The annual loan limit for a student is the amount of money their education will cost minus financial aid and any other form of assisting income. This is the amount of money that the student is allowed to borrow and often depends on subsidized funds and loans, the year that the student is in school and whether or not they are a dependant student. The cost of living expenses need to be calculated and set against any income that the student may receive. The lender will then decide the annual loan limit for the student although the student may not qualify for the maximum loan limit amount.

Generally, the longer the student is in school, the higher the annual loan limit will be. Independent students are eligible for a much higher loan limit than dependant students. The loan limit can also depend on the student's parents. Many parents of students apply for loans on their behalf to bridge the gap between costs and financial aid. These students will receive a lower annual loan limit than an independent student. Students whose parents are not granted a loan are treated as independent students and their annual loan limits reflect this.

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