Aggregate Loan Limits Are Changing. Here’s What You Need to Know.

Over the summer, the federal government changed the aggregate loan limits for federal student loan borrowers. These changes will pose new challenges for federal student loan borrowers. Here’s what you need to know about the changes:

• Caps the annual loan limits at $20,500 for graduate students and $50,000 for professional students. The aggregate limit is capped at $100,000 for graduate students and $200,000 for experienced students and does not include amounts borrowed as an undergraduate. (Borrowers who are both graduate and professional students at some point in their educational careers may only borrow up to $200,000 for graduate and professional school.)

With the elimination of the Graduate PLUS Loan program, graduate students’ only source of federal student loan funding is from the unsubsidized loan program. The federal government retains the $20,500 annual borrowing cap for graduate students, so there is no change. However, graduate students can no longer receive PLUS Loan funding, which means $20,500 is their hard cap for federal student loans. This change will push more graduate students to the private student loan lenders. Graduate enrollment may also decline as access to funding dries up for more costly graduate degree programs.

The $100,000 aggregate loan limit is another change that may cause some graduate students to reconsider their educational studies. Perennial students may not be able to obtain the financing for future graduate degrees if one of them is more costly than another. Assuming a graduate student receives the full loan amount ($20,500) annually, this funding will only last for nearly five years before the student hits their aggregate loan limit for graduate studies.

• $257,500 lifetime borrowing limit on all federal student loans, excluding borrowed Parent PLUS loan amounts (in the case of a dependent student who had Parent PLUS borrowed on their behalf for education expenses).

With the elimination of the Graduate PLUS Loan program, the federal government needed to offer students additional room in their lifetime borrowing limit on all federal student loans. So naturally, the federal government approved legislation that moves the total federal student loan limit to $257,500, from a previous high of $138,500. This change benefits professional students who can no longer rely on the PLUS Loan program to finance their studies.

• Allows institutions to impose their own lower program-level loan limits.

An interesting provision in the recent legislation was the language allowing institutions to impose their own loan limits for lower program-level degrees. For years, some schools have squawked about the need to restrict loan funding for lower-level programs with lower tuition costs than other programs. This provision may be beneficial in preventing excessive loan refunds for academic programs with lower career salaries. However, it’s important for students and parents to understand that this provision could also limit their access to federal student loans for certain programs, potentially requiring them to seek alternative funding sources.

• All parents (combined) may borrow $20,000 per year per dependent student and a $65,000 aggregate limit per dependent student (without regard to amounts forgiven, repaid, canceled, or discharged)

The most significant change to the aggregate loan limits was the reduction in the amount a parent can borrow for their dependent student in the Parent PLUS Loan program. This reduction results in a hard cap of $20,000 annually for each dependent student for whom the parent takes a PLUS Loan. It also has a lifetime aggregate limit of $65,000 per dependent student, so parents can no longer borrow large amounts. Some parents may need to consider private loans to help finance their students’ education. This change may require parents to reassess their financial planning for their child’s education and consider alternative funding options.