When a student decides to attend graduate school or professional school, they also have to decide how to pay for it. The costs of graduate and professional school can be staggering, so many students end up requiring at least some financial aid.
For example, according to Forbes, the expected student loan debt load after law school is around $140,000; for dental school, the number rises to $260,000. According to BestMastersDegrees.com, the average cost of a master’s degree is anywhere from $30,000 to $120,000.
One option for graduate students is the Grad PLUS Loan, which is a federal student loan.
On this page:
- What is a Grad PLUS Loan?
- Grad PLUS Loan Basics
- Grad PLUS Loan Requirements
- How to Apply for a Grad PLUS Loan
What is a Grad PLUS Loan?
The Grad PLUS Loan is a part of the Direct PLUS Loan program. In general, PLUS Loans are federal student loans designed to help students pay for graduate or professional education costs. They can also be used by parents of undergraduates to help their child pay for the cost of an education.
With the Grad PLUS Loan or any Federal Direct Loan, the lender is the U.S. Department of Education.
The maximum amount that can be borrowed for the PLUS Loan is the cost of attendance, which is determined by the tuition and fees charged by the graduate or professional school being attended, minus any other financial aid or assistance being received.
Grad PLUS Loan Basics
Here’s what you need to know about Grad PLUS Loans.
For Direct PLUS Loans disbursed for the first time on or after July 1, 2021, and before July 1, 2022, the interest rate is 7.6%. The interest rates on PLUS Loans are fixed for the entire life of the loan.
There is a loan fee charged on all Direct PLUS Loans. This fee is a percentage of the total amount of the loan, and it’s deducted from disbursements. The percentage can vary depending on the first disbursement of the loan.
The current loan fee for the Direct PLUS Loan is 4.248%.
If you’re a graduate or professional student using a Direct PLUS Loan, you’re not required to make payments as long as you’re enrolled in school at least half-time.
You also don’t have to make payments until six months after you graduate or leave school. This differs from the repayment requirements for parent borrowers of the Direct PLUS Loan.
Loan repayment options available with a PLUS Loan vary from 10 to 25 years, and loan servicers can work with borrowers to help them determine the plan that’s right for them. You can read more about federal student loan repayment plans here.
When someone receives a Grad PLUS Loan, the funds are sent directly to the school they’re going to attend and credited to their account.
The loan disbursement usually occurs in a minimum of two installments. The loan funds are first applied to tuition and fees, then room and board if applicable.
With the borrower’s permission, any remaining funds can be used for other school-related charges.
Grad PLUS Loan Eligibility Requirements
As with other federal student loans, eligibility for a Grad PLUS loan isn’t based on demonstrated financial need.
Eligibility also isn’t based on income or debt-to-income ratios. However, eligibility does require borrowers to complete the Free Application for Federal Student Aid (FAFSA). Unlike some other federal loans, applicants do have to submit to a credit check to be eligible for the Grad PLUS Loan.
A cosigner isn’t required with this student loan unless you have a less-than-perfect credit history. Some of the degree programs that may be eligible for this federal loan include master’s degrees, doctorate programs, business degrees, law, medicine, dental degrees, nursing, and veterinary medicine.
Credit Score Requirements
Although Grad PLUS Loans aren’t subject to a minimum FICO score or debt-to-income ratio, borrowers with an adverse credit history will have trouble qualifying.
Some of the factors that might be considered part of an adverse credit history include a current delinquency of 90 days or more or more than $2,085 in debt collections or charged-off debts in the previous two years.
Also included under the classification of having an adverse credit history includes default, bankruptcy discharge, foreclosure, repossession, or tax liens.
If you have an adverse credit history, your cosigner can help you as long as they don’t have an adverse credit history as well. If you apply for the Grad PLUS Loan and you’re initially denied, you can also reapply if you’re able to find a cosigner who’s qualified for approval.
How to Apply for a Grad PLUS Loan
The following are the steps required to apply for a Graduate PLUS Loan.
- Before starting the process of applying for the Grad PLUS Loan, you should have completed and submitted the FAFSA.
- Create an FSA ID by going to the Department of Education website. Once you’ve created an FSA ID and logged in, you have the option to choose to apply for a PLUS Loan. Here you’ll enter the amount of the loan you’re requesting as well as the school you plan to attend.
- You’ll need to include the award year the loan will be for, and you can choose between borrowing the maximum amount for you’re eligible or a certain loan amount.
- At this point, your credit will be checked, and you will find out whether or not you’re eligible for this loan based on your credit history.
- If you’re eligible for the PLUS Loan, you will sign a Master Promissory Note or MPN. This is a contract that outlines the terms of your loan.
- If you’re a graduate student receiving this loan for the first time, you’ll also have to complete entrance counseling.
Bottom Line: Does a Grad PLUS Loan Make Sense for You?
As a final note, if you’re planning to attend graduate school you should first check to see if you’re eligible for Direct Unsubsidized Loans.
These are recommended as the first option for graduate and professional students before applying for a PLUS loan because they offer lower interest rates. After that you can look into your other graduate student loan options.