Wondering what the limits are on your federal student loans?

So are you wondering whether you got the maximum amounts for grants and subsidized student loans in your financial aid package?   The numbers change depending on where you are in your college career, e.g. if you are in your first year of college (undergraduate) the maximum amount you can be awarded as a subsidized loan is $3,500.  The number stays the same whether you are considered a dependent or an independent student, but if you are in graduate school that number goes up to $8,500.  For undergraduate school, the amount increases by a $1000 a year through your third year and then remains constant (of course until the rules change) - so as a 3rd or 4th year student your max subsidized loans would $5,500.  For graduate school - the amount for all years is $8,500.  See a handy chart here.    The chart will also tell you the maximum federal debt you will be allowed to aggregate for your program, including unsubsidized loans, the numbers may be higher if you are in a health professional program.

For Grants the maximum annual award currently is:  Pell Grant - $5550; Federal Supplemental Educational Opportunity Grant - $100 - $4000; Iran and Afghanistan Service Grant - $5500; and the Teacher Education Assistance for College and Higher Education (TEACH) Grant - allows up to a maximum of $4000 per year to students who intend to teach in a public or private elementary or secondary school that serves students from low-income families.

Have questions? let me know in comments.

What does the recent Student Loan Reform mean?

Last March (2010), President Obama signed legislation expanding access to college for many more students.   Over $68 billion of tax-payer money that commerical banks previously received as subsidies for writing student loans will now be re-directed to student financial aid funding and support.   Areas that will be affected by this change, include the following:

• Pell Grant funding will double
• Funding for community colleges will increase
• Support for minority-serving institutions will be increased
• Student loan payments will be capped at 10% of a graduate's discretionary income with forgiveness of the loan remainder after 20 years, and after 10 years if you have a career in public service
• Commercial banks will no longer receive government subsidies for writing federal guaranteed student loans, and these loans will now be provided directly from the federal government's Department of Education.
You may remember much discussion in the media in recent years where some schools were being investigated for accepting incentives from commercial lenders to place them on preferred lenders lists so that they (the banks) could increase the numbers of loans written, and therefore the amount of government subsidy received.   These subsidies are what will be re-injected into the student financial aid system, helping students directly.

With reform, for all intents and purposes there are now only two major categories of loans 1) Direct Federal Guaranteed Loans and 2) Private Loans, which include loans that schools may make in partnership with a commercial institution.

As I have mentioned on this blog before, if you qualify, grant aid should be your first source of funding your education, as this aid does not have to be repaid, then if you must use loans, you should always seek to use federally guaranteed loans first, and private loans only as a last resort.    Ask a lot of questions to ensure that you really understand what type of loan you are signing up for.    Some private loans are being named in such a way that they tend to suggest, intentionally or otherwise that they may be federal loans.     

The Federal guaranteed loans are the following loans

Federal Perkins Loans

Direct Stafford Loans

a)    Unsubsidized Stafford Loans

b)    Subsidized Stafford Loans

Direct PLUS Loans for Parents      and

Direct PLUS Loans for Graduate and Professional Degree Students