A Complete Guide to Grad PLUS Loans for Graduate Students

Graduate PLUS loans are federal student loans available to graduate or professional students to pay for school. At the end of 2024, about 1.8 million borrowers collectively owed more than $112 billion on grad PLUS loans.

If you need money to pay for tuition and other educational costs, grad PLUS loans can help. However, there are important differences between these and other types of federal student loans to consider as you develop your higher education financing plan.

What are grad PLUS loans?

Graduate PLUS loans, commonly referred to as grad PLUS loans, are a type of federal student loan available exclusively to graduate or professional students through the U.S. Department of Education.

Grad PLUS loans can be appealing because, unlike Direct Subsidized and Direct Unsubsidized federal student loans, there are no fixed borrowing limits or financial need requirements. While federal loans for graduate students include Direct Unsubsidized Loans, you can only take out up to $20,500 every academic year. That can be a barrier to paying for grad school.

With a grad PLUS loan, you can borrow up to the cost of attendance after considering potential financial assistance. That flexibility comes at a cost, though. Grad PLUS loans have higher interest rates than other types of federal student loans.

Am I eligible for grad PLUS loans?

If you want to take out grad PLUS loans, you must meet certain criteria. To be eligible for a grad PLUS loan, you must:

• Be a U.S. citizen or eligible noncitizen
• Attend an eligible school and pursue a degree or certificate
• Enroll at least half-time
• Be a graduate or professional student
• Not have an adverse credit history

Unlike other federal loan options, grad PLUS loans require a credit check. Borrowers must not have an adverse credit history, which includes default, bankruptcy, and other serious events. While there is a credit check, there isn't a minimum credit score requirement.

“It's more about credit history than it is about credit score,” says Joseph Reinke, a chartered financial analyst (CFA) and founder of FitBUX, a financial planning platform for young professionals. “That's a really important point.”

If you have an adverse credit history, you can get around this grad PLUS loan eligibility requirement by getting an endorser. An endorser works similarly to a cosigner who takes on the responsibility to repay the loan if you can't.

You may also try to appeal the credit decision if there are extenuating circumstances. In either case, you must complete credit counseling for PLUS loan borrowers.

Interest rates and fees

Direct PLUS loans for grad students have higher interest rates than other federal loan options. Grad PLUS loans currently have an interest rate of 9.08% for the 2024-2025 academic year. That compares with 8.08% for Direct Unsubsidized loans for graduate students. All federal student loan rates are fixed and remain the same during repayment.

Grad PLUS loans also come with higher loan fees, which currently stand at 4.228% of the loan amount, compared with 1.057% Direct Unsubsidized graduate student loans.

Reinke notes that these factors can significantly increase costs, and says it's best to turn to other options first.

“Always go out and get the Direct Unsubsidized Loans first because they're cheaper,” he says. “However, you can only get $20,500 of that per year. And it also depends on how much you took out for undergrad because there's a cap on it. So once you've maxed that out, that's when you go to Grad PLUS loans.”

How to apply for a grad PLUS loan

To apply for Grad PLUS loans, you need to submit two applications:

1. The Free Application for Federal Student Aid or FAFSA.
2. The Direct PLUS Loan Application for Graduate/Professional Students.

Start with the FAFSA, which helps you qualify for federal, state, and school financial aid. To complete the FAFSA, you'll need:

• FSA ID
• Income information from your tax return
• Social Security Number
• Birthdate
• Email

Once your FAFSA is complete, you must submit a separate application for grad PLUS loans. You can typically apply online, but it's best to check with your school.

Repayment options

Grad PLUS loan repayment options include:

• Standard Repayment Plan: The default repayment plan that's the most cost-effective and spreads out monthly payments over 10 years.
• Graduated Repayment Plan: Payments gradually increase about every two years until loans are paid off within 10 years.
• Extended Repayment Plan: Extends the repayment term to 25 years and monthly payments can either be fixed or graduated. You must have more than $30,000 in outstanding federal loans to qualify for this plan.
• Income-Driven Repayment (IDR) plans: Different IDR plans exist and allow borrowers to limit their monthly payments, generally around 10% to 20% of discretionary income.

Graduate PLUS loans can also be put in deferment or forbearance under certain circumstances. This allows borrowers to pause payments for a period of time, which can be discussed with your loan servicer.

Pros and cons of grad PLUS Loans

Advantages of grad PLUS loans

The primary advantage of grad PLUS loans is you can borrow up to the cost of attendance after taking out other financial assistance. For graduate students trying to cover the cost of a master's or doctoral degree program, this can be a huge help.

Direct Unsubsidized Loans are more affordable, but the borrowing limits may leave you with a financial gap.

When it comes to student loan repayment, you can decide whether you want to pay off your debt fast or have lower monthly payments. You can also look into deferment and forbearance eligibility if you need a break.

If you work in public service or have six-figure debt, you can also look into student loan forgiveness through Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) plans.

Drawbacks of grad PLUS loans

Though the advantages of grad PLUS loans are plentiful, there are drawbacks to consider, primarily steep interest rates and loan fees. Of all federal loan options, Direct PLUS Loans for grad students are the most expensive.

You also don't get any interest subsidies with grad PLUS loans, and must pass a credit check with no adverse credit history.

Comparing grad PLUS loans to private loans

Grad PLUS loans offer borrowers fixed rates, so you know what you're getting into. Private student loans for graduate school may have variable interest rates.

While both grad PLUS loans and private loans have some credit requirements, they're quite different. To get approved for a grad PLUS loan, you don't need a certain credit score. Private lenders typically have minimum credit score requirements. So unlike grad PLUS loans, where you might qualify with a low to average score with no adverse credit history, you typically can't get private loans if you don't have good credit. Both options may allow a cosigner to help you qualify.

Grad PLUS loans also come with a range of repayment options, and even a chance at student loan forgiveness. You have the flexibility to reduce or pause payments through an IDR plan or deferment. That's not the case with private loans.