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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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|3.24% – 14.86%1||Undergraduate|
|3.58% – 12.28%2||Undergraduate|
|4.62% – 14.96%3||Undergraduate|
|0.00% – 23.00%4||Undergraduate|
|3.25% – 9.69%6||Undergraduate|
|* 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 Firstrust Bank, member FDIC, First Citizens Community 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.
Information advertised valid as of 11/15/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure: Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.24% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 3.83% APR to 12.53% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Auto Pay Disclosure: You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Loan Cost Examples: Earnest’s Loan Cost Examples: These examples provide estimates based on principal and Interest payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $118.28) and a 11.69% APR would result in a total estimated payment amount of $21,290.40. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $126.82) and a 13.03% APR would result in a total estimated payment amount of $22,827.79.
These examples provide estimates based on interest only payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $145.41) and a 11.69% APR would result in a total estimated payment amount of $26,173.03. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $156.59) and a 13.03% APR would result in a total estimated payment amount of $28,186.67. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on fixed $25 payments while in school. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $169.92) and a 11.69% APR would result in a total estimated payment amount of $30,584.74. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $188.42) and a 13.03% APR would result in a total estimated payment amount of $33,915.55. Your actual repayment terms may vary. Other repayment options are available.
These examples provide estimates based on deferred payments. Variable APR: A $10,000 loan with a 15-year term (180 monthly payments of $174.79) and a 11.69% APR would result in a total estimated payment amount of $31,462.16. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $193.75) and a 13.03% APR would result in a total estimated payment amount of $34,874.28. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.
Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.
Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant and work-study opportunities. 2) Next, fill out a FAFSA® form to apply for federal student loans. Federal student loans do not require a credit check or cosigner, and offer various protections if you’re struggling with payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.
Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.
Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.
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3 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for Edly.
1. Loan Example:
About this example
The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.
2. Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.
5 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
6 Important Disclosures for Funding U.
Funding U Disclosures
Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.