The costs of higher education continue to rise, and with the increased costs associated with earning an undergraduate degree or a graduate degree, students seek loans to finance these degrees. Students can apply for private and federal loans. Because the federal government ensures that students can obtain federal loans, students have an easier time obtaining federal loans than private loans. There is a limit, however, to the amount of federal loans one student can borrow.
Factors Determining Student Loan Award
The amount of federal loans a student can borrow depends on several factors. First, the student's level of education comes into play. A senior in college may borrow more money than a freshman in college. Medical students can also take out more loans than other students pursuing graduate studies. The number of classes the student takes at any given time also comes into play. A full-time student may borrow more money than a student who takes less than half of a full load of credit hours. There is also a distinction between subsidized and unsubsidized loans.
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Subsidized and Unsubsidized
If a student obtains a subsidized loan, the federal government will pay interest on the loan while the student is in school. If the student obtains an unsubsidized loan, the student must pay all the interest, but the student can have the interest payments deferred until after he finishes his schooling. At that time, the interest capitalizes and is added to the balance of the loan. The government bases awards of subsidized loans on the student's need, while the government may award unsubsidized loans to any students, regardless of need.
Maximum Annual Loans
The federal government set maximum loan amounts students can borrow as subsidized loans and unsubsidized loans. The federal government allows the following maximum loan awards to dependent students: • First-year undergraduate — $3,500 subsidized and $5,500 unsubsidized; • Second-year undergraduate — $4,500 subsidized and $6,500 unsubsidized; • Third-year and beyond undergraduate — $5,500 subsidized and $7,500 unsubsidized. The federal government allows the following maximum loan awards to independent students: • First-year undergraduate — $3,500 subsidized and $9,500 unsubsidized; • Second-year undergraduate — $4,500 and $10,500; • Third-year and beyond undergraduate — $5,500 and $12,500.
Maximum Aggregate Loans
The federal government also specifies the total loan award that a student can borrow for each stage in his education. The government authorizes the receipt of up to $23,000 in subsidized loans and $31,000 in unsubsidized loans for a dependent undergraduate student and up to $23,000 in subsidized loans and $57,500 in unsubsidized loans for an independent undergraduate student. Graduate students may receive significantly more funding, with graduate students receiving up to $65,500 in subsidized loans and $138,500 in unsubsidized loans and medical students receiving up to $65,500 in subsidized loans and $224,000 in unsubsidized loans. These figures apply to annual federal loans awarded after July 1, 2008.