How much can I borrow for college?

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If you need to borrow student loans, there are various federal and private options to consider, and each has a different set of rules and qualifications that determine if and how much you can borrow. Understanding loan limits and how they are determined can help you make informed decisions about funding your college education.

No matter what types of student loans or how many you take out, the maximum amount you can borrow each year is the cost of tuition, or COA, at your chosen college or university.

The COA is determined by the school and is used to calculate your eligibility for federal student aid, as well as the maximum amount you could borrow in federal and private student loans. It includes tuition and related expenses such as board and lodging, books and transportation.

While you can’t borrow more than tuition, you may be eligible to borrow less, which could reduce the amount of student debt you’ll need to repay over time.

[READ: What Does Cost of Attendance Mean and How Does it Affect My Student Loans?]

The US Department of Education offers several types of student loans to help finance their education, all of which have different eligibility requirements and loan limits. Private student loans are another option. Most students who need to borrow to finance their education will need to use a combination of these options.

The maximum amount that undergraduates can borrow each year in subsidized and unsubsidized direct federal loans ranges from $ 5,500 to $ 12,500 per year, depending on your year of study and whether you are a dependent or independent student – a determination made based on your free application for Federal Student Aid, or FAFSA, which you must submit annually to be considered for federal and certain other sources of financial aid.

There are also blanket or blanket federal limits on student loans for your undergraduate studies. Dependent students can borrow up to a total of $ 31,000 in both subsidized and unsubsidized student loans, with a maximum of $ 23,000 of the total in subsidized loans, while independent students can borrow up to $ 57,500 with the same ceiling for subsidized loans.

Limits on Federal Direct Subsidized Loans

Federal direct subsidized loans are available to eligible undergraduate students who demonstrate financial need. The US Department of Education pays the interest on these loans while you are in school at least part-time, during the six-month grace period after leaving school, and during adjournment periods.

Financial information reported on your FAFSA is used to calculate your expected family contribution, or EFC – an index that colleges use to determine your existing financial resources to pay for your education and how much you might be eligible to receive in Federal Student Aid, including including direct subsidized loans. Keep in mind that the FAFSA Simplification Act of 2020 replaces EFC with the Student Aid Index, or SAI, which will also serve as a guideline for the level of financial aid a student might receive when the changes come in. in force from the 2023-2024 academy. year.

You may be eligible for direct subsidized loans if your CEF (or ISC in the future) identifies that you have an eligible financial need. Your school will determine how much you can borrow, but the amount cannot exceed your financial needs.

Here’s how much dependent and independent undergraduates can borrow in direct subsidized loans:

– First year: $ 3,500

– Second year: $ 4,500

– Third year and beyond: $ 5,500

– Total limit: $ 23,000

If you are eligible, you should always use up direct subsidized loans first, as they have better terms than other student loans.

Direct Federal Limits on Unsubsidized Loans

Direct unsubsidized federal loans are available to undergraduate and graduate students and are not based on financial need. Interest accrues on these loans at all times, including while you are studying and during periods of deferment. The current administrative forbearance period granted by the federal government due to the coronavirus pandemic is an exception.

The amount of direct unsubsidized loans to which you may be entitled is determined by your year of study and your status as a dependent or independent student. The maximum amount you can borrow in unsubsidized loans per year increases each year you are in school, although dependent students are eligible to borrow less than independent students. The Federal StudentAid.gov website has a graph that shows how it works.

[Read: Understanding the Types of Federal Student Loans Available.]

It is important to note that there are exceptions to the unsubsidized loan limits for dependent students whose parents are found to be ineligible for Parent PLUS loans. These students can borrow up to the unsubsidized loan limits for independent students.

Federal Direct PLUS loan limits

Federal Direct PLUS Loans are available to parents of dependent undergraduates – the Parent PLUS Loan – or graduate students – the Grad PLUS Loan – for costs not covered by other financial aid or loans. Eligibility is not based on financial need, but a credit check is required.

Unlike the limits on subsidized and unsubsidized direct loans, there is no specific limit on borrowing from PLUS loans. Parents eligible for a Parent PLUS loan can receive until a dependent child’s remaining tuition fee is determined by their school. Likewise, graduate students can borrow up to the rest of the cost. Remember that these amounts cannot exceed what is left as the student’s tuition fees.

PLUS loan applicants who are turned down because of their credit may still qualify for a PLUS loan if additional conditions are met.

[READ: What to Do When a Parent Is Denied a PLUS Loan.]

Limits on private student loans

Federal subsidized and unsubsidized student loans tend to have the lowest interest rates. However, if you or your parents are considering a PLUS direct loan, you can compare the interest rate with that of a private student loan from institutions such as banks, credit unions, state and nonprofit lenders. and other sources.

The eligibility for student loans from these institutions and the interest rates offered are normally based in part on a credit check. Borrowers with a higher credit rating are generally offered better interest rates, while borrowers with a lower credit rating may be charged higher interest rates or be refused a loan.

Private student loans are usually made directly to students, but since many undergraduates have yet to establish a credit history, a co-signer may be required. As with federal student loans, private student loan borrowers can only borrow until they eventually cover the tuition, and these loans are usually certified by the school to ensure the student stays in. limits.

While the reality is that most students need loans to get a college degree, the key is to borrow the right amount. Just because you can borrow up to a certain amount doesn’t automatically mean you have to accept the maximum amount.

However, you also don’t want to be so wary of debt that you aren’t borrowing enough. It is wise to consider your income and financial obligations after you graduate and start your student loan repayment.

It can be difficult to decide how much student loans to borrow. If you need professional assistance, you can contact a financial aid administrator at your school or seek advice from a local organization or non-profit organization.

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