The Stafford loan program can be confusing to understand because of the many varieties of financing available under the program. There are both private loans guaranteed by the federal government and direct loans. Within the direct loan category, there are subsidized loans and unsubsidized loans. Within this large grid, each specific type of loan will have annual and aggregate limits.
Private Loan Guarantees
There are no expressed loan limits for the private loan program with a Stafford guarantee. The federal government is not disbursing any funds to these borrowers. Instead, the borrowers are using a private loan service with independently negotiated terms. The Stafford program simply guarantees the loans against default for qualified borrowers. This means the private lender can be assured the government will purchase the loan if the individual borrower defaults. A borrower can work with the private lender to determine appropriate loan limits, but the limits will not exceed the price of tuition in any given term, since Stafford loans are tuition-only loans.
Dependent Loan Aggregate Limits
Subsidized loans are directed toward needy students. These students will not have to make payments on the loans while they are still attending school. The first limit is for subsidized loans, and then the student can expand the limit by taking additional loans unsubsidized. in 2008, for example, a dependent student whose parents were not denied a plus loan could take up to $23,000 toward tuition payments throughout the four-year college time frame. An additional $8,000 was permitted for these students in unsubsidized loans for a combined aggregate limit of $31,000. This was not enough to cover most college tuition for public schools at the time the loan limits were set. To cover tuition above this level, the student will need to rely on parent assistance, PLUS loans or take private loans.
Independent Loan Aggregate Limits
Students whose parents were denied a plus loan or who are listed as independent, meaning the parents are not contributing, can take a larger limit for both subsidized and unsubsidized loans over four-years. These students could take up to $23,000 in subsidized loans in 2008. Their unsubsidized aggregate limit, though, was $34,500. This means the student could borrow as much as $57,500 from the Stafford program over the four-year college time frame.
Graduate Aggregate Limits
Graduate school tends to be more expensive than undergraduate school at most colleges and universities. The federal government recognizes this expense, and it sets higher limits for the Stafford loan program to accommodate for the difference. Students taking a Stafford loan after 2008 could borrow up to $138,500 from the Stafford program. Students in medical schools had higher limits of up to $224,000. The aggregate limits do not apply to any Stafford loans taken during undergraduate school. If Stafford loans were taken during both parts of the educational process, a student may later consolidate the debts to save stress and cost. The aggregate limits on all loans, though, are rigid. They are reset every few years to account for the rising cost of education.