirements, which generally mean scoring above the 75th percentile on one or more sections of a college admissions test or maintaining a GPA of at least 3.25.
  • Iraq and Afghanistan Service Grant: The maximum amount for the 2021-21 award is $6,345, equal to that of a Pell Grant. You may be eligible if your parent or guardian was a member of the U.S. armed forces and died as a result of military service performed in Iraq or Afghanistan after 9/11, if you were under 24 and enrolled in college at the time of that person’s death. Notably, another eligibility requirement states that you could receive this grant if you are ineligible for a Pell Grant by virtue of your Expected Family Contribution, but otherwise meet all other requirements.

3. Qualifying for in-state tuition

As a dependent student, you’d generally have to prove that at least one of your parents had lived in the state where your college is located before enrolling.

As an independent student, you’d have to prove your own residency, or your spouse’s, for at least a year (some states require two years) and also that you are actually an independent student (using the criteria noted above).

4. Receiving a tax deduction

Like the Federal Student Aid office, another branch of the federal government might classify you as a dependent — the Internal Revenue Service (IRS).

If you remain a dependent during your student loan repayment, you — and your family — should be aware of the tax implications. The IRS allows you to deduct up to $2,500 in paid federal and private loan interest from your taxable income. To be eligible, you can’t be a dependent student, or claimed as a dependent on someone else’s tax returns. You and your spouse, if you are married, should also file jointly.

Your parents may claim the student loan interest deduction if they took out a loan for you. But you can claim it yourself only if you’re not a dependent on anyone else’s form. Keep in mind, however, that this pertains to the IRS’ definition of dependency, and not the definition of a dependent or independent student.

Special circumstances

As we all know, family situations can be complicated. You may be technically considered a dependent student, but have parents who cannot or will not contribute to your education. Perhaps you don’t have a relationship with your parents, or you may have come from an abusive home situation. Maybe your parents are even incarcerated.

If you are experiencing special circumstances such as these, you can indicate them when you are filling out the FAFSA. In this case, your FAFSA would then not be fully processed, and you would not get an Expected Family Contribution amount. You will also have to immediately contact the financial aid office at the school you plan to attend.

It is possible, in this case, that you may be able to be considered an independent student, and have the Expected Family Contribution calculated without including your parents’ information.

Consider your student dependency status

If you’re not sure whether you’re an independent or dependent student, check out the Department of Education’s requirements. Once you know where you stand, you’ll know how you’re affected.

Most important, knowing your dependency status can help you understand your maximum loan allowances, as well as your access to federal grants and tax deductions.

Keep in mind that, if you need more help paying for college after applying for federal loans and grants, you might consider private student loans.

Rebecca Stropoli contributed to this report

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1 Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
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    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

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3 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

  1. Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
  2. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. This informational repayment example uses typical loan terms for a first year graduate student borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 9/1/2020. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.


4 Important Disclosures for Discover.

Discover Disclosures

  1. Aggregate loan limits apply.
  2. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
  3. Lowest APRs shown are available for the most creditworthy applicants and include an interest-only repayment discount and Auto Debit Reward. The interest rate ranges represent the lowest and highest interest rates offered on Discover student loans, including undergraduate and graduate loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.375% as of July 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.
  4. Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for the Discover Private Consolidation Loan and include an Auto Debit Reward. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable margin percentage. For variable interest rate loans, the 3-Month LIBOR is 0.375% as of July 1, 2020. Discover Student Loans may adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

5 Important Disclosures for SoFi.

sofiDisclosures

UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.76% annual percentage rate (“APR”) (with autopay), variable rates from 1.90% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.83% APR (with autopay), variable rates from 1.80% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.98% APR (with autopay), variable rates from 1.97% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 11.26% APR (with autopay), variable rates from 1.90% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 07/10/2020. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).


6 Important Disclosures for Ascent.

Ascent Disclosures

Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.

  1. Competitive variable rates calculated monthly at the time of loan approval based on a margin plus the 1-Month London Interbank Offered Rate (LIBOR) rounded to the nearest 1/100th of a percent. The current LIBOR is 0.176%, which may adjust monthly. Your interest rate may increase or decrease, based on LIBOR monthly changes. Rates are effective as of 09/01/2020 and reflect an Automatic Payment Discount. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month. (See Automatic Payment Discount Terms & Conditions.)
    1. Undergraduate Loans: Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 2.71% and 12.99%.  Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 3.53% and 14.50%. Rates reflect an Automatic Payment Discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate. The following table shows a 48 month in-school period plus 9 months of grace prior to a full repayment term of either: 60-months (lowest fixed/variable rate), 144-months (highest fixed rate) or 180-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options. (See Undergraduate Loan repayment examples.)
  2. Payments may be deferred. Subject to lender discretion, forbearance and/or deferment options may be available for borrowers who are encountering financial distress.
  3. Making interest only or partial interest payments while in school will not reduce the principal balance of the loan. There are three (3) flexible in-school repayment options that include fully deferred, interest only and $25 minimum repayment. (See Undergraduate Loan repayment examples.)
  4. Flexible repayment plans may be offered up to a fifteen (15) year repayment term for a variable rate loan and ten (10) year repayment term for a fixed rate loan. Students must be enrolled at least half-time at an eligible school. Minimum loan amount is $2,000.
  5. Interest rate reduction of either 0.25% (for Credit-Based Loans) or 2.00% (for Undergraduate Future Income-Based Loans) applies only when the borrower and/or cosigner sign up for automatic payments and the payment amount is successfully deducted from the designated bank account each month. The amount of the discount is dependent upon the loan product and credit history of the borrower at the time of application. Interest rate reduction(s) will not apply during periods when no payment is due, including periods of in-school, deferment, grace or forbearance, unless a regular payment amount has been arranged with the servicer. If you have two (2) consecutive returned payments for Nonsufficient Funds, we may cancel your automatic debit enrollment and you will lose the interest rate reduction. You will then need to re-qualify and re-enroll in automatic debit payments to receive the interest rate reduction.(See Automatic Payment Discount Terms & Conditions.)
  6. All applicants (individual and cosigner) are required to complete a brief online financial literacy course as part of the application process to be eligible for funding.
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  8. The legal age for entering into contracts is eighteen (18) years of age in every state except Alabama where it is nineteen (19) years old, Nebraska where it is nineteen (19) years old (only for wards of the state), and Mississippi and Puerto Rico where it is twenty-one (21) years old.
  9. 1% Cash Back Graduation Reward subject to terms and conditions. Click here for details. In order to be eligible for the 1% Cash Back Graduation Reward, borrower must meet the following criteria after graduation:
    • The student borrower has graduated from the degree program that the loan was used to fund.
    • The student borrower may change majors and/or transfer to a different school, but must obtain the same level of degree (e.g. – undergraduate or graduate)
    • The graduation date is more than 90 days and less than five (5) years after the date of the loan’s first disbursement.
    • Any loan that the student has borrowed under the Ascent loan is not more than 30-days delinquent or in a default status as of the graduation date and until any Graduation Reward is paid.
  10. Students can apply to release their cosigner and continue with the loan in only their name after making the first 24 consecutive regularly scheduled full principal and interest payments on-time and meeting the other eligibility criteria to qualify for the loan without a cosigner.

* Application times vary depending on the applicant’s ability to supply the necessary information for submission.


7 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.17% effective Sep 1, 2020 and may increase after consummation.


Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.