As you get ready to attend college, you might find that there are different terms applied to students. Just because you move out of your parents’ house doesn’t mean that you’re seen as an independent person in the eyes of the government.

Being a dependent student impacts your financial aid situation, so it’s important to understand the difference between an independent vs. dependent student.

Independent vs. Dependent Student

First of all, it’s important to understand that just moving out and no longer having your parents claim you on their taxes isn’t enough to make you an independent student. You might even still be considered a dependent student even if your parents aren’t helping you pay for school or covering any of your bills.

The Department of Education has a list of qualifications that indicate an independent student. You have to be able to claim one of the following characteristics if you want to be considered independent:

• Be 24 or older
• Be married
• Have children who receive at least half their support from you
• Have dependents (not kids or spouse) who live with you and receive at least half their support from you
• Be a graduate student or in a professional program
• Be a veteran or current member of the armed forces
• Be an orphan or ward of the court since turning 13
• Be an emancipated minor
• Within the last year, be considered homeless or self-supporting and at risk of being homeless

If you meet just one of these criteria, you can be considered an independent student.

How being a dependent student can impact your financial aid

When you fill out the Free Application for Federal Student Aid (FAFSA), you need to indicate your dependency status. If you’re dependent, the government assumes that your family is able to contribute to your college costs (even if they don’t). Your parents’ income and assets, as well as your own, will be taken into account when determining financial aid.

On the other hand, if you’re an independent vs. dependent student, you might have more access to aid opportunities. Here are some of the ways you can benefit if you’re not seen as a dependent student.

Federal student loan limits

First of all, federal student loan limits are higher for independent students than they would be for a dependent student. In your first year of undergraduate education, dependent students can only borrow up to $5,500, while an independent student could borrow up to $9,500. Limits are higher for independent undergraduate students in subsequent years.

It’s important to note, however, that subsidized loan limits remain the same whether you’re an independent vs. dependent student. Additionally, there are no different loan limits for graduate unsubsidized loans because graduate and professional students are already considered independent.

Federal grants

As a dependent student, your family’s income and assets will be considered when deciding whether you qualify for need-based grants. As a result, you might not get access to free money that doesn’t need to be paid back. An independent student, however, only has to rely on their own (or spouse’s) assets and income, so might actually qualify for grants.

In-state tuition

Qualifying for in-state tuition can help you reduce your need for student loans, since residents usually pay less than non-residents for public colleges. If you’re a dependent student, qualifying for residency might be easier, since you usually just need one of your parents to be living in the state. If your parents are divorced, and one of them lives in the state where you’re attending school, it might be easier to get in-state tuition as a dependent student. 

Independent students usually need to meet stricter residency requirements. In some cases, you might need to live in the state for one or two years before qualifying for the lower in-state tuition cost. 

Each state has its own rules for residency, so double-check.

If the school offers legacy options, you might qualify for lower tuition or some type of scholarship as a dependent student if one of your parents graduated from the institution. 

Student loan interest tax deduction

It’s not just the Department of Education that looks at your dependency status when deciding what you’re eligible for. The IRS also considers dependency when allowing for the student loan interest tax deduction. Realize that you’re only considered eligible for this tax deduction if you’re not claimed as a dependent on someone else’s tax form. 

However, the dependency issue in this case isn’t related to your student status. You can be considered a dependent student for purposes of federal financial aid and still not be a dependent on someone else’s tax form. Be sure to talk to your parents to see if they are claiming you as a dependent.

If you took student loans and are paying on them, you can still be eligible for the tax deduction, as long as your parents (or someone else) aren’t claiming you on their own taxes.

What about special circumstances?

In some cases, a dependent student might need special dispensation. Some situations that warrant special consideration include:

• Abusive home
• Estranged parents
• Parents refuse to provide their information for the FAFSA
• Incarcerated parents
• Parents can’t help with your education

The Department of Education still considers a dependent student in these cases, but you can get around it by indicating that you have special circumstances on the FAFSA form. After you finish with it, there won’t be an Expected Family Contribution. Additionally, your FAFSA won’t be considered fully processed. You’ll have to contact your school’s financial aid office to let them know of the extenuating circumstances and find out next steps.

Your school can provide you with information (including the documentation you might need) to be considered an independent student, even if you don’t meet the main criteria.

Bottom line

Most undergraduate college students are considered dependent students and their parents’ income and assets will be considered in calculating their financial aid. Whether you’re an independent vs. dependent student, you might still need additional resources to fund your education. In this case, an independent or dependent student can consider private student loans or join an organization like Juno that’s designed to negotiate the best offers for private student financing.

Juno can help you to find a student loan or refinance a loan at the most competitive possible rate. We get groups of buyers together and negotiate on their behalf with lenders to save them money on private student loans and private student loan refinance loans. 

Join Juno today to find out more about your options for affordable private student loans to help fund your degree.