A Beginner's Guide to Grad PLUS Loans for 2025
Student Finance & Loan Expert
Many graduate students in the U.S. need more financial aid to fund their education. Although many loan options are available, students often need clarification on the choices. This article simplifies federal Grad PLUS Loans, addressing key concerns like eligibility, application processes, and repayment options. It helps students make informed financial decisions and reduces the stress of funding their advanced education.
Key Things You Should Know About Grad PLUS Loans
- Graduate and professional students enrolled at least half-time in an eligible degree or certification program can apply for a Grad PLUS Loan, even with less-than-perfect credit. If you do not pass the credit check, you may still qualify with an endorser or by demonstrating extenuating circumstances.
- Grad PLUS Loans enable you to cover the entire cost of your education with federal loans.
- While the interest rate for Grad PLUS Loans is higher than most other federal student loans, it is still lower than many private lending options.
Table of Contents
- What is a Grad PLUS Loan?
- What is the difference between a PLUS Loan and a Grad PLUS Loan?
- Who qualifies for a Grad PLUS Loan?
- Can I get a Grad PLUS Loan even with bad credit?
- Pros and Cons of Grad PLUS Loans
- What do Grad PLUS Loans cover?
- Do Grad PLUS Loans have borrowing limits?
- How do I apply for a Grad PLUS Loan?
- Can Grad PLUS Loans be consolidated?
- Alternatives to Grad PLUS Loans
- How Will Grad PLUS Loans Impact My Long-Term Financial Health?
- Financial Planning Tips for Using Grad PLUS Loans for Living Expenses
- Can Grad PLUS Loans Fund Online Graduate Programs?
- Can I Secure Additional Funding Without a Cosigner If I Have Limited Credit?
- How Do Grad PLUS Loans Compare to Loans for Specialized Training?
- Are There Any Tax Benefits Associated with Grad PLUS Loans?
- What Are the Repayment Options for Grad PLUS Loans?
- Are Grad PLUS Loans Suitable for Funding a Career Change?
- Are Grad PLUS Loans a Viable Option for Military-Affiliated Graduate Students?
- Are Grad PLUS Loans the Right Fit for Dental and Health Professional Education?
- Can I Adjust My Grad PLUS Loan Terms if My Financial Situation Changes?
- Other Things You Should Know About Grad PLUS Loans
What is a Grad PLUS Loan?
Grad PLUS Loans are a type of Direct PLUS Loan for graduate and professional students. These loans typically have higher interest rates than Direct Subsidized and Unsubsidized Loans. If you received your loan between July 1, 2023, and July 1, 2024, the interest rate for Direct Unsubsidized Loans is 7.05% for graduate or professional students.
Besides high interest rates, Grad PLUS Loans also have a loan disbursement fee deducted from the total amount borrowed. Note that the interest rate for Grad PLUS Loans is established annually and determined by federal law. Interest begins to accrue when the loan funds are disbursed to the university and continues until the loan is paid in full.
What is the difference between a PLUS Loan and a Grad PLUS Loan?
The main difference between a PLUS Loan and a Grad PLUS Loan is the borrower and the purpose of the loan. Direct PLUS Loans are federal loans. They are referred to as a Parent PLUS Loan when made to a parent and as a Grad PLUS Loan when made to a graduate or professional student.
The purpose of a Parent PLUS Loan is to provide financial assistance to parents of dependent undergraduate students. It helps cover remaining education costs after other financial aid has been exhausted. Such a loan supplements the student's financial aid package, allowing parents to borrow up to the cost of attendance (COA) minus any other financial aid the student receives. On the other hand, the Grad PLUS Loan helps graduate students finance their tuition and other eligible program costs.
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Here is what students have to say about their Grad PLUS Loans
"Getting a Grad PLUS Loan was a game-changer for me. It covered my tuition and living expenses, allowing me to focus entirely on my studies without financial stress. Thanks to this loan, I graduated debt-free and ready to pursue my career." - Miyaka
"The Grad PLUS Loan made my dream of attending graduate school a reality. The application process was straightforward, and I appreciated the flexible repayment options after graduation. This loan gave me the financial stability I needed to succeed." - Christopher
"Securing a Grad PLUS Loan was a crucial step in my educational journey. It provided the necessary funds to complete my degree, and the support from the loan program was exceptional. I felt confident and supported throughout my studies." - Janna
Who qualifies for a Grad PLUS Loan?
To receive a Grad PLUS loan, you must:
- Be a graduate or professional student enrolled at least half-time at an eligible school in a program leading to a graduate or professional degree or certificate
- Have no adverse credit history (unless you meet certain additional eligibility requirements)
- Meet the general eligibility requirements for federal student aid
You do not have to demonstrate financial need to be eligible for a Grad PLUS loan. However, lenders will check to ensure you do not have an adverse credit history. If your credit report shows bankruptcy, late payments, or defaulted loans, you may not qualify for a Grad PLUS loan.
Can I get a Grad PLUS Loan even with bad credit?
You might get a Grad PLUS Loan with bad credit. Your credit score informs lenders about how well you have managed past and current credit responsibilities. A high credit score can help you get approved. Still, it also unlocks competitive interest rates and provides more repayment term options.
On the other hand, a low credit score is usually a red flag to private lenders, indicating you might have difficulty repaying your loan on time. Failure to repay your loan on or before your due date poses a greater financial risk for the lender.
Adverse Credit History Options
If you have an adverse credit history, you may still receive a Grad PLUS Loan through one of these options:
- Having an endorser. An endorser is someone with no adverse credit history who agrees to repay the Grad PLUS Loan if you do not.
- Documenting extenuating circumstances. You can demonstrate to the United States Department of Education that there are mitigating factors related to your adverse credit history.
For either option, you must also complete credit counseling for PLUS Loan borrowers.
Pros and Cons of Grad PLUS Loans
It is crucial to weigh the pros and cons when considering Grad PLUS Loans. The table below is a quick look at the advantages and disadvantages:
What do Grad PLUS Loans cover?
You can use Direct PLUS Loan funds to cover tuition, school supplies (like books, pens, and notebooks), and other living expenses such as housing, transportation, and child care. Additionally, these funds can pay for costs associated with a disability, like computer programs, tape recorders, and assistive listening devices.
Here is a list of what Grad PLUS loans can be used for:
- Tuition and fees
- Room and board
- Textbooks
- Supplies
- Child care
- Transportation
- Costs related to a disability
- Eligible study-abroad programs
You can also use loan funds for meal plans, food, bus passes, and parking passes. All living expenses, including medical necessities, toiletries, utilities, and household expenses, are eligible costs. However, you cannot use student loan funds to purchase a vehicle (even for commuting to school), pay off other debt, or cover business expenses.
The table below shows the cost of attendance between online and in-person instruction:
Do Grad PLUS Loans have borrowing limits?
Unlike other types of federal student loans, Grad PLUS Loans have no specific annual or aggregate borrowing limit. Instead, you can borrow up to your school's certified cost of attendance, minus other financial aid you have received.
Consider how much you truly need to cover your expenses even if you can borrow up to your school’s cost of attendance. The COA is an estimate, and you may manage with less. By borrowing only what you need, you will owe less upon graduation and reduce your future financial burden.
You can maximize all scholarship and grant opportunities, as these awards typically do not need to be repaid. When you are ready to borrow student loans, make sure not to borrow more than your estimated annual salary after graduation. Use a student loan calculator to estimate your eventual monthly loan payment. You may also visit the official page of the Bureau of Labor Statistics (BLS) to approximate your potential earnings.
If you have borrowed more than necessary, you can still return the unused federal loan money within 120 days without having to pay fees or interest. Policies for returning loans vary among private lenders. Contact your loan servicer for details, as some may waive interest costs for quick returns, while others may require a lump-sum payment.
How do I apply for a Grad PLUS Loan?
Follow these steps to apply for a Grad PLUS Loan:
1. Fill Out the FAFSA
Complete the Free Application for Federal Student Aid (FAFSA) to apply for any government financial aid. This online form, which requires personal and financial details, typically opens in October for the following school year. Deadlines vary by school. If you are wondering how much FAFSA gives you for off-campus housing, our experts can explain the calculation process and provide estimates based on your specific situation.
2. Identify Your Other Financial Aid Options
Explore all financial aid options, including grants and scholarships, which do not require repayment. Depending on your income and credit history, you may qualify for a private student loan with a lower interest rate, though these loans lack the perks of federal loans. Meanwhile, check out our blog if you want to know how to write a cover letter for a scholarship application.
3. Sign a Master Promissory Note
The Master Promissory Note (MPN) outlines the terms of your loan. By signing it, you agree to these terms. To complete this step, you will need your FAFSA log-in information, a driver's license, and the names and contact details of two personal references.
4. Complete Entrance Counseling
Entrance counseling ensures you understand the terms and conditions of your federal student aid package, including your Grad PLUS loan. If you have never taken a Direct Unsubsidized Loan or Direct PLUS Loan from the federal government, this step is required. Otherwise, you may be exempt.
5. Apply for a Direct PLUS Loan Online
Use the Direct PLUS Loan Application to apply for a Graduate PLUS loan. A credit check will be conducted. Your information will be sent to the school you select, which will determine your eligibility for the loan.
Can Grad PLUS Loans be consolidated?
If you are considering a Grad PLUS loan, you may already have federal loan experience. Let us say you have undergraduate debt. You could consolidate all your federal loans with a Direct consolidation loan. However, weigh the pros and cons of consolidation carefully.
If you do not need federal loan protections, you could refinance your Grad PLUS loans to lower the interest rate. Refinancing is the only way to reduce the interest rate on federal debt, as a Direct consolidation loan uses a rounded-up average of your original loans' rates.
Remember, qualifying for refinancing requires good credit or a creditworthy cosigner, along with a solid debt-to-income ratio and other criteria.
Alternatives to Grad PLUS Loans
If Grad PLUS loans are not suitable for you and you still need to pay for graduate school, consider these options:
Scholarships and Grants
Numerous scholarships and grants, including online education financial aid, are available for eligible graduate students. These can be found through federal, state, and local government programs, as well as nonprofit organizations, professional associations, community groups, private companies, and employers.
Below are some common examples of scholarships and grants for graduate students:
- Private Graduate School Scholarships. Private organizations offer these scholarships to support graduate students in various fields, such as law, medicine, and business.
- Need-based Financial Aid for Grad School. Graduate students can apply for financial aid, including grants and student loans, based on financial need through the FAFSA.
- Goldman Sachs MBA Fellowship. A competitive scholarship for Master of Business Administration (MBA) students, offering a full tuition and stipend package. If you are wondering how to get your MBA paid for, this scholarship could be a good option.
- Banks Brown Graduate Scholarship. A $5,000 scholarship for graduate students in hospitality programs, sponsored by the American Hotel & Lodging Association Foundation.
- Sallie Mae Scholarship. A scholarship offered by Sallie Mae, a well-known financial aid provider, to support graduate students.
Unsubsidized Direct Loans
Graduate students can access Unsubsidized Direct Loans, which are non-need-based. You can determine your eligibility by submitting a FAFSA.
Private Student Loans
Private lenders offer student loans with fixed or variable interest rates. These loans require a credit check and have varying features, terms, and eligibility requirements based on the lender's criteria. However, private student loans do not provide the federal benefits that Grad PLUS loans offer.
How Will Grad PLUS Loans Impact My Long-Term Financial Health?
Grad PLUS Loans create financial obligations that extend well past graduation, influencing future credit profiles, debt-to-income ratios, and overall wealth-building strategies. Borrowers should assess how monthly repayments interact with long-term financial goals, considering both the impact on borrowing capacity for major future investments and the potential benefits of alternative, lower-debt educational paths, such as accelerated online associate degrees. Evaluating these factors carefully can enable more strategic decision-making regarding both advanced degrees and overall financial stability.
Financial Planning Tips for Using Grad PLUS Loans for Living Expenses
To make the most of your loan and avoid financial pitfalls:
- Budget Wisely: Create a detailed budget to track your monthly expenses. Prioritize essentials and avoid overspending on non-necessities.
- Borrow Only What You Need: While Grad PLUS Loans can cover your full cost of attendance, borrowing more than necessary can lead to higher debt post-graduation.
- Build an Emergency Fund: Set aside a portion of the loan for unexpected expenses to reduce reliance on credit cards or additional loans.
Using loans for living expenses means taking on more debt. Planning ahead is essential to manage repayment effectively after graduation. Consider your future earning potential and align your borrowing with your expected salary.
If you’re considering Grad PLUS Loans to cover living costs, you might also find it helpful to explore our guide on can you take out a student loan for living expenses.
Can Grad PLUS Loans Fund Online Graduate Programs?
Accredited online graduate programs that meet Department of Education standards qualify for Grad PLUS Loans just as traditional on-campus programs do. These loans can cover tuition, fees, and other related costs associated with distance learning. It is essential to verify that your chosen institution is federally certified before proceeding with the application process. Compare total enrollment expenses carefully, as the financial profile of online programs may differ from conventional alternatives. For additional cost-effective options, consider exploring online schools no application fee.
Can I Secure Additional Funding Without a Cosigner If I Have Limited Credit?
While Grad PLUS Loans are federally managed and do not require a cosigner, some borrowers may face challenges due to limited or adverse credit history. Exploring additional funding options may provide further financial flexibility. Consider alternatives specifically designed for those seeking student loans without cosigner and no credit as they often offer competitive terms and adaptable repayment plans. Evaluating these options alongside your current financial strategy can help ensure your education funding aligns with long-term financial goals.
How Do Grad PLUS Loans Compare to Loans for Specialized Training?
When evaluating Grad PLUS Loans, it is important to consider how they stack up against loans specifically designed for specialized training or certifications. For instance, programs like flight schools often require funding sources tailored to their unique financial demands. While Grad PLUS Loans are flexible, offering coverage for tuition and living expenses, they lack the customization and industry-focused benefits provided by specialized loan options.
Prospective students pursuing niche fields such as aviation might find specialized loans more advantageous due to lower interest rates, better repayment terms, or perks like deferral options through training phases. If you're exploring opportunities in fields requiring specific training, such as becoming a commercial pilot, you can explore tailored options like pilot training loans. These loans are structured to meet the high upfront costs of intensive programs like aviation school, which may exceed the borrowing thresholds of Grad PLUS Loans.
Ultimately, understanding your specific education funding needs is crucial. Assess whether a general federal loan or a specialized one better aligns with your financial goals, educational requirements, and long-term career aspirations.
Are There Any Tax Benefits Associated with Grad PLUS Loans?
Grad PLUS Loan interest may qualify for the student loan interest deduction if IRS criteria are met. The deduction, which can reduce taxable income by up to $2,500 annually, depends on factors such as adjusted gross income, filing status, and dependency status. Borrowers should review current IRS guidelines and consult a tax professional to determine eligibility and phase-out thresholds. Evaluating tax benefits alongside other financial strategies can provide a more comprehensive perspective on funding advanced education compared to alternatives like the cheapest online bachelor degree.
What Are the Repayment Options for Grad PLUS Loans?
Grad PLUS Loans provide several repayment strategies to accommodate different financial situations. Borrowers are typically required to begin repayment shortly after full disbursement, yet options to consolidate or refinance can extend or modify the schedule. Consolidating Grad PLUS Loans into a Direct Consolidation Loan may offer access to alternative payment plans, including income-driven options, which can lower monthly obligations. Alternatively, refinancing with private lenders might secure a more favorable interest rate based on creditworthiness, though this shifts the loan from federal to private status with different benefits and protections. Comparing these repayment strategies with options like career training loans enables informed decision-making, ensuring the chosen plan aligns with long-term financial goals and minimizes total borrowing costs.
Are Grad PLUS Loans Suitable for Funding a Career Change?
Grad PLUS Loans can finance advanced education that facilitates a professional pivot, enabling borrowers to acquire the specialized skills needed for a new career path. Evaluating the projected increase in earning potential against the obligation of added debt is critical when considering such a move. Borrowers should also compare alternative funding sources and assess programs that specifically target career transitions, such as career changer programs, to ensure alignment with long-term professional objectives.
Are Grad PLUS Loans a Viable Option for Military-Affiliated Graduate Students?
Military-affiliated graduate students encounter unique financial circumstances, often balancing federal benefits like the GI Bill or tuition assistance with additional funding needs. Grad PLUS Loans can act as supplementary support to bridge any funding gaps for tuition and living expenses while pursuing advanced education. It is important to carefully evaluate how these loans integrate with existing military benefits and long-term financial planning strategies. Military-affiliated students should compare loan terms against alternative funding options available through institutions that cater specifically to their needs, such as an online college for military members, ensuring a comprehensive approach to meeting educational goals.
Are Grad PLUS Loans the Right Fit for Dental and Health Professional Education?
For dental and health professional programs, dedicated funding options may offer features tailored to the unique cost structures and income trajectories inherent to these fields. While Grad PLUS Loans provide broad coverage for tuition and living expenses, alternatives such as dental student loans often come with competitive interest rates, program-specific repayment plans, and benefits aligned with professional licensure timelines. Evaluating detailed fee structures and long-term repayment flexibility is essential for ensuring that the financing solution meets both immediate educational costs and future financial objectives.
Can I Adjust My Grad PLUS Loan Terms if My Financial Situation Changes?
Federal regulations offer limited options to modify Grad PLUS Loan terms directly; however, borrowers experiencing financial hardship may consider alternatives such as consolidation or refinancing. Consolidation, for instance, can convert your Grad PLUS Loan into a Direct Consolidation Loan, potentially unlocking access to income-driven repayment plans and more flexible terms. It is essential to contact your loan servicer for tailored advice and to determine eligibility for any available deferment or forbearance options. Evaluating strategies, such as exploring lower-cost educational alternatives like the easiest bachelor's degree, may also help mitigate long-term debt challenges.
Key Findings
- Grad PLUS Loans allow you to borrow up to your school's certified cost of attendance, minus any other financial aid received. Unlike other federal loans, there is no specific annual or aggregate borrowing limit.
- For Direct PLUS Loans disbursed between July 1, 2023, and July 1, 2024, the fixed interest rate is 8.05%. These loans also carry a loan fee of 4.228% for loans disbursed on or after October 1, 2020.
- To qualify for a Grad PLUS Loan, you must be a graduate or professional student enrolled at least half-time at an eligible school. You must not have an adverse credit history, and you must meet the general eligibility requirements for federal student aid.
- Grad PLUS Loans offer flexible repayment plans, including income-driven options. You can defer payments until six months after you leave school or drop below half-time enrollment.
- Grad PLUS Loan funds can cover tuition, fees, room and board, textbooks, supplies, child care, transportation, disabilities-related costs, and eligible study-abroad programs. They can also be used for meal plans, food, bus passes, and parking passes.
- If Grad PLUS Loans are not suitable, students can explore other options such as Unsubsidized Direct Loans, private student loans, and various scholarships and grants. Examples include the Goldman Sachs MBA Fellowship (covering full tuition and stipend) and the Banks Brown Graduate Scholarship ($5,000 for hospitality students).
Other Things You Should Know About Grad PLUS Loans
How were funds delivered when I applied for a Grad PLUS Loan?
The school will first apply Grad PLUS loan funds to your account to cover types of fees in college, tuition, room and board, and other school charges. If any funds remain, the school will disburse them to you for other education expenses.
What is the interest rate for the PLUS Loan?
For Direct PLUS Loans disbursed between July 1, 2023, and July 1, 2024, the interest rate is 8.05%. This rate is fixed for the life of the loan.
Additionally, all Direct PLUS Loans have a loan fee. This fee is a percentage of the loan amount and is proportionately deducted from each disbursement. For loans disbursed on or after October 1, 2020, the fee is 4.228%. Loans disbursed before this date had different fees.
Are parent PLUS Loans eligible for forgiveness?
Parent PLUS Loans are eligible for forgiveness under certain circumstances. Here are the main options:
- Public Service Loan Forgiveness (PSLF). Parent borrowers can have their loans forgiven after making 120 qualifying payments (ten years) if they work full-time in a qualifying public service job and are on an income-driven repayment plan.
- Income-Contingent Repayment (ICR). Parent borrowers can have their remaining loan balance forgiven after making 25 years of monthly payments under the ICR plan, available after consolidating their loans into a Direct Consolidation Loan.
- Temporary Expanded Public Service Loan Forgiveness (TEPSLF). This program allows for forgiveness of Parent PLUS loans if the borrower has made qualifying payments under a graduated repayment or extended repayment plan, provided that the last year of payments was at least as much as they would have paid under an income-driven repayment plan.
- Federal Agency Forgiveness. Federal agencies may repay federal education loans, including Parent PLUS loans, as an employee recruitment or retention tool.
- Military Forgiveness Programs. Parent PLUS loans may be eligible for repayment under various military loan forgiveness programs, depending on the service.
- State and Employer-Paid Student Loan Assistance. Some states and employers offer student loan repayment assistance programs that can help with Parent PLUS loan debt.
- Refinancing. Parent borrowers can consider refinancing their loans with a private lender to reduce their interest rate and monthly payments.
References:
- Federal Student Aid. (n.d.). Can I cancel my student loan? https://studentaid.gov/help-center/answers/article/can-i-cancel-loan
- Federal Student Aid. (n.d.). Direct PLUS loans. https://studentaid.gov/understand-aid/types/loans/plus
- Federal Student Aid. (n.d.). Direct PLUS loans for graduate or professional students. https://studentaid.gov/understand-aid/types/loans/plus/grad
- Federal Student Aid. (n.d.). What is the current interest rate for Direct Subsidized and Unsubsidized Loans? https://studentaid.gov/help-center/answers/article/what-is-current-interest-rate-for-direct-unsubsidized-loans
- Hanson, M. (2023, August 23). Cost of online education vs. traditional education. https://educationdata.org/cost-of-online-education-vs-traditional-education
- Sallie Mae. (2023). How America pays for college 2023. Retrieved June 15, 2024, from https://www.salliemae.com/about/leading-research/how-america-pays-for-college
