How Do Grad PLUS Loans Work?
Applying for a Grad PLUS Loan is a multi-step process that should begin only after you’ve exhausted other forms of aid.
- Complete the FAFSA®: The first step is to submit the Free Application for Federal Student Aid (FAFSA®). Your school uses this information to determine your eligibility for all federal financial aid. You can complete it online at FAFSA.gov.
- Accept Other Aid First: Before taking out a Grad PLUS Loan, you must accept the maximum amount of Direct Unsubsidized Loans you are offered. Unsubsidized loans have lower interest rates and fees, making them a more affordable option.
- Undergo a Credit Check: Unlike other federal loans for students, Grad PLUS Loans require a credit check. The U.S. Department of Education looks for an “adverse credit history,” which includes events like bankruptcy, foreclosure, or accounts delinquent by 90 days or more.
- Borrow as Needed: If approved, you can borrow up to your school’s certified Cost of Attendance (CoA), minus any other financial aid you’ve received. While this flexibility is helpful, it’s crucial to borrow only what you truly need to minimize your future debt.
Interest Rates and Fees
Grad PLUS Loans have higher interest rates and origination fees than other federal loans. For the 2024–2025 academic year, the interest rate for new Grad PLUS Loans is 9.08%. This rate is fixed for the life of the loan. Additionally, these loans carry an origination fee of 4.228%, which is deducted from each loan disbursement. (Rates and fees are subject to change in subsequent years).
Grad PLUS Loans vs. Other Options
Understanding your options is key to making a smart borrowing decision. Here’s how Grad PLUS Loans compare to other common loan types for graduate students:
| Feature | Grad PLUS Loan | Direct Unsubsidized Loan | Private Student Loan |
|---|---|---|---|
| Credit Check? | Yes (must not have adverse history) | No | Yes (often requires strong credit) |
| Annual Loan Limit | Cost of Attendance (minus other aid) | $20,500 | Varies by lender (often up to CoA) |
| 2024-2025 Interest Rate | 9.08% (Fixed) | 8.05% (Fixed) | Varies (Fixed or Variable) |
| Federal Protections? | Yes (e.g., Income-Driven Repayment, PSLF) | Yes (e.g., Income-Driven Repayment, PSLF) | No |
Frequently Asked Questions (FAQs)
What happens if I have an adverse credit history?
If you are denied due to your credit history, you have options. According to the U.S. Department of Education, you may still qualify by obtaining an endorser (similar to a co-signer) who does not have an adverse credit history. Alternatively, you can provide documentation of extenuating circumstances for the review of the Department of Education.
Are Grad PLUS Loans eligible for Public Service Loan Forgiveness (PSLF)?
Yes. Grad PLUS Loans are a type of Direct Loan and are eligible for the Public Service Loan Forgiveness (PSLF) program. To qualify for forgiveness, you must make 120 qualifying payments under an income-driven repayment plan while working for an eligible public service employer. If you have other types of federal loans, you may need to consolidate them with a Direct Consolidation Loan.
For the most current information on rates and terms, visit the official Federal Student Aid website.