What Is a Grad PLUS Loan?

Understanding the Grad PLUS Loan Options Available to You

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Graduate school can be expensive, and many people can’t pay for an advanced degree out of pocket. Graduate and professional students can borrow up to $20,500 per year in Direct student loans from the government. However, if your graduate school program costs more than that, you might need more loans to cover the gap.

If so, a grad PLUS loan might be an option. It’s generally easier to qualify for these loans than for private student loans, and grad PLUS loans come with income-driven repayment options.

What Does a Grad PLUS Loan Cover?

Grad PLUS loans are made for graduate or professional students who are looking for funding at eligible programs. 

Grad PLUS loans are part of a federal lending program that’s generally best to turn to after you’ve maxed out your ability to borrow under the Direct Loan Program because they carry slightly higher interest rates than Direct Loans.

With the grad PLUS loan, it’s possible for you to borrow up to the cost of attendance at your institution, minus the amount of other financial assistance you received. And, like other federal student loan programs, you have a fixed interest rate based on the congressional formula for setting rates. For the 2019-20 academic year that rate is 7.08%. 

Pros
  • Can cover up to your cost of attendance


  • Eligible for income-driven repayment 

  • Loan payments can be deferred while you’re in school


  • Interest paid on the loan might be tax-deductible


Cons
  • Must pass a simple credit check


  • Interest rate is higher than for other federal student loans


  • No need-based subsidy


How to Apply for a Grad PLUS Loan

Before you apply for a grad PLUS loan, you need to fill out the Free Application for Federal Student Aid (FAFSA). While there are no need-based options for these loans, the FAFSA is still required and the information will be sent to the eligible institutions of your choice.

In addition to filling out the FAFSA, you also need to go to the Direct PLUS loan application, available through the Department of Education. You can see which schools accept grad PLUS loans, as well as see if there is an additional application process required by the school. As part of the process, you’ll also be required to sign the appropriate Master Promissory Note and meet entrance counseling criteria. 

In addition to filling out the application, this loan requires a credit check. While your precise credit score isn’t considered, your credit report is reviewed to find out if there are any adverse items.

For the purposes of qualifying for this loan, an adverse history includes:

  • One or more debts that are more than 90 days delinquent, totaling $2,085 or more
  • Within the last five years, you’ve had an item such as a default, bankruptcy, foreclosure, tax lien, or write-off of federal student debt

If there are adverse items on your credit report, you’ll either need an endorser or be able to prove that there are special circumstances that led to the adverse item.

In many cases, this credit check is easier to pass than the more in-depth requirements that come with private student loans.

Alternatives to a Grad PLUS Loan

If a graduate or professional program falls within the limits of an unsubsidized loan from the federal government, that can be a good choice. Interest rates (6.6% for 2018-19) are lower with those types of loans than with the grad PLUS loan. And there aren’t any credit requirements. 

However, if you have excellent credit and can qualify for a private student loan, that might make a better choice. In many cases, it’s possible to get a lower interest rate if you’re a well-qualified borrower. But with private loans, you won’t have access to income-driven repayment options. 

For some professionals and graduates, higher earnings might not make income-driven repayment necessary. Private loans can be a good alternative, allowing for various repayment terms at lower interest rates.

In some cases, you might be able to reduce the need for a grad PLUS loan by getting part or all of your tuition paid for when you teach classes or receive a research fellowship. 

Contact your program to find out what opportunities are available that can reduce your overall need for student loans as a graduate or professional student.

Who Should Consider a Grad PLUS Loan

For the most part, students who need additional funding on top of Direct Unsubsidized Loans for graduate or professional study can benefit from a grad PLUS loan; especially if they don’t qualify for private student loans. As long as you don’t have a muddy credit history, it should be possible to close the funding gap with the help of this loan.

Carefully review your options as you determine whether a grad PLUS loan is the right choice for you. Consider alternatives, including private student loans, before making a final decision about how to finance your continued education.

Article Sources

  1. Federal Student Aid. "How Much Can I Borrow?" Accessed Jan. 21, 2020.