Applying for Grad PLUS Loans: What You Need To Know

In the 2023-24 school year, full-time graduate students at public universities paid an average of $11,827 in tuition and fees, according to the National Center for Education Statistics. For many graduate students, this isn't affordable without student loans.

Grad students have multiple options to cover educational costs, including federal loans and private student loans. Grad PLUS loans are a type of federal student aid you can take advantage of, but there are pros and cons to consider.

Here's what you need to know before applying for grad PLUS loans.

What are grad PLUS loans?

Graduate PLUS loans are a type of Direct PLUS Loan issued by the Department of Education. They're different from Direct Unsubsidized Loans, the other federal loan option available to grad students. Unlike most types of federal student aid, your credit matters when it comes to eligibility for PLUS loans. You must undergo a credit check after applying, and you can't qualify if you have adverse credit (more on this later). You'll also pay a higher interest rate and origination fee than you would for other federal loans.

The good news is that grad PLUS loans allow you to borrow up to the school-certified cost of attendance, minus other financial aid. You aren't subject to the same strict annual and lifetime borrowing limits that Direct Subsidized and Unsubsidized Loans have. You can also take advantage of other benefits exclusive to federal loans, including income-driven repayment plans.

Who is eligible for grad PLUS loans?

To qualify for grad PLUS loans, you must meet the following eligibility requirements:

• You must be a graduate or professional student attending an eligible school.
• You must be enrolled at least half-time in a program that will result in a graduate or professional degree or certificate.
• You must not have adverse credit.
• You must meet all of the general eligibility requirements for federal student loans, including being a U.S. citizen or eligible noncitizen.

While your credit matters in determining eligibility for grad PLUS loans, the credit check for grad PLUS loans doesn't work the same way it does with private student loans. Private lenders focus on both your credit score and history, and many have strict credit score minimums. If you don't meet the requirements, you typically must apply with a cosigner who has strong credit. But the Department of Education has its own definition for adverse credit.

What is adverse credit?

The Department of Education considers you to have adverse credit if you have any of the following on your credit report:

• Accounts with a total combined balance greater than $2,085 that are 90 or more days past due or that have been placed in collections or charged off in the 2 years before the report date
• A default, bankruptcy discharge, repossession, foreclosure, or tax lien within the past 5 years
• A write-off or charge-off of federal student loan debt in the last 5 years
• A wage garnishment in the past 5 years

If you have an adverse credit history, you may still be able to get a Direct PLUS Loan. To do so, you either need to get an endorser who doesn't have an adverse credit history, or document extenuating circumstances pertaining to your adverse credit.

An endorser is similar to a cosigner. This person agrees to be legally liable for the amount borrowed, and must repay the loan if you don't. Meanwhile, proving extenuating circumstances requires you to sufficiently document that your past credit problems happened because of a specific, unique problem, such as a serious medical issue or something else beyond just a job loss or a bad economy. With both of these options, you must also complete credit counseling.

How to apply for a grad PLUS loan

You must complete a couple steps to apply for a grad PLUS loan. Here's what you need to do:

• Complete your Free Application for Federal Student Aid (FAFSA): You can submit the FAFSA online. You must complete it every year that you want aid. It requires you to provide basic financial details about yourself and your spouse, if applicable.
• Complete the Direct PLUS Loan Application for Graduate/Professional Students: Most schools also allow you to do this online, although some have different processes. Contact your school's financial aid office if you have questions.

If you're found to be eligible for a grad PLUS loan, you'll need to sign a Direct PLUS Loan Master Promissory Note (MPN) and complete student loan entrance counseling if you have not already done so. Your MPN is your written promise to comply with loan terms, and entrance counseling is designed to educate you on the loan you're taking out.

What are the interest rates for grad PLUS loans?

The interest rate for grad PLUS loans is higher than the rates on other Department of Education Loans, such as Direct Unsubsidized Loans. Keep this in mind when deciding if your loans are affordable and when choosing which student loans to pay off first.

For grad PLUS loans first disbursed on or after July 1, 2024, and before July 1, 2025, you'll pay an interest rate of 9.08% for your grad PLUS loan. This rate is fixed for the life of the loan and won't change with economic conditions.

You will also owe an origination fee of 4.228% (this is true for all Direct PLUS Loans disbursed on or after Oct. 1, 2020). This fee is a percentage of your overall loan amount, and it's proportionately deducted from each loan disbursement.

Repayment options for grad PLUS loans

While you are enrolled in school at least half-time, and for up to six months after graduating or leaving your program, your grad PLUS loans will be in a grace period and you won't have to make monthly payments. However, interest will accrue during this time.

After your grace period, you have multiple options for repaying your student loans. In fact, the flexible payment options available for grad PLUS loans are among the most important federal student loan benefits. You can choose from the following:

• A standard 10-year repayment plan with fixed monthly payments
• A graduated 10-year repayment plan with payments that slowly increase over time
• An extended repayment plan if you have more than $30,000 in grad PLUS loans; payments will be fixed or graduated and your repayment term is 25 years
• Income-driven repayment plans that set payments at 5% to 20% of discretionary income and allow for loan forgiveness after 10 to 25 years, depending on the plan

You can reach out to your loan servicer to change your payment plan as needed.

Pros and cons of grad PLUS loans

There are benefits and downsides to grad PLUS loans.

Pros

• You can borrow up to the school-certified cost of attendance, minus other financial aid.
• You have several repayment plans to choose from.
• Your loans are in deferment until 6 months after you graduate or leave school.

Cons

• You must pass a credit check to qualify.
• The interest rate and origination fee are higher than those of most other federal student loans.
• Interest accrues during school and your grace period, even though your loans are in deferment.

Is it possible to refinance a grad PLUS loan?

You can't refinance loans with the Department of Education, but you can consolidate grad PLUS loans. Consolidation is similar to refinancing in that it allows you to change your repayment terms or combine your debt with other eligible federal student loans. Your interest rate will not drop, but instead will be a weighted average of the rates for all consolidated debts.

It's possible to refinance grad PLUS loans with a private lender, but you'll need to qualify based on your credit and income. You may be able to reduce your interest rate by refinancing with a private lender, but you forfeit federal borrower benefits, including income-driven repayment plans and possible loan forgiveness, if you do so. Think carefully before choosing to refinance your grad PLUS loans, as the decision can't be reversed.

Grad PLUS loans FAQ

How much can I borrow with a grad PLUS loan?

You can borrow up to the school-certified cost of attendance, minus any other financial aid you've received.

What credit score do I need to qualify for a grad PLUS loan?

Your credit score is not a factor when qualifying for a grad PLUS loan, but you can't qualify with adverse credit. This means your credit report has recent repossessions, foreclosures, charge-offs, wage garnishment orders, or other negative marks, as defined by the Department of Education.

What happens if I can't repay my grad PLUS loan?

If you can't repay your grad PLUS loan, consider options such as deferment, forbearance, and switching to an income-driven repayment plan. Contact your loan servicer as soon as you think you may not be able to make a payment. Don't just stop paying, or your loan could go into default, causing serious financial consequences.

Can I refinance a grad PLUS loan?

You can't refinance your loan with the Department of Education, but you can refinance with a private lender. However, you give up all federal student loan benefits once you refinance your loan.

Are grad PLUS loans eligible for loan forgiveness?

Grad PLUS loans are eligible for loan forgiveness through programs like income-driven repayment and Public Service Loan Forgiveness.