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

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.

By learning about these limits, you can plan ahead and ensure you have the funds you need to pay for college.

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.

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) $7,500
A maximum of $5,500 may be subsidized
A maximum of $5,500 may be subsidized
Career Maximum Loan Amounts $31,000
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.

*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 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.

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 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:

  • High interest rate: For loans disbursed on or after July 1, 2019, borrowers face a 7.08% rate, compared with the 5.05% rate on direct subsidized and direct unsubsidized 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 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. 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 and graduate students to borrow up to $150,000.

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.

Today’s private student loan rates often are competitive with federal student loan rates and start around 4.21% (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 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.

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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