Federal Direct Loan Limits
Although Federal Direct Loans have become the most popular type of federal student loan in America because of their many benefits (see Benefits of Federal Direct Loans), limitations apply on the
amount that students may borrow. There are seven key criteria prospective borrowers need to take into account when applying for these loans.1. Student's Grade Level
The amount that may be borrowed usually increases for students as they progress from freshmen to sophomores and then become upperclassmen. Graduate students are allowed even higher limits, in most cases.
The rules also permit undergraduate students to borrow up to $2,625 to pay for any coursework they need to enroll in an undergraduate degree or certification program. Bachelor's degree recipients may borrow up to $5,500 for coursework required for a graduate or professional degree or certificate program – or up to the same amount for teacher certification coursework.
2. Subsidized vs. Unsubsidized Loans
There are two types of Federal Direct Loan: subsidized (the federal government picks up the loan's interest costs while the student is an undergraduate) or unsubsidized (the borrower pays interest throughout the period of the loan). Only undergraduates can get a subsidized loan.
The limits for subsidized loans are less than for unsubsidized loans (see next item). The total limit students can borrow is the unsubsidized limit – so any subsidized money they get will decrease how much unsubsidized money they can borrow in addition to their subsidized loan. See Federal Direct Loans: Subsidized Vs. Unsubsidized.
3. Student's Tax Status
Whether borrowers are "independent" students who claim themselves on their own tax returns or are claimed as dependents on someone else's tax return can affect how much unsubsidized money they can borrow. Tax status does not affect borrowing limits for subsidized loans.
Unsubsidized Loans: Tax Status Matters. Loan limits are $4,000 to $5,000 higher per year for independent students, as shown in the following chart:
[Note: The unsubsidized direct loan limits in the table below are overall Federal Direct Loan limits. The loan limits are reduced by the amount of any Direct Subsidized Loans received by the student.]
Direct Subsidized Loan – Undergraduate Students | |||
Loan Limits | Dependent | Independent | |
Annual | |||
First-Year (Freshman) | $3,500 | $3,500 | |
Second-Year (Sophomore) | $4,500 | $4,500 | |
Third-Year and Beyond (Junior, Senior) | $5,500 | $5,500 | |
Cumulative | $23,000 | $23,000 | |
Some exceptions. Students who are claimed as dependents on their parents’ tax return may borrow the same amount as independent borrowers who claim themselves if certain criteria are met. These conditions include:
- If the parent(s)’ sole income is from disability or public assistance benefits
- If the parent is incarcerated or cannot be located
- If the parent has bad credit
- If the parent has declared bankruptcy and the court has mandated that the parent cannot take on additional debt of any kind
- If the parent will not be able to repay an outstanding PLUS loan because of high debt or a high debt-to-income ratio
- If the parent is ineligible to receive a PLUS loan due to citizenship issues
Students who wish to become eligible for the higher loan limits and who have one parent who meets any of the above criteria should have that parent apply – and be rejected for – a PLUS loan, even if their other parent would qualify for one. (If both parents were to apply and one of them qualifies for a loan, the higher loan limit provision cannot be applied.)
Subsidized Loans: Tax Status Doesn't Matter. The limits for subsidized loans are lower and only undergraduate students are eligible for them. The limits for these loans are listed as follows:
Direct Subsidized Loan – Undergraduate Students | |||
Loan Limits | Dependent | Independent | |
Annual | |||
First-Year (Freshman) | $3,500 | $3,500 | |
Second-Year (Sophomore) | $4,500 | $4,500 | |
Third-Year and Beyond (Junior, Senior) | $5,500 | $5,500 | |
Cumulative | $23,000 | $23,000 | |
As of July 1, 2013, new student borrowers of subsidized Stafford loans can only borrow an amount equal to 150% of the standard duration of their educational programs. Students can also borrow the difference between the subsidized and unsubsidized loan limits each year since the subsidized limits are always less than the unsubsidized limits.
4. Graduate Loans Depend on the Field of Study
Students who receive education in various medical, dental or veterinary fields are eligible to receive several times the amount of financial aid that is offered to other students. Here are the loan limits for graduate and professional students:
Direct Unsubsidized Loan – Graduate and Professional Students | |||
Loan Limits | Graduate and Professional | Medical School | |
Annual | $20,500 | $43,883 – $47,167 | |
Cumulative | $138,500 | $224,000 | |
However, certain kinds of healthcare professions have lower borrowing limits than those for "Medical School."
$40,500 Limit
- Doctor of Osteopathic Medicine
- Doctor of Dentistry
- Doctor of Veterinary Medicine
- Doctor of Optometry
- Doctor of Podiatric Medicine
- Doctor of Naturopathic Medicine and Doctor of Naturopathy
$37,167 Limit
- Doctor of Pharmacy
- Graduate in Public Health
- Doctor of Chiropractic
- Doctoral Degree in Clinical Psychology
- Masters/Doctoral Degree in Health Administration
Important: The cumulative loan limits for graduate and professional students include any unpaid undergraduate loans that have been taken out. The $40,500 limit applies to a nine-month academic period and is prorated accordingly for school years that exceed this length. Note that regulations can shift; some of these limits may have changed. Use them as a guideline.
5. College-Imposed Limits
Educational institutions may impose lower loan limits on their students than listed above. Loan limitations must be determined on an individual basis; a school cannot arbitrarily lower limits across the board. Loans cannot be limited based on race, religion, ethnicity, sexual orientation, disability, age or marital status. Limits on unsubsidized loans for independent students also cannot be lowered.
If a student's loan limit is lowered, the educational institution is required to list in writing the reasons for that decision.
6. Other Factors Affecting Loan Size
Completing a grade midyear. Students who complete a grade during the school year (say, move from freshman to sophomore status in January) may be eligible to take out higher loan amounts. The reason: Their new grade level could make them eligible to apply for the difference between the loan limit for – in this case, freshmen – and the new, higher amount sophomores can get. (If this could apply to you, check with your institution's financial aid officer.)
Switching schools. Transfer students may be able to borrow the difference between the loan limit at the new institution and the amount they borrowed at their previous place of learning if the new school has higher in-house limits.
Pro-rating limits. Loan limits may also be prorated to fit an academic year that is shorter or longer than a normal school year, in some cases. For example, a senior who graduates after the fall semester may only be eligible for half of the amount of loan money to which he or she would otherwise be entitled. But loans may not be prorated on the basis of enrollment status, such as for a half-time versus full-time student. Both students will be eligible for the same loan limits.
Also note that loan limits are not reduced by origination or other fees charged for the loan – or by any interest that is capitalized by the lender.
0 Response to "Federal Direct Loan Limits"
Post a Comment