How to Pay For College When You’ve Hit Your Federal Student Loan Limit

federal student loan limits

To prevent college students from taking on needless debt, the Department of Education limits how much they can borrow for college.

Unfortunately, many college students and their parents are unaware of these federal student loan limits, according to Ronald Ramsdell, founder of College Aid Consulting Services.

“Most students and parents aren’t aware of the limits and don’t plan ahead accordingly,” Ramsdell said. “And colleges don’t educate families on federal loan limits and what’s available and what’s not.”

What are current federal student loan limits?

If you’re a college student or the parent of one, you should be aware of the Department of Education’s federal student loan limits. These limits could affect how you plan to pay for college.

Here’s your guide to how much you can borrow through federal student loans.

Subsidized and unsubsidized student loan limits

There are two main limits on Direct Subsidized Loans and Direct Unsubsidized Loans:

  • Annual federal student loan limits: how much you can borrow for each school year.
  • Aggregate federal student loan limits: how much you can borrow throughout your time in college.

For undergraduate students, annual federal student loan limits are determined by your year in school and your dependency status.

You might not be sure whether you’re a dependent student. Generally, if you pay for less than half your expenses, you’re a dependent student. But if you pay for half your expenses or more, you’re an independent student.

The limits for independent students will also apply if your parent applies for and is denied for Parent PLUS loans.

Federal student loan limits are also different for graduate students, who often face higher tuition costs. The graduate student loan limits are more straightforward and do not vary based on school year or dependency.

This table of federal student loan limits clearly outlines how much you can borrow, according to your situation, courtesy of the Pennsylvania State University student aid office:

Dependent Undergraduate Student Independent Undergraduate Student* Graduate and Professional Degree Student
First Year
(0 – 29 credits)
$5,500

A maximum of $3,500 may be subsidized

$9,500

A maximum of $3,500 may be subsidized

$20,500
Second Year
(29.1– 59 credits)
$6,500

A maximum of $4,500 may be subsidized

$10,500

A maximum of $4,500 may be subsidized

$20,500
Third, Fourth, and Fifth Years (59.1+ credits) $7,500

A maximum of $5,500 may be subsidized

$12,500

A maximum of $5,500 may be subsidized

$20,500
Career Maximum Loan Amounts $31,000

A maximum of $23,000 may be subsidized

$57,500

A maximum of $23,000 may be subsidized

$138,500

The graduate debt limit includes Direct Loans received for undergraduate study.

*Limits also apply to dependent students whose parents are denied for a Parent PLUS loan.

Cost-of-attendance limits on student loans

On top of the annual and aggregate student loan limits, your college sets its own guidelines on how much you can borrow based on its cost of attendance.

Your college’s financial aid office estimates the total educational cost of attending the school, including expenses such as tuition, fees, books, room and board, and transportation for a given enrollment period.

Then, it sets loan limits based on the cost of attendance after all other financial aid is applied, like so:

  • Cost of attendance – (minus) federal grants, scholarships, work study, and other student aid = your student loan limit

When it comes to federal student loan limits and cost-of-attendance limits, the lower of the two will always apply.

Here’s when your loan limit will match the cost of attendance:

  • Your cost of attendance for a year is below the annual Direct Loan limits. “The actual loan amount a student is eligible to receive may be less than the annual federal loan limit,” said Kristen Moon, an independent college counselor and founder of Moon Prep.
  • Determining Grad PLUS and Parent PLUS loan limits. You can’t borrow more than the federal student loan limits – even if you’re attending an expensive school with costs above the annual loan limits or aggregate limits. However, Grad PLUS and Parent PLUS federal student loans can be used to fill that gap in funding, up to the loan limits set per the cost of attendance.

Knowing your cost of attendance is an important part of understanding your student loan limits. Many colleges publish this information on their websites, but you also can contact college financial aid offices and request it.

4 solutions for dealing with federal student loan limits

Some students might face higher college costs than they are permitted to borrow.

For example, a college freshman might need to borrow $7,000 to cover a year’s worth of tuition and fees – $1,500 above the annual limit. Or a college senior who wants to study abroad might be too close to the aggregate loan limit to be able to fund the program with Direct Loans alone.

Here’s how to plan for and handle college costs beyond the federal student loan limit.

1. Plan educational expenses with loan limits in mind

“Students need to set a budget and plan ahead when it comes to loan limits,” Moon said. Keep them in mind at each stage, from choosing your college to planning each semester.

Identify all your options and figure out how you can cover college costs in a way that maximizes other sources of college funding, such as savings, grants, or scholarships – before loans. Doing so will help you limit your student debt and avoid reaching federal student loan limits. You’ll also be able to anticipate any gaps in college funding and work to fill them before you near the loan limits.

2. Visit your college’s financial aid office

For students or parents who are facing educational costs they can’t cover or nearing either annual or aggregate student loan limits, there is help.

“If they suspect the loan amount will not cover all costs, they should reach out to the college’s office of financial aid to discuss this,” Moon said. “If the loan amount does not cover the cost of attending the university, then there are options the university can offer.”

For instance, Moon said, a university might be able to offer institutional need- or merit-based aid. Students or families might also be able to get on a payment plan for tuition or college costs and avoid a loan.

Even if you don’t think you qualify for more aid, you should make the effort. Make an appointment, meet in person, and be prepared to describe your situation and any extenuating circumstances.

Explain why you need and should receive additional aid. The human element can make all the difference.

“There are things colleges can do above and beyond the formula – whatever the methodology – to determine additional funding,” Ramsdell said.

 

3. Consider borrowing with PLUS Loans

If your cost of attendance is higher than Direct Subsidized Loan or Direct Unsubsidized Loan limits, Parent PLUS and Grad PLUS loans allow you to borrow enough to fill the gap.

However, there are a couple of drawbacks to watch out for with PLUS loans:

  • High interest rate: For 2017-18, borrowers face a 7.00% rate, compared to the 4.45% rate on Direct undergraduate loans.
  • Credit requirements: Borrowers cannot have adverse credit (as defined by the Department of Education) if they want to access PLUS loans.

While graduate students and parents of college students have the option to borrow with PLUS loans, undergraduate students don’t. They must rely on parents, who might be unwilling or ineligible to borrow PLUS loans.

However, parents who can’t qualify for PLUS loans should still apply, as a denial will increase the loan limits for their child.

4. Shop around for private student loans

When students are up against federal student loan limits, they have another option: private student loans. These loans aren’t subject to the federal loan limits outlined above.

That doesn’t mean there are no limits on student loans from a private lender. Some private lenders, such as CommonBond, set their loan limits according to cost of attendance. Others have an aggregate limit on student loans, such as Citizens Bank, which allows undergraduate students to borrow up to $90,000 and graduate students up to $110,000.

Private lenders may also base how much you can borrow on your creditworthiness, according to FinAid. Borrowers will often need good credit and credit history to be eligible for a private student loan.

Still, private student loans might offer a better deal than some federal student loans.

“Times have changed a lot in the past few years, especially regarding private student loans,” Ramsdell said.

Today’s private student loan rates often are competitive with federal student loan rates and start around 4.00% to 5.00% for well-qualified borrowers. To know for sure, request a few student loan rates from our favorite lenders.

However, keep in mind that you won’t have the same borrower protections and benefits federal student loans offer if you choose to take out a private student loan.

For example, deferment, forbearance, and repayment options are givens with federal student loans but not with private student loans. So taking on this form of student debt carries a higher risk.

Plan around student loan limits and find smart solutions

When you understand federal student loan limits and how they relate to college costs, you can plan for any gaps in funding and work to fill them.

You’ll also avoid scrambling to come up with last-minute funding, backing yourself into a bad deal, or taking on a high-interest student loan.

And if you do see yourself needing additional funding because you expect to hit federal loan limits, start exploring your options. Just make sure you give yourself enough time to find one that works best for you.

Need a student loan?

Here are our top student loan lenders of 2018!
LenderRates (APR)Eligibility 

1 = Citizens Disclaimer.

2 = CollegeAve Autopay Disclaimer: 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.
3.24% -
11.99%
1
Undergraduate, Graduate, and ParentsVisit Citizens
2.93% -
9.67%
Undergraduate, Graduate, and ParentsVisit CommonBond
3.54% -
12.66%
2
Undergraduate, Graduate, and ParentsVisit CollegeAve
4.04% - 9.07%Undergraduate and GraduateVisit LendKey
3.00% - 10.76%Undergraduate and GraduateVisit Connext
3.25% - 11.85%Undergraduate and GraduateVisit SallieMae
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. 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, understand what you are buying, and consult 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. Please do your homework and let us know if you have any questions or concerns.