Caps on Stafford Loan Borrowing

Take a look at the usual college financing discussion and it appears as if you only have to take a one time loan for your four years and you are good to go. What actually happens is that you need to borrow a loan each year of your college education, thus we shall now discuss the caps implemented on Stafford loans.

Taking their name from Senator Robert Stafford, these are the most common and most popular type of student loan borrowing; even though it is not a loan as much as being a written government promise that the aforementioned loan or loans will be repaid if the circumstance of default by student is to arise. Due to this nature of theirs, intermediaries such as the Chase or Sallie Mie can also come into play alongside the issuing of loans by the government itself.

Available to any student enrolled in a college listed as eligible by the government, Stafford Loans tend to prove cheaper when considered in the long term due to that fact that the paying back of these loans is promised by the government and therefore no risk of money loss to due default is faced by the issuing intermediaries, who can thus afford to charge up to 2-3 points lower interest rates than private loan providing organizations.

However, the biggest problem with such a loan is the usually insufficient amount of money offered due to the artificial limits or caps set by the government on Stafford Loans. These caps may vary due to circumstances and qualification but may be so limited that you are forced to look towards other artificial financing options too.

The caps are basically limited to $5,500 if you are a freshman, $6,500 for a sophomore and $7,500 as a junior and senior if you are also being provided for by your parents. Students independent from their parents can get a loan of $9,500 as freshman, $10,500 if you are a sophomore and $12,500 for junior and senior. Independent students are also eligible for a $20,500 loan for each graduate year.

The caps limit this to a lifetime borrowing limit of $31,000 for a dependent, while you can borrow $57,500 and $138,500 for your under-graduate and graduate studies if you are listed as independent. The amount allowed for independent graduate students can increase to $238,000 subject to certain conditions regarding your education course.

The artificial limits do not impose that much of a problem for undergraduates as long as you divide your loan borrowing within the four years. Borrow a few every time so that you do not end up exceeding the capped limits and find yourself in a financial problem. Plan out your borrowing and make sure that you do not borrow the whole amount at the start if you are expected to spend something near to 60 percent of your year in school.

Stafford Loans finance thousands of students in the United States each year, issuing loans on low interest rates and other benefits. On the other hand though, they require really careful and right management as they offer only a very limited amount of financial solution for specific students due to these caps.