If you are a freshman starting college, you are probably considering taking out a student loan. In the past decade, taking out a student loan has become very expensive, and you can borrow money up to a certain amount. Even though people use it to pay their tuition, dorms, and school supplies, the amount you can borrow varies. Here, we will take a look at the student loan limits in the USA and see just how much money you can borrow without running into any problems.
Like with any other type of loan, knowing your borrowing limits is a must with student loans. Knowing your limits can help you stay on budget with the money you can borrow and help you to cut costs down. Of course, there are some things you need to know before taking out a student loan.
The first one is that your debt load can’t exceed your annual income. To put it in simple words, if you have an income of 50,000$ per year and you have 60,000$ in debt, your total debt load can’t exceed 120,000$.
Second thing, you can borrow only up to the total amount allowed of funds that are available in your federal student loan program. So, if you have federal loans, you can borrow a maximum of 31,500$ per year in subsidized Stafford loans and a maximum of $57,500 per year in unsubsidized Stafford loans.
On the other hand, if you are considering getting a private student loan, you might have other borrowing limits, and the max amount you can take is then different. Before taking out any loan, consult with a financial advisor.
How Much May You Get in Student Loans?
As mentioned above, student loan limits differ from source to source, but most schools will allow you to borrow a maximum of $57,500 per year in federal loans and a maximum of $138,500 per year in private student loans. On top of that, the total amount that you can borrow depends on factors such as your income and family size.
With that said, keep in mind that once you take out a student loan, you need to be very diligent in making your monthly payments on time.
Federal Loan Limits
Federal student loan limits vary based on your credit score and other factors, but in general, you can borrow up to $57,500 per year. This includes both Stafford and PLUS loans. If you have a strong credit history, you may be able eligible to borrow more than the federal limit. At the end of the day, it’s better to make a plan for how much money you need and for what since you don’t want to end up paying more than you borrowed.
Private Loan Limits
Private student loan limits vary from federal. They do offer you the possibility to borrow more money, but you need to be aware that if you borrow more, you will need to return even more.
With that said, the most common limit for private loans is $100,000. Although some lenders have limits on the amount of debt that you can take at once, so be sure that you check your borrowing limit before you apply.
How Much Should You Borrow for Student Loans?
Student loan limits can be a little confusing, so let’s take a look and figure out how much you can borrow for your education. Generally speaking, it’s not good to borrow more money than you will be earning after you finish school. That’s why it’s advisable to borrow only the money you will need to cover your education.
So, if you are planning to make 70,000$ per year, you should borrow 50,000$ since you will have an interest rate to pay, and if you miss your payments, it can accumulate. At the end of the day, always do your research and consult with an expert before you apply for any student loan.
What Happens If You’ve Reached Your Federal Loan Limit?
In the case that you have reached your federal loan limit, your next step is to contact your loan provider. Once you reach your limit, you are, unfortunately, no longer eligible to receive money.
There are some options you can try.
- Try to get a forbearance or a deferment. This is a form of financial aid if you are experiencing financial difficulties. This way, you can postpone your payments.
- Try to seek a higher limit. You can turn to Direct Loan Repayment Program. With this program, you are able to get your limits raised, and you can continue borrowing the money.
- Public Service Loan Forgiveness (PSLF). Through this program, you can have your student loans forgiven after ten years of full-time work in a public service job.
What Happens If You Don’t Use Your Student Loan In Its Entirety?
In the case that you fund yourself with some extra money from your student loan, you can give the money back to the lender to reduce the amount you owe. As well you have the option to keep that money, but at the end of the day, you will still have to repay the loan back with interest.
This can be a very good thing since, by law, both federal and private student loans don’t have any prepayment penalties, so you can pay your debt sooner with that extra money. By you returning the extra money back, you can actually minimize your interest rates as well.
Can You Return Unused Student Loans?
A lot of people are wondering if you can actually return the excess money back to the lender. Well, the answer is yes. According to Federal Student Aid, once your loan is disbursed, you have a period of 120 days where you can send the money back to the lender and not pay any fees or interests.
Here are steps on how you can return the loan back.
- Must be under your name. If you are looking to send the loan back, your name needs to be on the loan
- Must be enrolled at least half time in school. While you are using the loan, you must be at least half-time enrolled in school
- Must be a current loan. In order for you to send it back, it must be a current loan that you still haven’t repaid back
- Can’t cancel or modify the loan
We all have been students at some point, and we all know how expensive student loans can be. That’s why it’s very crucial to understand their limits and how much you can borrow without them capping and putting you in debt that was easily avoided.
In this article, we gave you a better insight into the federal and private student loan limits, so read them, inform yourself and make the best decision for yourself. At the end of the, it’s your education, and it’s important to do the best for your future.