Federal Student Loan Borrowing Limits – Student Guide: Here are all you need to know for a proper guide on Federal Student Loan. See below for details on borrowing limit, qualification requirements, benefits, and lots more.
Federal Student Loan Borrowing Limits
Here’s a quick overview:
- First-Year Undergraduate Students – Dependent students can borrow $5,500 with no more than $3,500 in subsidized loans; independent students can borrow $9,500, with no more than $3,500 in subsidized loans.
- Second-Year Undergraduate Students – Dependent students can borrow $6,500, with no more than $4,500 in subsidized loans; independent students can borrow $10,500, with no more than $4,500 in subsidized loans.
- Third-Year and Beyond Undergraduate Students – Dependent students can borrow $7,500, with no more than $5,500 in subsidized loans; independent students can borrow $12,500, with no more than $5,500 in subsidized loans.
- Graduate and Professional Students – $20,500 of unsubsidized only
The aggregate loan limit for dependent students is $31,000 with no more than $23,000 as subsidized.
If you have met your federal student loan limit, private loans can fill the gap.
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Qualifying for Federal Student Loans
- Be a U.S. citizen or eligible non-citizen
- Have a valid Social Security number
- Be enrolled or accepted for enrollment as a student with an eligible degree or certificate program, at least half-time
- Maintain academic progress in college
- Show you are qualified to obtain a college degree or career school education
- Are not in default on existing federal student loans
There may be some circumstances in which you lose your eligibility for federal student loans.
Deciding How Much to Borrow
While it is always possible to borrow the full amount of available federal student loans each year, it isn’t recommended if you can pay for college with other things like scholarships, grants, or savings.
It’s worth noting that student loans can be used for things like living expenses and housing—not just tuition—so keep this in mind when going through the following sections.
Figure Out the Net Cost of College
Start by calculating the cost of attendance at the school of your choice.
A good rule of thumb is to determine the net college cost and the amount of income and savings currently on hand, then subtract what’s available from the net price.
Based on the unmet need, you can determine what you may need to borrow to fund your education.
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Consider How You Will Repay Your Loans
Although these calculations are helpful, it is also necessary to recognize your financial obligation on the other side of the line.
Upon leaving school, you need to be able to repay your federal student loans, so keeping track of the total amount borrowed during school is important.
Be sure to research your first- and second-year income potential in your selected career field to determine what you can anticipate earning. This resource from the National Association of Colleges and Employers offers a first look at expected starting salaries broken out by industry.
Once you understand your future salary expectations, you can plan ahead for your eventual federal student loan repayment. Keep your total student loan debt to a manageable amount by estimating your monthly repayment obligation here.
How to Take Out Federal Student Loans
Getting federal student loans is a relatively simple process, but it begins with understanding the eligibility requirements listed above. Additionally, you need to know whether or not your school is eligible to receive federal student loans from students.
1) Figure Out if Your College(s) of Choice Are Eligible for Federal Aid
An eligible school can be an institution of higher education or a post-secondary vocational institution that meets specific requirements.
Details about what is required from eligible schools to participate in the federal student aid program can be found here.
2) Fill Out the FAFSA
Once you have determined you are enrolled or plan to enroll in an eligible school, you need to complete the Free Application for Federal Student Aid, or the FAFSA. The FAFSA is most easily filled out online, and it requires you to create an FSA ID if you do not already have one.
Once you are logged into the FAFSA site, you can select the academic year you are applying for, whether you are the student or the parent, and then complete the required information. The FAFSA begins with the student demographic section, which includes the pertinent personal details that identify the student.
Once this information is complete, you simply sign and submit the form. You also have the option to complete the FAFSA in paper form if you prefer.
3) Review Your Award Letter
Once the school calculates your federal student aid, it will send an award letter to you that details the amounts. Each school varies as far as timing of award letters so it may be some time between submitting the FAFSA and receiving the award information.
When you receive the award letter, determine the amount of aid you want to accept and from which school, and then inform the financial aid office at that school what you would like to do. They will set a deadline, typically detailed in the award letter, so be sure to respond in a timely fashion.
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Benefits of Federal Student Loans
Most students who need to borrow for their education turn to federal student loans first, not only because of the ease of applying, but also due to the inherent benefits federal student loans have.
Relatively Low Interest Rates
Additionally, federal student loans are low-interest student loans and often have lower rates than even the best private student loans, making the cost of borrowing for your education less expensive.
Some private student loan lenders offer variable interest rates that may seem lower initially, but as interest rates rise, so will your student loan interest rates.
Deferment and Forbearance Protections
Federal student loans also come with deferment and forbearance options, designed to help borrowers who are facing financial hardship or trouble paying their loans back each month.
Deferment is the process of delaying student loan payments for a set period of time, either because you are currently in school at least half-time or because of a financial hardship. During deferment, you may not be subject to accruing interest on select federal student loans.
Forbearance is also the process of temporarily suspending student loan payments, but due to financial hardship alone.
A Variety of Repayment Options
In addition to these inherent advantages of federal student loans, borrowers also have the ability to select from a number of repayment plans other than the standard 10-year plan.
Good Credit Not Require & Can Help You Build Credit
Finally, federal student loans don’t require a good credit score and—because of this—are a great option for those with bad credit.
In addition, federal student loans may help build your credit over time. As long as you make on-time payments in the minimum amount due, federal student loan servicers report your payment history to the three major credit bureaus—Equifax, Experian, and TransUnion—each month.
This helps you establish a strong track record of responsible money management, which aids in getting new credit in the future.
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