What to Know About Grad PLUS Loans
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- Grad PLUS loans let you borrow up to the cost of attendance each year.
- Interest rates and origination fees are higher than other federal student loans.
- You must be enrolled at least part-time to apply.
Attending a graduate or professional degree program can help launch your career and improve your lifetime earning potential. But before that happens, you must figure out how to pay for your degree.
One financial aid option from the federal government is the grad PLUS loan. Weigh the pros and cons of this student loan to decide how it fits into your graduate school financing plan.
What Is a Grad PLUS Loan?
A grad PLUS loan is a federal student loan that helps graduate students finance their tuition and other eligible program costs. Eligible applicants can borrow up to the cost of attendance per year after subtracting any other aid they receive. The loan funds can cover tuition, room and board, textbooks and other supplies, technology, and travel costs to and from school.
Grad PLUS loans come with a fixed interest rate — currently 7.54%. These loans are unsubsidized, meaning student loan interest begins to accrue as soon as the loan funds are disbursed. Additionally, you'll pay a 4.228% origination fee to the U.S. Department of Education to process the loan. They deduct the fee from the loan amount, so you don't need the cash to cover this expense. But it does reduce the amount of funding you have to work with.
Grad PLUS Loan Eligibility
There are two primary eligibility requirements to qualify for a grad PLUS loan.
At Least Half-Time Graduate Student
To apply for a grad PLUS loan, you need to enroll in a graduate or professional program as at least a part-time student. Check your school to see how many credit hours you need to reach part-time status. Additionally, the program must lead to either a graduate degree or a professional certificate.
Good Credit History
The Department of Education states that you can't have an "adverse" credit history to qualify for grad PLUS loans. That means you may not have any of the following on your credit report:
- Student loan default
- Long-term delinquency
Some hits on your credit report drop off after seven to 10 years. Get a free credit report to see if they're still impacting your history.
Grad PLUS Loan Interest Rates
All graduate PLUS loans have the same interest rate. The rate may change each year you apply for a new loan, but it's fixed once you sign your loan agreement. The interest rate for the 2022-2023 school year is 7.54%.
How to Get a Grad PLUS Loan
Follow these steps to apply for a grad PLUS loan.
Fill Out the FAFSA
The Free Application for Federal Student Aid (FAFSA) is the application form required for any financial aid from the government. It's an online form that requires personal and financial details to determine your eligibility. It typically opens in October for the following school year. The deadline varies by school.
Identify Your Other Financial Aid Options
Even with the benefits that come with a federal student loan, it's always smart to check out other options as well. You don't need to repay grants and scholarships. And depending on your income and credit history, you may qualify for a private student loan with a lower interest rate. However, private student loans don't have the same perks as federal loans.
Sign a Master Promissory Note
A Master Promissory Note (or MPN) states the terms of your loan. Signing the MPN indicates that you agree to those terms. To complete this step, you'll need your FAFSA log-in information, a driver's license, and the names and contact details of two personal references.
Complete Entrance Counseling
Entrance counseling is a required step to make sure you fully understand the terms and conditions of your federal student aid package, including your graduate PLUS loan. But that's if you've never taken on a direct unsubsidized loan or direct PLUS loan from the federal government. You're probably off the hook if you've taken out these loans in the past.
Should You Get a Grad PLUS Loan?
Grad PLUS loans have pros and cons, so explore your options before moving forward. Grad PLUS loans have a higher interest rate and origination fee than some other federal student loans. A federal direct unsubsidized loan, for instance, has a 5.28% interest rate and just a 1.057% origination fee.
Also, consider how much you need to cover your attendance costs. It may be tempting to accept all of your financial aid offers, but over-borrowing can lead to expensive repayments for years to come.
Frequently Asked Questions About Grad PLUS Loans
Is a grad PLUS loan better than an unsubsidized loan?
It depends on your needs. Unsubsidized direct loans come with significantly lower interest rates and origination fees. But the amount you can borrow each year is limited to $20,500. Graduate PLUS loans, on the other hand, let you borrow up to the cost of attendance, which is determined individually by schools.
What are the benefits of grad PLUS loans?
One of the biggest benefits is the amount of money you can borrow with a grad PLUS loan. Additionally, you get the perks of taking out any federal student loan: income-driven repayment plans and the public service loan forgiveness (PSLF) program if you spend 10 years in an eligible career.
Do grad PLUS loans have a limit?
Yes, you may borrow up to the total cost of attendance, as calculated by the school you attend. You also need to subtract any other aid you receive. So if you get a scholarship and another student loan with better terms, those totals are subtracted from your cost of attendance to determine your grad PLUS loan limit.
Can you be denied a grad PLUS loan?
Yes, the federal government can deny you a grad PLUS loan. To qualify, you need to enroll as at least a part-time student. You'll also need to meet the credit requirements, which include no bankruptcies, student loan defaults, or other loan delinquencies.
How long does it take to get approved for a grad PLUS loan?
The entire process can take 3-4 weeks. Check your school's deadline window to allow for enough time to fill out your FAFSA, review your loan terms, and get the funds disbursed.
DISCLAIMER: The information provided on this website does not, and is not intended to, constitute professional financial advice; instead, all information, content, and materials available on this site are for general informational purposes only. Readers of this website should contact a professional advisor before making decisions about financial issues.