How Much In Loans Can I Take Out?

<p>The question of how much in loans a student alone can take often come up, as well as students/parents proclaiming that THE STUDENT will have to take out X amount in loans to go to a school. The reality is that the student, alone, is limited as to how much he is entitled to take out in undergraduate school loans. The only guarantee for FAFSA vetted dependent students are the basic Stafford loan amounts.</p>

<p>A dependent, full time student who fills out and has a FAFSA processed can borrow $5500 in Stafford loans freshman year as long as the Cost of Attendance and other award limits are observed. This amount can be borrowed even if there is no financial need and be used to pay the EFC or expected contribution of the school. If there is defined need, then up to to $3500 of this amount can be subsidized freshman year which means that no interest accrues while the student is a full time student. Also the subsidized portion has been getting a lower interest rate of under 4% when it does start to accrue,but this subsidy will expire unless Congress extends it. </p>

<p>If a parent applies for PLUS (parent loan ) and is turned down (the parent can be told an endorser is needed or an appeal), then the student can automatically get an additional $4K in unusubsidized Stafford loans freshman year, again if the COA of the school and other award limits are kept in mind. </p>

<p>Those students whose parents refuse to fill out a FAFSA can still get the basic Stafford loan upon completing the student portion of the form and going through a process with the school financial aid office as they will dictate, but for freshman year, the amount will be $5500. Only the basic amounts will be permitted to be borrowed and none of it will be subsidized. </p>

<p>For future years, the student Stafford loan amounts are $6500 (up to $4500 can be subsidezed) for sophomore and junior years, and $7500 (up to $5500 can be subsided) for senior year. The additional amounts for those students whose parent is turned down by PLUS is $4K each year except for senior year when the amount goes up to $5K. </p>

<p>For those students who have financial need, most schools will use, at very least, the subsidized portion of the Stafford entitlement as part of the financial aid package, and many schools will use every bit of it. They are listed as Stafford loans, or DIrect loans or sometimes just broken down as Sub (subsidized) and UnSub (unsubsidized) loans. Rare is the school that allows a student with financial need to use these loans to meet student or family EFC. </p>

<p>The other loan that can show up in a student financial aid package is the Perkins loan which is also a federal loan and is always subsidized. A school has to "subscribe" to this loan and most have limited amounts of it, and it usually goes fast. It is intended for the neediest students, but left up to the school's discretion as who those may be. They are supposed to go to PELL eligible students first. The annual maximum is $5500 each year, and the interest rate,which does not accrue until the student is no longer full time is under 6% once it does start to accrue. This loan is scheduled to be dicontinued in 2015.</p>

<p>None of these loans are cumulative in that you cannot borrow more the next year because you did not use up your limit in borrowing the year before.</p>

<p>You get the loans per term most of the time. The full $5500 freshman amount, for a school that has the standard two semester year will award $2750 of the loan at onset of each semester. There is that feature of these loans, however, that you can borrow the entire amount for the spring semester if you have not used any of that year's allocation for the fall term. This can be helpful for some students is stretching out their college time, working first semesters and using the full loan amounts to pay for the second semesters of two school years.</p>

<p>So all dependent students vetted by FAFSA can borrow up to $5500/6500/6500/7500 over the four years of college on an unsubsidized with independent students allowed to borrow and additional $17K over that time, as well as those students for whom a parent applies and is turned down for PLUS each year.</p>

<p>These loan amounts can add up to quite a bit just in the student's names, since the unsubsidized parts of the Stafford are cranking up interest at close to 7% the instant they are released. A dependent student can end up in debt to the tune of more than $75K if that student gets maximum Perkins of $5500 a year and the maximum Staffords. I say, more than $75K, because the unsubidized parts of the Staffords are accruing interest, easily coming to at least a thousand and more, by the time payment is due.</p>

<p>Some schools do have their own loan funds and may lend the student alone some money out of it. I don't see that very often at all. Any other loans available to students are private loans that depend on the student's financial standing, and most of the time it comes down to the parent having to sign. Don't let that CO in the CO-sign fool you. It's your parent that they are initially after and you are in there for good measure as both of you are on the line as long as either of you are alive. Student loans that are federally backed, are NOT dischargeable upon bankruptcy, and the long arm of the federal government makes these pretty much forever loans and your parents social security, as well as yours, both parties' credit records and bank accounts are open for the taking when these loans are taken.</p>

<p>And here I thought someone was asking until I saw who posted. :)</p>

<p>I should have been asking. I haven’t always practice what I am preaching and which is why I am not preaching and posting.</p>