The 150% Subsidized Loan Limit
If you are planning to pay for your college education with a federal loan then for some of them time is of the essence.
With direct subsidized loans the interest is covered by the government whilst you are studying, but this doesn’t last. The 150% subsidized loan limit is a rule that restricts the amount of time that you are eligible for these loans.
Here is a look at this rule and how you are able to use it to your advantage.
The rule is applied to first time borrowers and limits the loan eligibility to 150% the length of your academic program.
For instance if you are enrolled in a two year academic degree program then you will be eligible for these loans for three years and for a four year program it will be six years of eligibility.
This will then give students an incentive to stay on track and ensure they finish their degrees in a good amount of time. The limit protects taxpayers as well as they fund the loan subsidies.
After the eligibility has finished students will need to borrow unsubsidized loans if they want to borrow more. The student will then be responsible for paying the interest on the unsubsidized loan.
How Does the Rule Affect You
The 150% subsidized loan limit only applies to direct subsidized loans first time borrowers.
To qualify as a first time borrower you will need to have no outstanding balances on previous direct loans. If you have taken and paid off a loan for an undergrad and then decide to take a new loan for graduate school then you will be subjected to a new time limit.
If you decide to change what you are studying then your loan eligibility will also change. If your new program is longer than the other than your eligibility window will also increase and vice versa.
Pros and Cons
Subsidized loans are great for borrowers as they are able to save money and keep monthly loan payments down. It can be a good tool to fund your education and be interest free, but there are risks.
With the rule once you reach 150% time limit you are no longer eligible for any more subsidized loans.
If you are still studying and have reached the limit then you lose the interest subsidy.