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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:
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.
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:
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:
|Year||Dependent 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 limit||Not 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.
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.
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).
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.
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.
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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|1.04% – 11.98%1||Undergraduate, Graduate, and Parents|
|1.13% – 11.23%*,2||Undergraduate, Graduate, and Parents|
|3.84% – 9.40%3||Undergraduate and Graduate|
|1.05% – 11.44%4||Undergraduate and Graduate|
|1.22% – 11.66%5||Undergraduate and Graduate|
|2.76% – 7.14%6||Undergraduate and Graduate|
|1.24% – 11.99%7||Undergraduate and Graduate|
|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers. |
1 Important Disclosures for College Ave.
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.
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.
Information advertised valid as of 4/22/2021. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.
2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
3 Important Disclosures for CommonBond.
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. If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. 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 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Earnest.
5 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.26% annual percentage rate (“APR”) (with autopay), variable rates from 1.22% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.37% APR (with autopay), variable rates from 1.12% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.52% APR (with autopay), variable rates from 1.29% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 10.76% APR (with autopay), variable rates from 1.22% 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 4/1/2021. 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 Citizens Bank.
Citizens Bank Disclosures
Undergraduate Rate Disclosure: Variable interest rates range from 2.76% – 7.14% (2.76% – 7.14% APR). Fixed interest rates range from 3.01% – 7.50% (3.01% – 7.50% APR).
Graduate Rate Disclosure: Variable interest rates range from 2.19% – 6.73% (2.19% – 6.73% APR). Fixed interest rates range from 2.89% – 7.09% (2.89%-7.09% APR).
Business/Law Rate Disclosure: Variable interest rates range from 1.36% – 9.54% (1.36% – 8.82% APR). Fixed interest rates range from 4.13% – 9.84% (4.13% – 9.12% APR).
Medical/Dental Rate Disclosure: Variable interest rates range from 1.36% – 8.34% (1.36% – 8.04% APR). Fixed interest rates range from 4.03% – 8.64% (4.03% – 8.34% APR).
Parent Loan Rate Disclosure: Variable interest rates range from 2.10% – 7.41% (2.10%-7.41% APR). Fixed interest rates range from 4.69% – 7.83% (4.69% – 7.83% APR).
Bar Study Rate Disclosure: Variable interest rates range from 4.45% – 9.60% (4.45% – 9.53% APR). Fixed interest rates range from 7.39% – 12.94% (7.38% – 12.81% APR).
Medical Residency Rate Disclosure: Variable interest rates range from 3.55% – 7.05% (3.55% – 6.77% APR). Fixed interest rates range from 6.99% – 10.49% (6.97% – 10.07% APR).
Variable Rate Disclosure: Variable Rates are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of March 1, 2021, the one-month LIBOR rate is 0.11%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.
Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
Lowest Rate Disclosure: Lowest rates require a 5-year repayment term, immediate repayment, a graduate degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
Eligibility Criteria: Applicants must be a U.S. citizen, permanent resident, or eligible non-citizen with a creditworthy U.S. citizen or permanent resident co-signer. For applicants who have not attained the age of majority in their state of residence, a co-signer is required. Citizens Bank reserves the right to modify eligibility criteria at any time. Citizens Bank private student loans are subject to credit qualification, completion of a loan application/Promissory Note, verification of application information, and if applicable, self-certification form, school certification of the loan amount, and student’s enrollment at a Citizens Bank participating school.
Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7 Important Disclosures for Discover.
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.