Yes, There’s a Limit to Federal Student Aid — Here’s How Much

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“So I guess I can’t get any more financial aid this semester,” the text read. “I’m going to have to pay my tuition out of pocket.”

I stared at my phone for a few seconds, not comprehending what I was reading. My boyfriend’s financial aid had run out. How was that possible? And where was he going to get that tuition money?

As I quickly learned, the federal government has a maximum student loan amount — and once you reach it, you aren’t allowed to borrow more.

Here’s what to do if you’re about to hit that ceiling.

What is the maximum student loan amount?

Federal student loan limits are based on several factors:

  • Type of schooling: undergraduate or graduate
  • Student status: dependent or independent
  • Annual vs. aggregate: per year vs. per lifetime

This chart from the Pennsylvania State University student aid office breaks down the limits depending on your situation:

Dependent Undergraduate Student Dependent Undergraduate Student with a Parent PLUS Loan Denial Independent Undergraduate Student Graduate or 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. $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. $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. $12,500. A maximum of $5,500 may be subsidized. $20,500
Aggregate Maximum Loan Amount $31,000. A maximum of $23,000 may be subsidized. $57,500. 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.

My boyfriend, an independent undergraduate student, had hit the cap of $57,500.

He was getting a second bachelor’s degree — and since it was the same level of schooling, he hit the maximum amount of student loans after only two semesters. If he wanted to go on to get a master’s degree, he could take out more (but that’s another conversation).

Although they aren’t technically student loan limits, there are two other limitations to be aware of:

  1. You can’t exceed the cost of attendance at your school; in other words, you can’t take out more loans than you actually need.
  2. You can receive Direct Subsidized Loans only for your maximum eligibility period, which is “150 percent of the published length of your program” — for example, six years for a four-year bachelor’s degree or three years for a two-year associate’s degree.

What to do if you hit the maximum student loan amount

If you’ve borrowed the maximum amount of student loans — or are close to it — here are four steps you can take.

1. Talk to your financial aid office

The federal government isn’t the only place that offers aid; states and colleges have programs too.

So talk to your financial aid office and ask if there’s anything it can do. Perhaps it can offer some need- or merit-based aid or recommend a local scholarship program. It also might be able to help you find aid from your state.

As one expert told Student Loan Hero, “There are things colleges can do above and beyond the formula — whatever the methodology — to determine additional funding.”

2. Drop down to part time

If you discover you’re about to hit the student loan ceiling, decreasing your course load will lower your costs and give you time to work while attending school. By doing so, you’ll hopefully be able to cover your tuition without taking on additional loans.

As for the federal loans you’ve already taken out? If you’re enrolled in classes half time, your loans will remain in deferment — which means you won’t need to make payments on them.

If they’re subsidized loans, the government will cover the interest. But if they’re unsubsidized loans, you might want to start making minimum payments to avoid ballooning interest charges.

3. Dip into your emergency or retirement savings

Although it’s never ideal to spend your savings, sometimes it’s necessary.

When my boyfriend ran out of financial aid, we dipped into our joint emergency fund to help pay for his tuition — and have been slowly building it back up ever since.

If you’ve been in the working world for a while, you could tap your retirement savings for tuition. For example, if you’ve had a Roth IRA open for more than five years, you can withdraw contributions for your education penalty- and tax-free.

Think long and hard before you do so, however. The best thing to do with retirement investments is let them sit and grow.

4. Consider private student loans

One final option to consider is private student loans. Since they aren’t offered by the federal government, they aren’t subject to traditional student loan limits.

You can obtain private student loans from a variety of lenders, including big brick-and-mortar banks and smaller online startups.

Although these loans have fewer restrictions than federal loans, their interest rates are higher. And you’ll probably need a cosigner (unless, of course, you’ve already been in the workforce and have established credit of your own).

Before you take on any additional loans, make sure you understand the terms — and how much you’ll end up paying in the long run. (You can use our student loan payment calculator to run the numbers.)

Taking on an additional $30,000 at a 9.00% interest rate, for example, will lead to monthly payments of $380 when you graduate and a total of $15,603 in interest over 10 years. Add that to the federal loans you already have, and you could be overwhelmed by debt when you graduate.

If you’ve hit the maximum student loan amount, don’t panic. Take a few deep breaths and carefully consider your options.

And remember: Whatever you take out, you’ll have to pay back.

Need a student loan?

Here are our top student loan lenders of 2019!
LenderVariable APREligibility 
* 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.
** Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

1 Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
  2. Explanation of Rates “With Autopay” (APD)
    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.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).


2 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

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)All rates shown include the auto-pay 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.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 7/1/2019. Variable interest rates may increase after consummation.


4 Important Disclosures for CommonBond.

CommonBond Disclosures

A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.

Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.

Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
If you are unable to pay your government loan, the government can refer your loan to a collection agency or sue you for the unpaid amount. In addition, the government has special powers to collect the loan, such as taking your tax refund and applying it to your loan balance.

A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If you refinance your government loan, your new lender will use the proceeds of your new loan to pay off your government loan. Private student loan lenders do not have to honor any of the benefits that apply to government loans. Because your government loan will be gone after refinancing, you will lose any benefits that apply to that loan. If you are an active-duty service member, your new loan will not be eligible for service member benefits. Most importantly, once you refinance your government loan, you will not able to reinstate your government loan if you become dissatisfied with the terms of your private student loan.

If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you are a borrower with a secure job, emergency savings, strong credit and are unlikely to need any of the options available to distressed borrowers of government loans, a refinance of your government loans into a private student loan may be attractive to you. You should consider the costs and benefits of refinancing carefully before you refinance.

If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.

Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.


5 Important Disclosures for Discover.

Discover Disclosures

  1. 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.
  2. View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
  3. Aggregate loan limits apply.
  4. Lowest rates shown ARE FOR THE UNDERGRADUATE LOAN AND include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest INTEREST RATE OFFERED ON THE DISCOVER UNDERGRADUATE LOAN and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA 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. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.50% as of July 1, 2019. Discover Student Loans will 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. Please visit https://www.discover.com/student-loans/interest-rates.html for more information about interest rates.
3.99% – 11.44%1Undergraduate and Graduate

Visit Earnest

3.98% – 11.35%*,2Undergraduate and Graduate

Visit SallieMae

3.96%
11.98%
3
Undergraduate, Graduate, and Parents

Visit College Ave

3.66% – 9.64%4Undergraduate and Graduate

Visit CommonBond

3.87%
11.87%
**,5
Undergraduate and Graduate

Visit Discover

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.

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