Reaching the Federal Student Loan Limit

By Rachel Fenton

In September, the National Center for Education Statistics released a statistical brief, Reaching the Limit:  Undergraduates Who Borrow the Maximum Amount of Federal Direct Loans.  Recognizing the increasing number of undergraduate borrowers and the increasing loan amounts borrowed over the past two decades, this brief analyzes the extent to which borrowing at the federal maximum Stafford Loan limit has changed over time and how that change has varied among groups of students.  Also, given concerns that federal loan limits may necessitate private loan use, the brief reviews the extent to which students borrow the federal loan maximum before taking out private loans.

Highlights from the brief are below:

  • The total number of undergraduate Stafford Loan borrowers increased from 3.8 million in 2007-08 to 4.5 million in 2011-12.
  • The percentage of Stafford Loan borrowers who borrowed the individual maximum for subsidized loans declined from 68% in 2007-08 to 64% in 2011-12. Similarly, the percentage of borrowers who took out the maximum amount of combined subsidized and unsubsidized Stafford Loans decreased from 61% in 2007-08 to 55% in 2011-12.
    • However, among all undergraduates (including Stafford borrowers and non-borrowers), a small, but statistically significant increase (2 percentage points) in maximum borrowing occurred between 2007-08 to 2011-12.
  • With regard to dependency status, 25% of all dependent undergraduates borrowed the maximum loan amount in 2007-08, compared to 24% in 2011-12. For all independent students, 18% borrowed the maximum loan amount in 2007-08, compared to 21% in 2011-12.
    • A higher percentage of dependent undergraduates (24%) borrowed the maximum than independent undergraduates (21%) in 2011-12.
  • Whether a student borrowed the maximum loan amount varied by the type of institution attended. For example, in 2011-12, 64.8% of Stafford borrowers attending private nonprofit four-year institutions borrowed at the individual maximum, compared to 56.3% of borrowers at for-profit institutions, 54.7% of borrowers at public four-year institutions and 43.3% of borrowers at public two-year institutions.
  • Whether a student borrowed the maximum loan amount also differed by dependency status. For example, in 2011-12, of those who borrowed the individual maximum in combined Stafford Loans, 53% were dependent students, compared to 48% being independent students.
  • In 2011-12, 11% of undergraduates who did not borrow the individual maximum in Stafford Loans borrowed from a private lender, compared to 12% of students who borrowed the maximum.
    • Eighteen percent of dependent Stafford Loan borrowers had parents who borrowed under the Parent PLUS Loan program before the Stafford Loan limit was reached. In contrast, 22% of borrowers who reached the maximum loan limit had parents who borrowed PLUS Loans.