A Beginner's Guide to Grad PLUS Loans

If you’re planning to attend a graduate program, a graduate PLUS loan could help you cover the cost. Grad PLUS loans are specifically designed for graduate and professional students, and could cover up to your school’s total cost of attendance, with a few caveats. 

Here’s what you should know before taking out a grad PLUS loan. 

What is a grad PLUS loan?

Graduate PLUS loans are a type of Direct PLUS Loan available to graduate and professional students. These loans typically have higher interest rates compared to other types of federal debt, such as Direct Subsidized and Unsubsidized Loans. They also come with a loan disbursement fee that’s deducted from the total amount borrowed.

• Who qualifies: Eligible graduate and professional students
• 2023-24 interest rate: 8.05% 
• 2023-24 loan disbursement fee: 4.228% of the loan amount 
• Borrowing limits: Up to the school’s cost of attendance (minus any other financial aid you receive)
• Repayment timeline: 10 to 25 years, depending on your repayment plan
• How to apply: Complete the Free Application for Federal Student Aid (FAFSA) and Direct PLUS Loan Application 

If you take out grad PLUS loans, you won’t have to start making payments until six months after you graduate, leave school, or drop below half-time enrollment status.

However, interest will begin to accrue on the loan as soon as the money is disbursed. You can choose to pay the accrued interest or allow it to capitalize, meaning it can be added to your total loan balance.

Pros and cons of grad PLUS loans 

When considering graduate PLUS loans, it's important to weigh the pros and cons. Here's a quick look at the advantages and disadvantages of grad PLUS loans: 

Who qualifies

To qualify for a grad PLUS loan, you must meet certain eligibility requirements, including:

• You must be a U.S. citizen or an eligible noncitizen, such as a permanent resident.
• You must be a graduate or professional student enrolled at least half-time at an eligible school.
• You must be enrolled in a program leading to a graduate degree or certificate.
• You must not have an adverse credit history.

You don’t need to demonstrate financial need to be eligible for a grad PLUS loan, but lenders will check to make sure you don’t have an adverse credit history. If you have things like bankruptcy, late payments, or defaulted loans on your credit report, you may not qualify for a grad PLUS loan. 

However, adding an endorser to your application (similar to a cosigner) could help you get approved.

Check Out: Can You Get a Student Loan With Bad Credit?

Borrowing limits

Unlike other types of federal student loans, grad PLUS loans don’t have a specific limit on how much you can borrow per year, nor do they have an aggregate limit. Instead, you might be able to borrow up to your school’s certified cost of attendance, minus other financial aid you’ve received.

If you have more expenses that a grad PLUS loan doesn’t cover, you could also consider taking out private student loans to fill in the gaps. If you decide to take out a private student loan, be sure to consider as many lenders as possible to find the right private student loan for you. 

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What it covers

In addition to covering the cost of tuition and school supplies (like books, pens, and notebooks), you can use Direct PLUS Loan funds to cover other living expenses, like housing, transportation, and even child care. Additionally, you can use the funds to pay for costs associated with a disability, like computer programs, tape recorders, and assistive listening devices. 

Here’s a list of what grad PLUS loans can be used for: 

• Tuition and fees
• Room and board
• Textbooks
• Supplies
• Child care
• Transportation
• Cost related to a disability
• Costs for eligible study-abroad programs

You can also use loan funds to pay for meal plans, food, bus passes, and parking passes. All living expenses, including medical necessities, toiletries, utilities, and household expenses, are eligible costs.

You can’t use student loan funds to purchase a vehicle (even if used to commute to school), pay off other debt, or pay for business expenses.

How to apply 

To apply for grad PLUS loans, you must complete the Free Application for Federal Student Aid (FAFSA), as well as a separate Direct PLUS Loan Application. You’ll also have to undergo a credit check. 

Here are the steps to follow:

1. Fill out the FAFSA: Your first step in paying for grad school should be registering for the FAFSA. Your school will use your FAFSA results to determine what federal financial aid you qualify for.
2. Apply for scholarships and grants: Unlike student loans, college scholarships and grants don’t have to be repaid — which makes them a great way to pay for school. You might also be eligible for school-based scholarships, depending on your FAFSA results.
3. Apply for a Direct PLUS Loan online: Use the Direct PLUS Loan Application to apply for a graduate PLUS loan. A credit check will be conducted, and your information will be sent to the school you select, which will determine your eligibility for the loan. 

Check Out: How To Take Out a Student Loan

Grad PLUS loan alternatives

In some cases, taking out private graduate student loans could be a better choice than grad PLUS loans. Here are a few situations when this might make sense:

• You have good-to-excellent credit: If you have good credit, meaning a FICO score of 670 or higher, you might qualify for a lower interest rate on a private student loan compared to a Direct PLUS Loan. Having a lower rate could help you save money on interest charges over the life of your loan. 
• You want a longer repayment term: The standard loan term on grad PLUS loans is 10 years — though you could potentially extend your repayment term by signing up for another repayment plan or by consolidating with a Direct Consolidation Loan. But if you’d like to start with a longer term right off the bat, you might be able to get a term up to 20 years through a private lender. This could be helpful for longer or more expensive programs, such as law school or medical school.
• You don’t want to pay disbursement fees: Grad PLUS loans charge some hefty disbursement fees. Private student loans, on the other hand, generally don’t come with disbursement fees, which could save you money. 

If you decide to get a private student loan to pay for college, remember to consider as many lenders as you can to find the right loan for you. 

Grad PLUS loan FAQ

Below are answers to some frequently asked questions about graduate PLUS loans. 

What is a Direct PLUS Loan?

Direct PLUS Loans help students pay for higher education. There are two types of Direct PLUS Loans: graduate PLUS loans and parent PLUS loans. You can borrow up to the cost of attendance with a Direct PLUS Loan, minus any other financial assistance you receive (such as scholarships and grants). For the 2023-24 school year, these loans have a fixed interest rate of 8.05%.

Is it hard to get a grad PLUS loan?

Grad PLUS loans can be harder to qualify for than other federal student loans. You likely won’t qualify for the loan if you have adverse credit history, or if you’re not a graduate or professional student in school at least half-time. You also need to be a U.S. citizen or an eligible noncitizen, such as a permanent resident. 

Can my grad PLUS loans be forgiven? 

Grad PLUS loans are eligible for certain forgiveness programs, such as Public Service Loan Forgiveness (PSLF). These loans are also eligible for income-driven repayment plans, like the Saving on a Valuable Education (SAVE) plan. These repayment plans cap your monthly loan payments based on your discretionary income and family size. After making payments under an IDR plan for 20 to 25 years (depending on the plan), any remaining loan balance is forgiven.