What Are the Income Requirements for Federal Student Loans?

Students living independently from their parents often have more financial need.

Though the federal government sometimes considers an applicant's ability to repay a student loan, it also considers the applicant's financial need when deciding whether or not to approve the loan. The applicant's income is a key factor for both of these considerations: When you apply for any loan, the lender considers your income level.

Determining Financial Need

Many federal student loans are available only to students who demonstrate financial need as determined by the Free Application for Federal Student Aid (FAFSA). To determine your financial need, federal lenders use the information you provide on your FAFSA to calculate your Expected Family Contribution (EFC), which is the amount of money your family could afford to pay for your college expenses based on income and other expenses. Your financial need is the total cost of attendance for your school minus your EFC.

Federal Perkins Loan

A Federal Perkins Loan is a low-interest loan available to undergraduate and graduate students who demonstrate extreme financial need on their FAFSA application. At the time of publication, undergraduate students can borrow up to $5,500 for each year of study and graduate students can borrow up to $8,000 for each year of study. If you apply for a Federal Perkins Loan, the amount you receive depends on your financial need and the amount of funding available for students at your school.

Direct Stafford Loan

Direct Stafford Loans provide low-interest financing to students of four-year colleges, community colleges, trade schools or technical schools. A Stafford loan may be subsidized, which means that the government covers a portion of the interest on the loan, or it may be unsubsidized. There are no income requirements to apply for an unsubsidized loan, but the amount you can borrow varies based on the amount of disposable income you have available for college and the number of years of school you have completed. Subsidized loans are only available to those students whose FAFSAs show financial need. Students with higher financial need will receive larger loans. The maximum amount you can receive on a subsidized loan depends on how many years you have attended school.

PLUS Loans

If you are an undergraduate student, your parent may qualify for a Federal PLUS Loan, which is a federal student loan that isn't based on financial need. If you are a graduate or professional student, however, you may qualify for a Federal Plus Loan on your own. If you or your parent qualifies, you can typically borrow up to the difference between your cost of attendance and other financial aid you are receiving.

References

• Federal Student Aid: Direct Stafford Loans
• StaffordLoan.com: Stafford Loan Frequent Questions
• Federal Student Aid: Campus-Based Aid
• Federal Student Aid: Direct PLUS Loans for Graduate and Professional Degree Students
• Federal Student Aid: Direct PLUS Loans for Parents
• Federal Student Aid: Completing the FAFSA