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

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

Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

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While federal student loans can be a useful way to pay for college, they might not cover all your costs. The Department of Education sets federal student loan limits, meaning you can only borrow a certain amount per year and throughout your educational career.

Once you’ve reached the aggregate student loan limit (or he total amount you can borrow for undergraduate and graduate study), you’ll need to find another way to pay for school.

Read on to learn about federal student loan limits, as well as what to do when you’ve hit your max.

What are current annual and aggregate 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.

So how much can you borrow through federal student loans? Let’s examine two types of limits:

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 or graduate school.

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

Dependent Undergraduate Student Independent Undergraduate Student* Graduate and Professional Degree Student

First Year

(0 – 29 credits)


A maximum of $3,500 may be subsidized


A maximum of $3,500 may be subsidized


Second Year

(29.1– 59 credits)


A maximum of $4,500 may be subsidized


A maximum of $4,500 may be subsidized

Third, Fourth, and Fifth Years (59.1+ credits)


A maximum of $5,500 may be subsidized


A maximum of $5,500 may be subsidized

Career Maximum Loan Amounts


A maximum of $23,000 may be subsidized


A maximum of $23,000 may be subsidized


The graduate debt limit includes direct loans received for undergraduate study.

*These limits may 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 like 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.

“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.

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 when you’ve reached the aggregate student loan limit

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 reaching the aggregate student loan limits to be able to fund the program with direct loans alone.

Here are four ways to anticipate and handle college costs beyond the federal student loan limit:

1. Plan educational expenses with loan limits in mind
2. Visit your college’s financial aid office
3. Consider borrowing PLUS loans
4. Shop around for private student loans

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 are 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.

3. Consider borrowing 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:

  • Higher interest rate: For loans disbursed on or after July 1, 2020, borrowers face a 5.3% rate, higher than the 4.3% rate on direct loans for graduate loans and the 2.75% rate on direct loans for undergraduates.
  • 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 PLUS loans, undergraduate students don’t. They must rely on parents, who might be unwilling or ineligible to borrow PLUS loans.

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. CommonBond, for example, sets its loan limits according to cost of attendance (with a lifetime borrowing limit of $500,000). Others have a lower aggregate limit on student loans, such as Citizens Bank, which allows undergraduate students to borrow up to $150,000.

Borrowers will often need good credit and credit history to be eligible for a private student loan. Most undergraduate students qualify by applying with a cosigner, such as a parent.

Today’s private student loan rates often are competitive with federal student loan rates and start around 3.34% (as of the date of publishing) 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 a given with federal student loans but not necessarily 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.

If you do see yourself needing additional funding because you expect to hit federal loan limits, start exploring your options. And remember, it’s never too early (or late) to apply for scholarships.

Rebecca Safier contributed to this report.

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