Maxed Out Your Federal Student Loans? 3 Options to Consider

You can only borrow so much money for college from the federal government. Here’s what to do if you need more.

A piggy bank wearing a graduation cap sits on top of a calculator.
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Many students have no choice but to take out loans for college. If you’re going to go that route, taking out federal loans is generally your best bet.

With federal loans, the interest rate assigned to your debt is not only reasonable, but fixed during your repayment period. Federal loans also come with borrower protections that make the repayment process easier. For example, if you graduate and can’t afford your monthly loan payments, you can apply for an income-driven repayment plan. You can also ask to defer your loan payments for a period of time if you encounter a financial hardship.

The problem with federal loans, however, is that they don’t allow you to borrow limitlessly. These days, federal loans are capped at $31,000 for undergraduate students who are also dependents (not including students whose parents are unable to obtain PLUS Loans). That $31,000 is a total limit, not a yearly one, so it’s the maximum you can take out to fund your entire undergrad education.

Now, that might seem like a lot of money to borrow, but if you have no funds set aside for college, and your family can’t help you foot the bill, it won’t even be enough to cover the average cost of tuition at a public four-year, in-state college ($10,230 a year, or $40,920 over four years). And it certainly won’t pay for a four-year education at an out-of-state college or private one.

So what happens if you need to borrow more for college than what federal loans allow for? Here are a few options you might pursue.

1. Borrow privately

Private lenders often get a bad rap because they can charge exorbitant amounts of interest and offer borrowers little leeway as far as repayment goes. But if your credit is strong, you might snag a private student loan at a competitive rate, and with terms that are manageable post-graduation. Therefore, shop around and see what you're eligible to borrow.

2. Work during your studies

If you've exhausted your federal loan options and still need more money to cover your tuition bills, getting a job could be your ticket to bridging that gap. The benefit of working while in school versus borrowing elsewhere is that you won't increase your debt load, thereby making your loans more manageable upon graduation.

One thing you might increase by going this route, however, is your stress load. Working a substantial number of hours while in school could put you at an academic disadvantage, and the last thing you want to do is risk falling behind on your studies. That said, if you're confident in your ability to manage a job schedule and a class schedule, working part-time during semesters, as well as in between them, could help you overcome whatever borrowing shortfall you're facing.

3. Take a year off to work

Not everyone can manage a schedule of taking classes and working simultaneously. If you feel that doing both at the same time isn't right for you, then you might consider taking a couple of semesters off, working full-time, and using your earnings to pay your college costs. That money, coupled with what you're allowed to borrow federally, could be enough to cover your expenses.

Financing your college degree with federal loans might be your ideal course of action, but if you can’t fund your education on federal loans alone, you’ll need to be open to additional options.

At the same time, remember that many colleges and organizations offer scholarships that are both need- and merit-based, and while snagging one isn’t a given, it’s something you can look into to cover your borrowing shortfall as well.

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