Private Student Loans
Private student loans come from banks, credit unions, and other financial institutions. The limits vary by lender but generally max out at the total cost of attendance at the school you or your child attends. In addition, most private lenders have a maximum loan amount that can’t be exceeded no matter how costly your school is. To apply for a private student loan, contact the lender directly.
Annual and Aggregate Loan Amounts
An important limiting factor when it comes to student loans is the total amount you borrow each year and in the aggregate over the course of your college career. Usually, your aggregate limit as a graduate or professional student includes amounts borrowed (but not yet repaid) as an undergrad. Likewise, aggregate loan limits for private loans usually consider amounts borrowed through federal loans.
Federal Direct aggregate limits are affected by your status (dependent or independent) as well as your parents’ eligibility to take out a Federal Direct Parent PLUS loan. If they are ineligible, your annual and aggregate limits are higher.? The amount of any Parent PLUS loan is not subtracted from your Federal Direct loan limit. Your limit is affected by whether your parents are eligible or not. Keep in mind that aggregate limits are not lifetime limits. As you pay down your student loan debt, your cumulative limit is refreshed.
Loan Eligibility by Type
While a good rule of thumb is to max out Federal Direct Subsidized loans, followed by Federal Direct Unsubsidized loans before turning to Parent PLUS or Grad PLUS loans with private student loans last, you must be eligible for each type of loan in order to apply.
Federal Direct Subsidized loans are available to students with demonstrated financial need who are enrolled in school at least half time. The formula is as follows: Demonstrated Financial Need = Cost of Attendance (COA) Expected Financial Aid (EFA) Expected Family Contribution (EFC).?
Thanks to the 2021 Consolidated Appropriations Act, beginning in the term „student aid index” (SAI) will replace EFC on all FAFSA forms. In addition to some changes in the way the SAI is calculated, the change attempts to clarify what this figure actually is-an eligibility index for student aid, not a reflection of what a family can or will pay for postsecondary expenses.
If the COA, for example, is $20,000, the EFA is $10,000, and the EFC is $5,000, your demonstrated financial need is $5,000 ($20,000 $10,000 $5,000 = $5,000). No matter your need, you can only borrow up to the limit listed in the table above based on your year in school. If you need more money, you can turn to an unsubsidized, Parent PLUS, or private loan.
Federal Direct Unsubsidized loans are available to undergrad or graduate level students regardless of financial need. You can borrow up to your limit but no more than the result of subtracting the cost of attendance from any financial aid you are receiving.?
PLUS loans are available to parents or graduate students regardless of financial need. An adverse credit history can impact your ability to get a PLUS loan unless you have an endorser (co-signer) or can show extenuating circumstances for the adverse credit history.?
Private student loans are available to anyone-undergrad, graduate, or parent-who can meet the requirements of the lender, which typically includes a credit check.
The three types of federal student loans: Direct Subsidized, Direct Unsubsidized, and Direct PLUS. The first two have limits on how much can be borrowed while Direct PLUS loans have no limit. Subsidized direct loans to undergraduates max out at $23,000.