The Free Application for Federal Student Aid allows U.S. students to qualify for federal student aid, including Stafford Loans, Pell Grants and Direct PLUS Loans. When filing their application, most students under the age of 24 will file dependent status regardless of whether they live with their parents, and students aged 24 or older will file independent status. The U.S. Department of Education sets limits on the maximum amount of loans that a student can qualify for each year that vary depending upon the financial situation of his parents.
Dependent undergraduate students whose parents have the ability to take out Direct PLUS Loans may not obtain more than $5,500 in Stafford Loans for their first year of education, of which no more than $3,500 can be subsidized; $6,500 for their second year, of which no more than $4,500 can be subsidized; and $7,500 for each additional year of undergraduate schooling, of which no more than $5,500 of this amount can be subsidized. Loans subsidized by the U.S. government offer an interest rate of 4.5 percent compared to a 6.8 percent interest rate for unsubsidized loans for the 2010 to 2011 school year. As of March 2011, the cumulative Stafford Loan limit for undergraduate students comes to $31,300, of which no more than $23,000 can take the form of subsidized loans.
As of March 2011, independent undergraduate students and students whose parents earn too little to qualify for Direct PLUS Loans cannot take out more than $9,500 in federal loans their freshman year, $10,500 their sophomore year and $12,500 for every following year with a cumulative total of no more than $57,500 in loans while trying to obtain their bachelor's degree. The U.S. Department of Education subjects independent students to the same $3,500, $4,500 and $5,500 subsidized loan limits as dependent students.
Graduate and professional students who already have a bachelor's degree can qualify for up to $20,500 a year in Direct Stafford Loans, of which $8,500 of this amount can take the form of subsidized loans, as of March 2011. These individuals cannot receive more than $138,500 in federal loans over the course of their entire undergraduate and professional or graduate education with a cumulative subsidized loan limit of $65,500.
The children of high-income parents will usually receive little funding in the way of Stafford Loans and Pell Grants, but they can apply for Direct PLUS Loans. Each university decides on the maximum amount of funding that the student needs in Direct PLUS Loans, a limit that varies depending on the cost of attending the institution. The credit history and income of the parent or graduate or professional student will determine how much in loans a student can obtain. Direct PLUS Loans can cover the student's tuition for an unlimited amount of years until he completes his schooling.