How Much Money Can You Borrow From FAFSA?
The amount of money you can borrow through FAFSA largely depends on the type of loan you are eligible for, your year in school, whether you’re a dependent or independent student, and whether your parents are involved in helping you pay for college. In this article, we’ll go into detail about these limits, helping you understand exactly how much you can borrow, and whether it will be enough to cover your tuition and other costs.
Federal Student Loans: The Two Main Types
There are two main types of federal student loans you can borrow through FAFSA: Subsidized loans and Unsubsidized loans. Each has different borrowing limits and eligibility requirements.
Subsidized Loans: These are for students with financial need. The government pays the interest on these loans while you’re in school, during the grace period (usually six months after you graduate), and during deferment. The borrowing limits for subsidized loans are relatively low compared to unsubsidized loans.
Unsubsidized Loans: These loans are available to almost any student, regardless of financial need. However, the interest accrues while you’re in school, and you’re responsible for paying it. The borrowing limits are generally higher than subsidized loans.
How Much Can You Borrow as an Undergraduate?
Yearly borrowing limits differ based on your year in school and whether you’re classified as a dependent or independent student. Here's a breakdown of the federal loan limits for undergraduates:
| Year in School | Dependent Students (Subsidized + Unsubsidized) | Independent Students (Subsidized + Unsubsidized) |
|---|---|---|
| First Year | $5,500 (up to $3,500 subsidized) | $9,500 (up to $3,500 subsidized) |
| Second Year | $6,500 (up to $4,500 subsidized) | $10,500 (up to $4,500 subsidized) |
| Third Year & Beyond | $7,500 (up to $5,500 subsidized) | $12,500 (up to $5,500 subsidized) |
For dependent students, the total aggregate limit for undergraduate studies is $31,000, with no more than $23,000 coming from subsidized loans. For independent students, the total aggregate limit is $57,500, with the same cap of $23,000 on subsidized loans.
Graduate and Professional Students
Graduate students have different limits. Once you graduate from your undergraduate studies and move on to graduate or professional school, your borrowing options change. You are only eligible for Unsubsidized Loans as a graduate or professional student. The yearly loan limit is $20,500, and the aggregate limit for both undergraduate and graduate loans is $138,500, with no more than $65,500 in subsidized loans.
Parent PLUS Loans
Parents of dependent students can also apply for Parent PLUS Loans. These loans allow parents to borrow the full cost of attendance (including tuition, room and board, books, and other expenses) minus any financial aid the student has already received. There’s no strict cap on how much can be borrowed through Parent PLUS Loans, but parents need to pass a credit check, and they are fully responsible for paying back the loan.
The Limits Might Not Be Enough: The Gap in Funding
Here’s the kicker: for many students, especially those attending private universities or out-of-state schools, the maximum amount you can borrow from FAFSA loans often isn’t enough to cover all of your expenses. For example, a year at a private university can easily cost upwards of $60,000 when you factor in tuition, room and board, books, and other living expenses. Compare this with the $7,500 maximum loan limit for a third-year undergraduate, and you’ll quickly realize there’s a significant gap.
So, what do you do when the FAFSA loan limits aren’t enough?
Alternatives to Federal Loans
Private Loans: Many students turn to private lenders to fill the gap between the federal loan limits and the actual cost of attending college. Private student loans typically have higher interest rates and less favorable repayment terms than federal loans, but they can be an option if you need additional funds. However, these loans often require a cosigner, and the interest accrues while you’re in school.
Scholarships and Grants: Another option is to look for scholarships and grants. Unlike loans, these don’t need to be repaid, making them one of the best ways to fund your education. Scholarships are often merit-based, while grants are usually need-based.
Work-Study Programs: The Federal Work-Study Program provides part-time jobs for students with financial need, allowing them to earn money to help pay education expenses. While this won’t cover all your costs, it can supplement your income and reduce the amount you need to borrow.
Income-Share Agreements (ISAs): Some schools offer ISAs, where you agree to pay a percentage of your future income for a set number of years in exchange for financial support while you’re in school. This can be a flexible alternative to traditional loans.
Interest Rates and Repayment Options
While the amount of money you can borrow is important, you also need to consider the interest rates and repayment terms associated with federal student loans.
- Subsidized Loans: As of the 2023-2024 academic year, the interest rate on subsidized loans is 5.50%.
- Unsubsidized Loans: The interest rate for unsubsidized loans for undergraduates is also 5.50%, while for graduate students, it’s 7.05%.
Repayment typically begins six months after you graduate or drop below half-time enrollment. Federal loans offer various repayment plans, including Income-Driven Repayment (IDR) plans, which cap your monthly payments at a percentage of your discretionary income, and Public Service Loan Forgiveness (PSLF), which forgives remaining debt after 10 years of payments while working in a qualifying public service job.
The Role of Dependency Status
Your dependency status plays a crucial role in determining how much you can borrow. If you’re a dependent student, your parents’ financial information will be considered when determining your financial aid package. If you’re classified as independent, only your own financial information is used. Independent students can borrow more money because they are assumed to have fewer financial resources.
You’re considered an independent student if you:
- Are 24 years or older
- Are married
- Have children or dependents who receive more than half their support from you
- Are a veteran or active-duty member of the U.S. armed forces
- Are an orphan, in foster care, or a ward of the court
If you qualify as an independent student, you can borrow more through federal loans, but remember that it also means your financial aid package might include more loans than grants or scholarships.
Key Considerations Before Borrowing
Before you rush to borrow the maximum amount allowed, consider these factors:
Will You Be Able to Repay It? Many students graduate with significant debt and struggle to make their monthly loan payments, especially if they don’t land a high-paying job right after college. Borrow only what you truly need.
Interest Rates Will Accumulate: If you take out unsubsidized loans, interest will start to accrue immediately. This means your loan balance will grow even while you’re still in school. Keep this in mind when calculating how much to borrow.
Explore All Other Options First: Exhaust all of your scholarship, grant, and work-study options before turning to loans. Free money is always better than borrowed money.
Conclusion: Borrowing Smart
Ultimately, the amount of money you can borrow through FAFSA is determined by federal limits, your financial need, and your status as a dependent or independent student. While federal loans are often more affordable and offer better repayment options than private loans, the maximum amounts may still leave you with a funding gap, especially if you’re attending a costly school. Carefully consider how much debt you’re willing to take on, and explore all your options before borrowing. Borrowing money for college is a big decision, and it’s important to make an informed choice.
The FAFSA can open doors to your future, but how much you borrow today will impact your financial life for years to come. Make sure you’re prepared for that reality.
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