Do I Have to Borrow All the Student Loans I’m Offered?

Quick Answer

You don’t have to borrow the full student loan amount in your student aid offer. You can choose to borrow a lesser amount, and if you need more money in the future, you can request to borrow more later.

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When you get your student aid award letter, you might find the loan amount you're offered is more than you need to pay for tuition and other education costs. Students are allowed to borrow up to the maximum amount offered, but it's not required, and borrowing less means you'll have less to pay back down the road. Let's discuss how much you can get with student loans, how to decide how much to keep and how to accept a lower loan amount.

How Much Can You Get in Federal Student Loans?

How much you can borrow in federal student loans depends on how many years you've been attending school, your dependency status and whether you're a graduate or undergraduate student. Dependents and students earlier in their college careers may qualify for lower loan amounts. Here are the current federal loan maximums you can borrow for each academic year:

  • Undergraduate federal student loans: $5,000 to $12,500 per year, with an overall loan limit of $57,500
  • Graduate and professional federal student loans: Up to $20,500 per year, with an overall loan limit of $138,500

Universities may provide their own loan programs to students that also have varying loan limits. Private lenders typically provide loans that cover the full cost of attendance for the year; however, lenders can set lifetime limits on how much you can borrow in total.

How Much Should You Borrow?

Deciding how much to borrow is a delicate balance between borrowing enough to get through school comfortably while not overdoing it. Here's are some steps to follow to determine the amount you'll need in a given year:

1. Determine Your Education and Living Costs

Visit your college's tuition and fees page to find out how much it'll cost to attend school for the year. Then review room and board fees, as well as any program- or activity-specific fees you'll be required to pay, and estimate how much that will cost you.

If you're staying off campus, take into consideration how much you'll pay in rent, food, utilities and other home costs. Next, estimate school supplies, books and transportation costs. After totaling up these costs for the year, you should have a good idea of how much money you'll need.

2. Add Up Funding Sources

Once you know how much the academic year will cost, add up the school funds you're receiving. This could include scholarships, grants, distributions from a 529 plan and other savings.

If the money you have socked away and free money you've been awarded is less than you'll need, determine the gap and how much more you'll need to borrow.

3. Consider Earning Income

If you have the capacity to fit a job into your schedule, working in the evenings or on the weekends could reduce the number of loans you need to take out.

Consider looking for an on-campus job or even a part-time job related to the field you want to pursue after graduation since that could add some experience to your resume. With the recent rise in remote work, you might even find a job you could do from your dorm.

4. Decide on Your Loans

Three types of federal loans exist for new borrowers—direct subsidized loans, direct unsubsidized loans and direct PLUS loans. Subsidized loans are the type to consider first since they aren't charged interest while you're in school, for six months after you leave and during deferments.

Unsubsidized loans are a good second choice for undergraduate and graduate students. These loans are charged interest while you're in school and during periods of deferment but they have a lower interest rate than PLUS loans. With unsubsidized loans, you also may qualify for federal benefits like income-driven repayment (IDR) plans and loan forgiveness.

If you exhaust the loan options above, direct PLUS loans could finance graduate program costs, and your parents could take out a parent PLUS loan to help foot the bill for undergraduate expenses. Shopping for private loans through private lenders is another way to bridge the gap.

How to Accept Your Financial Aid

After filling out the Free Application for Financial Student Aid (FAFSA), you'll get a student aid offer that includes the amount available to you. You can accept the loan amount offered or choose a lesser amount you want to receive, according to StudentAid.gov. You can also increase the amount you borrow later if you discover the funding isn't enough. If you accept loans and end up not needing them, funds returned within 120 days of disbursement may not be charged interest or fees.

With non-PLUS federal loans, you don't have to start repaying the debt until you graduate or leave school, but it could be a good idea to at least start paying interest on unsubsidized loans while pursuing your degree. Otherwise, interest will accrue on your loan and capitalize, which is when it's added to your principal. Over time, interest capitalization can grow your balance, making you owe significantly more than what you initially borrowed.

Borrow Only What You Need

It might be tempting to borrow as much as you can for school, but borrowing conservatively can keep debt under control and help you avoid overspending using loan refund checks.

If there's a credit on your college account when loans are disbursed to your school, the credit could go to you in a refund check that's meant for living and education costs. Spending that money excessively can come back to bite you because it's money you'll have to pay back.

Coming up with a school budget and exhausting other aid options could help reduce your reliance on loans, resulting in less debt to tackle when school days are behind you and you venture into the workforce.

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