A graduate or professional degree can unlock many financial and career opportunities, though the achievement comes at a cost – often to the tune of more than $20,000 per year. That’s where a Grad PLUS loan can help.
Some professions require graduate degrees for highly sought-after positions. In other cases, money spent on graduate or professional school can lead to higher earnings later in your career. If you decide to borrow money for graduate school, here’s what you should know about Grad PLUS loans and the most effective ways to pay them back.
Benefits of Grad PLUS loans
Grad PLUS loans come with many of the same benefits that other federal student loans come with. Among them are:
Grad PLUS loans: Weighing the costs
Despite the benefits, borrowing money always comes with a cost. When you’re weighing your loan options, consider such factors as the interest rate and fees you’ll be expected to pay.
Eligibility requirements for Grad PLUS loans
The U. S. Department of Education funds federal direct Grad PLUS loans. In order to qualify you must:
You must agree to a credit check when you apply for a Grad PLUS loan. If you know in advance that you are going to be applying for loans to pay for graduate school, you have a chance to clear up any adverse credit history, such as debts that are more than 90 days delinquent.
You can see where you stand by getting a free copy of your credit report from each of the three credit reporting companies – Equifax, Experian, and TransUnion – at www.annualcreditreport.com.
If you’ve had some financial challenges in the past, the following steps can help you improve your credit so that you are more likely to qualify for a Grad PLUS loan:
An adverse credit history can derail your chances of getting approved for a Grad PLUS Loan and can be caused by the following events:
What to do if you have an adverse credit history
If you have an adverse credit history, don’t panic — you still may be able to qualify for a Grad PLUS loan.
Here are some options to consider:
If you have a major blemish on your credit reports such as a bankruptcy or a foreclosure, you must wait five years from that event to qualify for a Grad PLUS loan.
If you don’t want to put off graduate school for that long, you may be able to qualify for private loans to pay for the cost of attendance.
Applying for a Grad PLUS loan
To apply for Grad PLUS loans, you must file the Free Application for Federal Student AID (FAFSA) or the Renewal FAFSA if you completed a FAFSA in a previous year.
Once you get your financial aid award letter, you’ll find out how much financial aid you’ve received from other federal loan options such as Direct Loans. At that point, you’ll know how much you need in Grad PLUS loans to pay for the rest of your college costs.
The financial aid office of the school you wish to attend should be able to tell you what to do to request a Direct PLUS loan. Some schools will ask that you submit a loan request at StudentLoans.gov. On the StudentLoans.gov web site, click on Apply for PLUS Loans. It takes approximately 20 minutes to complete the application, which must be done in one session. To complete the application, you’ll need:
When applying for a Grad PLUS loan you will also have to complete a Direct PLUS Loan Master Promissory Note (Direct PLUS MPN), which basically is your agreement to repay the loan.
The repayment process for Grad PLUS loans
The federal government does not collect loan payments. Rather it assigns student loans to student loan servicers, companies that handle the collection process. Once you’re assigned a servicer, that is the company who will manage your loan repayment and who you’ll make your payments to.
There are several different repayment plans that you can choose from:
If you get a Grad PLUS loan, you can defer making payments as long as you are enrolled in an accredited graduate or professional school at least half-time. You also get a six-month grace period after you complete your education before you are obligated to start making payments.
Should you make payments while in school?
Some students may want to focus entirely on their studies and work as little as possible, paying back the loan after they graduate. However, think long and hard before you do that.
The minute your Grad PLUS loan is disbursed, interest will start to accrue. That means if you don’t make payments while you’re in school, the balance you owe will be higher than it was when you took out the loan.
Many people continue to work while they are in graduate or professional school. If you can afford to make student loan payments, do so. Another option is to make interest-only payments, which will ensure that the balance due doesn’t grow while you are in school.
Some ways to come up with extra money to make student loan payments while you are in school include:
The earlier you can start paying back your loans, the less interest you’ll pay over time. You’ll also get out of the grip of debt sooner, which can allow you to focus on other financial goals.
If you find that you have trouble making your payments, contact your student loan servicer immediately, as they may be able to offer options that can help you, such as the ability to temporarily defer your payments.
Grad PLUS loans give you the opportunity to further your education, no matter what the costs. If graduate school or professional school will increase your earning potential, the cost of taking out student loans may be well worth it.
However, make sure you borrow only what you need, and come up with a repayment strategy before you sign on the dotted line. By taking those precautions, you can move forward in your professional life without compromising your financial future.