Student Loan Limits: Federal and Private Loan Borrowing Caps

Many students rely on student loans to help pay for college. In fact, more than half of undergraduates graduate with student loan debt, averaging $29,300, according to the College Board.

Federal student loans come with annual borrowing limits that depend on your year in school and whether you're an undergraduate or graduate student. If these limits aren't enough, you might need to consider private student loans to cover the difference.

Before you borrow, it's crucial to understand how much you're eligible for and the types of loans available. Without this knowledge, you could end up with a college bill you can't pay.

Current private student loan rates

Federal student loan borrowing limits

How much you can borrow depends on your dependency status, financial need, and whether you're an undergraduate or graduate student. Your school determines how much you're eligible to receive based on your Free Application for Federal Student Aid (FAFSA) results and the school's total cost of attendance.

However, there are still limits on how much you can borrow each year and over the course of your studies.

Undergraduate borrowing limits

Undergraduate students can get federal Direct Subsidized Loans and Direct Unsubsidized Loans. However, only students with financial need qualify for subsidized loans. With these loans, the government covers the interest while you're in school and six months after you leave or drop below half-time enrollment. Unsubsidized loans are available to all undergraduate students, regardless of financial need.

If you're a dependent undergraduate student and your parents don't qualify for a parent PLUS loan, you can borrow the same amount as independent students.

Graduate and professional borrowing limits

Graduate and professional students can get Direct Unsubsidized Loans to help pay for school. If that's not enough, they can also take out grad PLUS loans, which have a higher interest rate.

Grad PLUS loans don't have a set borrowing limit, but you can't borrow more than your school's cost of attendance, minus other financial aid you receive.

Parent loan borrowing limits

Parent PLUS loans allow parents of undergraduate students to borrow as much as the full cost of attendance at the child's school, minus any other financial aid the student receives.

Parent PLUS loans can be a good option if your child needs additional funds after exhausting Direct Subsidized and Unsubsidized Loans.

Private student loan limits

Private student loans work differently from federal loans because they're credit-based. Each lender sets its own borrowing limits, but many cap loan amounts at the full cost of attendance at your school, minus any other financial aid you receive.

Your loan terms and interest rate depend on your credit score, income, and debt-to-income ratio.

“A higher credit score means you're looked upon more favorably by the lender,” says Connor Pierce, a certified student loan consultant with Student Loan Planner. “This can lead to approval for higher borrowing amounts and also will likely give you a better interest rate which saves you money over the life of the loan,” he adds.

If you don't have a credit history, you'll likely need a cosigner with strong finances. Your cosigner's credit profile would affect how much you can borrow and the interest rate you receive, according to Pierce. Keep in mind, your cosigner is responsible for the loan if you're unable to make payments.

Factors to consider before you borrow

Before you borrow, consider your school's total cost of attendance, your career path, and how your future loan payments will fit into your budget.

1. Your college's total cost of attendance

“Each school has a different cost of attendance, and some can be significantly higher than others,” says Pierce.

Cost of attendance includes tuition, fees, room and meals, books, and supplies. Review the costs at each school you're considering.

“Identify what your end goal is. What is your 'why' for college?” says Lisa Marker-Robbins, founder of Flourish Coaching, a service that helps teens find the right college and have better career outcomes.

If a school isn't affordable without maxing out your student loan limit or taking on private loans, you may want to consider more affordable options, like in-state schools or community colleges.

2. Your career path and grad school plans

Consider whether the cost of attendance at your chosen school aligns with your career goals. If your career path requires a graduate degree, factor in those costs too.

“You really need to be planning for both, and grad school should change how you view undergraduate loans,” advises Lisa Marker-Robbins, founder of Flourish Coaching, a service that helps teens find the right college and have better career outcomes.

Marker-Robbins helps her clients plan by working backward. “We begin with career choice and then figure out what majors lead to those jobs,” she explains. “Then, we look at which colleges are within budget and offer that major.”

Research your chosen career to estimate how much student loan debt you can realistically afford. Marker-Robbins suggests using tools like the Occupational Outlook Handbook and basing your calculations on an entry-level salary in the bottom 10%.

3. Your estimated monthly student loan payments

After estimating your annual costs, calculate how much you'll need to borrow after factoring in financial aid and any contributions from income or savings.

Use a student loan calculator to estimate your monthly payments for both federal and private loans. This will help you determine if your expected loan amount is manageable with your career plans, as not all salaries can support high loan payments.

What happens if I max out the student loan limit?

If you've hit your annual or total federal loan limits, it might be a good idea to:

• Explore private student loans: Private student loans can help bridge the funding gap when federal student loans aren't enough. However, “You should almost always exhaust federal loan options prior to taking private loans because the terms for private loans are usually not as friendly,” says Pierce.
• Talk to the financial aid office: After you receive your financial aid letters, Pierce suggests requesting a “professional judgment” from the school's financial aid office. The office will review your financial information and let you know if you can qualify for additional aid or scholarships before you decide to borrow more.
• Explore tuition assistance programs: Some employers offer tuition assistance as part of their benefits package, paying a portion of tuition costs or student loans. You may be able to get help from an employer with loan payments.