Most student and parent education loans have two main types of limits on the amount that may be borrowed.
There may also be a cost of attendance limit in addition to or instead of the annual loan limit. The amount of the loan must be less than the cost of attendance minus other financial aid received. This loan limit is intended to prevent the total of all financial aid, including the student loans, from exceeding the college’s total cost of attendance. The cost of attendance loan limits will be applied proportionately to each of the payment periods during the academic year.
Both the annual and cumulative loan limits must be applied to the loan amount borrowed. Each type of loan limit represents a restriction on the amount that may be borrowed. All restrictions on a borrower’s eligibility must be applied in combination. Sometimes, a borrower will seek a loan amount that satisfies the annual limit but will qualify for a lower amount because the student’s total debt would otherwise exceed the cumulative loan limit. The borrower will then be restricted to the lower loan amount.
For example, the Federal Stafford Loan has annual limits for dependent undergraduate students based on the student’s year in school. The 2015-2016 loan limits are $5,500 for freshmen, $6,500 for sophomores and $7,500 per year for juniors, seniors and any additional undergraduate years of study. The Federal Stafford Loan also has a cumulative loan limit of $31,000 for dependent undergraduate students. Suppose a dependent undergraduate student in a 5-year engineering degree program borrows to the annual limit for each of the first four years, a total of $27,000. During the student’s fifth year the annual limit would be $7,500. However, as the next table illustrates, the remaining cumulative loan eligibility is $4,000 after the end of the fourth year, so the student cannot borrow to the $7,500 annual loan limit as a fifth year senior. Instead, this student may borrow no more than $4,000.
|Year||Annual Limit||Amount Borrowed||Cumulative Debt||Remaining Cumulative Loan Eligibility|
Private student loans often have an annual limit equal to the cost of attendance minus other aid. State loan programs are more likely to have a dollar limit and these limits tend to be lower than the annual limits on private student loans from commercial lenders.
Most private student loans have cumulative loan limits of $75,000 to $120,000 for undergraduate students and higher limits for graduate and professional students. These cumulative loan limits usually include all student loan debt, including both federal and private student loans.
Residency and relocation loans and bar study loans tend to have annual loan limits that are half the annual loan limits offered by the lender to students who are currently enrolled.
The annual and cumulative borrowing limits on federal education loans vary according to several factors:
Grade level progression in the middle of the academic year may lead to a student qualifying for higher annual loan limits. The student will then be eligible to borrow the difference between the new annual loan limit and the amount already borrowed during the academic year.
Similar rules apply to transfer students. Transferring does not reset the loan limits. Transfer students may borrow the difference between their annual loan limit at the new institution and the amount received at the previous college.
Loan fees (which may be added to the loan balance) and capitalized interest do not count against the loan limits.
The Federal Stafford loan is a student loan available to undergraduate and graduate students. The next two tables show the overall Federal Stafford loan limits for undergraduate and graduate students for loans first disbursed on or after July 1, 2008. There are lower loan limits for the subsidized Federal Stafford loan. Any amounts not received as a subsidized Federal Stafford loan may be borrowed as an unsubsidized Federal Stafford loan up to the overall annual and cumulative loan limits.
The annual loan limits for independent undergraduate students are $4,000 or $5,000 higher than the annual loan limits for dependent undergraduate students, depending on the student’s year in school. The cumulative loan limits are $26,500 higher for independent undergraduate students than for dependent undergraduate students.
Dependent students whose parents are denied eligibility for a Federal Parent PLUS loan are eligible for the same Federal Stafford loan limits as independent students. College financial aid administrators may make a dependent student eligible for the increased Federal Stafford loan limits even without a Federal Parent PLUS loan denial in certain exceptional circumstances. If a dependent student borrows at the higher loan limits one year and the student's parent becomes eligible for a Federal Parent PLUS loan in a subsequent year, the exceptional Federal Stafford loan amounts do not count against the dependent student cumulative loan limits.
|Third-Year and Beyond (Junior, Senior)||$7,500||$12,500|
Graduate and professional school students have even higher loan limits. The cumulative loan limits for graduate and professional school students include any undergraduate student loan debt.
|Loan Limits||Graduate and Professional||Medical School|
In addition to the annual loan limits, Federal Stafford loans are also capped at the annual cost of attendance for the period of enrollment minus any other aid for the enrollment period.
College financial aid administrators may reduce loan limits for individual students on a case-by-case basis, provided that the college does not discriminate against borrowers on the basis of race, national origin, religion, sex, marital status, age or disability status. However, guidance published by the U.S. Department of Education appears to limit this statutory authority:
On a case-by-case basis, you may refuse to originate the loan for an individual borrower, or you may originate a loan for an amount less than the borrower's maximum eligibility. However, you may NOT limit borrowing by students or parents on an across-the-board or categorical basis. Similarly, you may originate a loan for an amount less than the borrower's maximum eligibility. However, you must ensure that these decisions are made on a case-by-case basis, and do not constitute a pattern or practice that denies access to borrowers because of race, sex, color, income, religion, national origin, age, or handicapped status. Also note that your school cannot engage in a practice of originating FSA Loans only in the amount needed to cover the school charges, nor limit Direct Unsubsidized borrowing by independent students. When you make a decision not to originate a loan or to reduce the amount of the loan, you must document the reasons and provide the explanation to the student in writing.
Students may borrow up to $2,625 for preparatory coursework necessary for enrollment in an undergraduate degree or certificate program. Bachelor’s degree recipients may borrow up to $5,500 for preparatory coursework necessary for enrollment in a graduate or professional degree or certificate program. Bachelor’s degree recipients may borrow up to $5,500 for teacher certification coursework. These loan limits are subject to a limit of 12 consecutive months.
If a dependent undergraduate student’s parents have ended all financial support of the student and refuse to complete the Free Application for Federal Student Aid (FAFSA), the college’s financial aid administrator may allow the student to borrow unsubsidized Federal Stafford loans despite the incomplete FAFSA form. The student, however, will not be eligible for subsidized Federal Stafford loans, the Federal Pell Grant or other forms of Title IV federal student aid.
In certain exceptional circumstances, college financial aid administrators may allow a dependent undergraduate student to borrow at the higher Federal Stafford loan limits available to independent students without requiring the parent to obtain a denial of a Federal Parent PLUS loan. These circumstances include, but are not limited to, the following situations:
Note that the parent must be unable to borrow and/or repay a Federal Parent PLUS loan because of these circumstances. Unwillingness to borrow is not sufficient to justify the higher Federal Stafford loan limits.
There is no requirement that a college financial aid administrator make the student eligible for the higher loan limits even if exceptional circumstances exist. So, sometimes, it is simpler for a parent to apply for the Federal Parent PLUS loan, knowing that he/she will be denied due to an adverse credit history. In these cases, only the parent who is likely to be denied a Federal Parent PLUS loan should apply for the loan. If only one parent applies and is denied the Federal Parent PLUS loan, the student is eligible for the increased loan limits. If both parents apply and one is approved while the other is denied, the student is not eligible for the increased loan limits.
Annual loan limits for Federal Stafford loans are prorated for undergraduate students in certain circumstances:
For example, if an undergraduate student in a 4-year Bachelor’s degree program will be graduating at the end of the fall semester (halfway through the academic year), the student is eligible for half of the annual loan limit for seniors.
Annual loan limits for Federal Stafford loans are not prorated by enrollment status, so a half-time student is eligible for the same annual loan limits as a full-time student.
Health profession students, such as students enrolled in medical school, are eligible for higher Federal Stafford loan limits due to the phase-out of the Health Education Assistance Loan (HEAL) program.
The increased loan limits are available only to health profession students enrolled at U.S. colleges and universities. Students enrolled at foreign institutions are not eligible.
The $40,500 annual loan limit assumes a 9-month academic year. The annual loan limit is increased even further for students enrolled in programs with a 10, 11 or 12-month academic year (e.g., $47,167 for a 12-month academic year). Eligible programs include Doctor of Allopathic Medicine, Doctor of Osteopathic Medicine, Doctor of Dentistry, Doctor of Veterinary Medicine, Doctor of Optometry, Doctor of Podiatric Medicine, and since 5/1/2005, Doctor of Naturopathic Medicine and Doctor of Naturopathy.
The annual limit is $33,000 (9-month) or $37,167 (12-month) for Doctor of Pharmacy, Graduate in Public Health, Doctor of Chiropractic, Doctoral Degree in Clinical Psychology and Masters/Doctoral Degree in Health Administration programs.
Eligibility for subsidized Federal Stafford Loans is determined by the college or university’s financial aid office based on demonstrated financial need, up to the annual and cumulative loan limits.
|Third-Year and Beyond (Junior, Senior)||$5,500||$5,500|
As of July 1, 2012, graduate and professional school students are no longer eligible to borrow new subsidized Federal Stafford loans. Previously graduate and professional school students were eligible to borrow up to $8,500 a year in subsidized Federal Stafford loans, with a $65,500 cumulative limit that includes undergraduate subsidized Federal Stafford loans.
New borrowers of subsidized Federal Stafford loans on or after July 1, 2013 may borrow subsidized Federal Stafford loans for no more than 150% of the normal duration of their educational program.
Since the overall Federal Stafford loan limits exceed the subsidized Federal Stafford loan limits, all undergraduate students are eligible to borrow at least $2,000 in unsubsidized Federal Stafford loans each year. Eligibility for the unsubsidized Federal Stafford loan does not depend on demonstrated financial need.
Cumulative loan limits, sometimes referred to as aggregate limits, may be refreshed by repaying the debt.
Federal Perkins loans are awarded by the college financial aid office based on demonstrated financial need. College financial aid administrators have significant discretion in deciding which students will receive a Federal Perkins loan and how much they will receive, subject to the annual and cumulative loan limits as well as available funding.
Note that each college has a limited allocation of Federal Perkins loan funding from the revolving loan pool, so actual loan amounts are often much lower than the loan limits. The average Federal Perkins loan amount in 2011-12 was $1,824 for undergraduate students and $2,747 for graduate and professional students. (The overall average Federal Perkins loan amount was $1,957.)
The cumulative loan limits for graduate and professional school students include any undergraduate Federal Perkins loan debt.
The annual loan limit for the Federal PLUS loan is the annual cost of attendance minus other aid received during the enrollment period. There is no cumulative loan limit. The loan limits are the same for both the Grad PLUS and Parent PLUS programs.
There are no limits on federal consolidation loans, other than the underlying limits on the loans included in the consolidation loan. Federal Consolidation loans count against the cumulative Federal Stafford loan limits corresponding to the proportion of the consolidation loan that repaid Federal Stafford loans.
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