Understanding Federal Student Loan Limits

Before you can know the limits of your federal loans, you must know yourself. Yes, it’s that philosophical.

Are you a dependent student? Then the total loan limit for four years of undergraduate study is $31,000 with no more than $23,000 coming from subsidized funds.

Independent students have a lifetime maximum limit of $57,500 with no more than $23,000 from subsidized loans allowed.

If you’re a graduate student, you have a maximum of $138,500 with a maximum of $65,500 coming from subsidized loans.

Now that we’ve gotten that out of the way, here’s some more info to help you understand these special kinds of loans.

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Federal student loans are called Stafford loans

Federal student loans, also known as Stafford loans, are government-guaranteed student loans that were created under Title IV of the Higher Education Act of 1965. These loans are offered in subsidized and unsubsidized forms. When a student can demonstrate a financial need, the government will pay for the interest on these loans. This is paid while the student is actively in school and during a period of authorized deferment. Hence the limit of $5,500 for dependent students and $9,500 for independent students in subsidized loans on an annual basis.

What’s the difference between annual and aggregate limits?

It’s worth noting the difference between annual and aggregate maximum loan limits (which are the ones at the top of this article). Annual loan limits are the maximum amount a student can take out in an academic school year while aggregate maximum loan limits are the total amount a student may take out in Stafford loans over the course of their college career.

Here’s how the annual disbursement of loans plays out: Federal student loan limits for the first year of undergraduate study are $5,500 for dependent students and $9,500 for independent students. No more than $3,500 of either amount may be in subsidized loans. Second-year undergraduates get a boost with a max of $6,500 for dependents and $10,500 for independent students. No more than $4,500 can be from subsidized loans. Third-year and beyond have a maximum of $7,500 for dependent students and $12,500 for independent students. And no more than $5,500 can be from subsidized loans.

Keep a close eye on interest rates

Interest rates change at an annual rate and are the same for subsidized and unsubsidized Stafford loans. Graduate Stafford loans are higher. The interest rates that are set at the time the loan is originated will stay the same throughout the life of the loan no matter how long the repayment period chosen. There is also a loan fee in the form of a percentage for the origination of loans.

Before you tap out your maximums, just keep in mind that you will have to pay these loans back. Planning to stay under your loan limit and under your daily budget will save your sanity in the long run.