The majority of college funding is provided by federal student loans. This is due to the fact that they are relatively easy to obtain and do not necessitate a rigorous credit check or financial requirements to qualify.
However, the amount a student can borrow from the federal government to fund their school fees is limited.
This resource explains the federal student loan restrictions for undergraduate and graduate students pursuing a degree.
Federal Student Loan Limits
Federal student loan limits adjust based on whether your parents or guardians can claim you as a dependent, the type of loan you’ll use and what year you’re in school. For instance, both independent and dependent first-year students can borrow $3,500 in subsidized loans. But dependent students are limited to $2,000 in unsubsidized loans, while independent students can borrow up to $6,000 in unsubsidized loans.
Subsidized vs. Unsubsidized Loans
Undergraduate students loans are classified as either subsidized or unsubsidized. Here’s how they differ:
- Subsidized loans don’t accrue interest when you’re enrolled in school at least part-time, during periods of deferment and during your six-month grace period after you leave school. When you start to repay your loans, you’ll be responsible for your loan plus the interest that starts accruing after you leave school.
- Unsubsidized loans accrue interest even while you’re in school. The good news is that you don’t have to start making payments until your grace period ends. The bad news is that your payments will be higher compared to subsidized loans since your interest started accruing immediately upon disbursement, not graduation.
Do all federal student loans have the same limit?
The Department of Education has set strict limitations on the amount college students can borrow based on several factors, including dependency status, year in school, and other financial aid received. This is included in the Free Application for Federal Student Aid (FAFSA).
Even if multiple federal loans are available to you, though, some should take priority over others.
For example, federally subsidized loans can be much more affordable than unsubsidized loans. That’s because the government pays (or subsidizes) any interest that accrues on that loan while you’re still in school. With unsubsidized loans, the interest just builds.
Additionally, you’ll find that certain federal loans have different maximum borrowing limits depending on whether you’re considered a dependent student or an independent one. This designation is based on factors like age, marital status, occupation or grade level.
Direct Loan limits for dependent students
Direct Loans, sometimes referred to as Stafford Loans, are college education loans provided by the federal government for undergraduate, graduate, and professional students.
They come in two varieties: subsidized or unsubsidized. The federal government covers interest on subsidized loans while the borrower is in school or during deferment, and students cover the interest on unsubsidized loans.
Subsidized loans from the federal government are only available to those who demonstrate financial need and are pursuing an undergraduate degree. While subsidized loans ultimately cost the borrower less because of the covered interest payments, unsubsidized loans have fewer restrictions on how much you can borrow.
For dependent students—that means listed on someone else’s tax return as a dependent child or adult—federal student loan limits apply as follows:
| Year in school | Annual borrowing limit, subsidized loans for dependent students | Annual borrowing limit, unsubsidized loan for dependent students |
| First-year undergraduate students | $3,500 | $5,500 total (including subsidized) |
| Second-year undergraduate students | $4,500 | $6,500 total (including subsidized) |
| Third- and fourth-year undergraduate students | $5,500 | $7,500 total (including subsidized) |
| Aggregate loan limits | $23,000 | $31,000 (including subsidized) |
Direct Loan limits for independent students
College students who can prove they are independent may qualify for more federal funding to help cover the cost of their education. Independence as a student means there is no other person who can or is claiming the student as a dependent on their tax return.
Students can be considered independent if they are at least 24 years old, married, have a dependent child, or are a member of the armed services. These are just a few of the qualifying situations.
Independent students are managing the financial aid process for their college years on their own, in theory, and therefore may need additional help through federal loans.
While less restrictive than dependent students’ borrowing limits, there are still limitations imposed on independent students who qualify for financial aid. The restrictions are as follows:
| Year in school | Annual borrowing limit, subsidized loans for independent students | Annual borrowing limit, unsubsidized loan for independent students |
| First-year undergraduate students | $3,500 | $9,500 (including subsidized) |
| Second-year undergraduate students | $4,500 | $10,500 (including subsidized) |
| Third- and fourth-year students | $5,500 | $12,500 (including subsidized) |
| Aggregate loan limits | $23,000 | $57,500 (including subsidized) |
It is important to note that all graduate students are considered independent students. Their federal student loan limits are as follows:
| Year in school | Annual borrowing limit, subsidized loans | Annual borrowing limit, unsubsidized loans |
| Graduate or professional student | N/A | $20,500 |
| Aggregate loan limits (including loans received for undergraduate studies) | $65,500 | $138,500 |
Parent PLUS and Grad PLUS loan limits
When federal Direct Loans are not enough to cover the full cost of attendance, graduate students may qualify for a Grad PLUS Loan. Parents of an undergraduate student may qualify for a Parent PLUS Loan.
Grad PLUS and Parent PLUS Loans differ from Direct Loans in that they are only available to graduate-level students and parents of students who do not have an adverse credit history.
The loan limits for Grad PLUS and Parent PLUS Loans also differ from Direct Loans. There is no annual limit as a set dollar amount, but students or parents may not borrow more than the total cost of attendance, less any other financial aid received.
What affects federal student loan limits?
While federal student loans are a great first choice for student borrowers, you may not be able to get all the funding you need.
The loan maximum is affected by a variety of factors, including the student’s personal situation and even the other sources of funding that the student receives, such as scholarships, grants, or private student loans.
Federal student loan limits can be affected by a student’s:
- Dependency status
- Year in school
- Age
- Marital status
- Enrollment status (full-time versus half-time)
These will impact how much federal financial aid you can receive through subsidized or unsubsidized loans. Each of these factors also influences what you are eligible to receive and may indicate a need for supplemental financing through private student loans or other funding sources.
Do federal student loan limits change?
There are two ways in which you can expect federal student loan limits to change. The first thing to know is that federal loan limits increase as a student advances in school. So, a third-year student will have more available federal loan funding than a second-year student, who will have a higher limit than a first-year student.
Additionally, the federal government adjusts the loan limits periodically, taking into consideration factors like inflation.
Can you appeal for a larger loan amount?
If you need to borrow more in federal loans than the current limit, you may be able to request a higher amount. This is often allowed for graduate students in certain healthcare fields and may grant you access to as much as $26,667 in additional federal loans for that year.
If you need to borrow more because you have been denied certain federal loans or are limited in your borrowing ability due to your FAFSA, you may be able to appeal that decision. This process is initiated through your school’s financial aid office and involves writing a letter explaining your appeal and any extenuating circumstances you want the Department of Education to consider.
Why are there limits on federal student loans?
The government doesn’t outright state why there are limits on federal student loans, but the reasoning is likely multi-faceted. For starters, the Department of Education has a budget to follow each year, which includes educational lending to eligible students.
Without limits, there would be a high likelihood of the ED running out of available funds before all eligible students are able to access these much-needed loans.
Additionally, federal student loans come with certain benefits such as loan deferment, forbearance, income-driven repayment, and loan forgiveness. By limiting how much money it lends, the government can also limit how much it will potentially need to forgive in the future.
