September 30, 2022

What to Know as the Pause on Student Loans Is Set to Expire

Mark Kantrowitz, a financial-aid expert, advises students to borrow “only as much as you need, not as much as you can.” Your total debt at graduation should be less than your anticipated annual starting salary, he said — ideally, “a lot less.”

Abby Shafroth, a lawyer with the National Consumer Law Center, said students rightfully worried about borrowing too much but should also be wary of borrowing too little. “You don’t want to borrow less but then not have enough for books,” she said.

The Consumer Financial Protection Bureau offers tools on its website to help determine how much you can safely borrow based on your financial situation and anticipated income after graduation.

Here are some questions and answers about student loans:

On July 1, rates for federal student loans for undergraduates rose to 4.99 percent for loans made through June 2023. Rates on federal loans are set each spring based on a formula and apply to all new loans made during a given academic year. The rate is fixed for the life of the loan. So if the rate on your loan for the last academic year was 3.73 percent, that won’t change. (Rates on most student loans are temporarily set to zero during the repayment pause; regular rates are expected to apply when the pause lifts.)

In general, dependent students can borrow up to $5,500 in federal loans their first year, $6,500 their second year, and $7,500 for each of their third and fourth years, with an overall cap of $31,000 (in case it takes longer to graduate). Borrowing caps are higher for independent and graduate students. Parents can borrow so-called Plus loans, at higher interest rates, if additional funding is needed. (Private lenders also offer student loans, but the loans lack the consumer protections of federal loans and are not included in the payment pause.)

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