Grad PLUS Loans for Graduate Students

NOTE: If you have strong credit (or can secure a creditworthy cosigner) you may want to compare private student loan options. There could be a cost savings on both the fees (most lenders offer zero origination fees) and interest rates (starting as low as around 3.93% in today’s marketplace).

The Grad PLUS Loan, also called a Graduate PLUS Loan, is a federal student loan available to students attending graduate school and professional school. It offers a fixed interest rate and flexible loan limits.

Eligibility for the Grad PLUS Loan does not depend on demonstrated financial need, but you need to file the FAFSA (Free Application for Federal Student Aid) to qualify. You also have to pass a simple credit check.

The Grad PLUS Loan allows you to borrow up to the full annual cost of attendance (COA) minus other financial aid received (scholarships, fellowships, grants, federal student loans, private student loans). There is no aggregate (cumulative) loan limit.

Key benefits of the Grad PLUS Loan:

• The interest rate is fixed at 7.6% for the 2018-2019 academic year
• Loan payments can be deferred while you are enrolled on at least a half-time basis at an accredited graduate school or professional school
• A cosigner is not required
• Multiple repayment plans (including income-based) available
• The interest paid on the loan may be tax deductible

How to Apply for a Grad PLUS Loan

The first step in the application process is to file the FAFSA (Free Application for Federal Student Aid) or Renewal FAFSA (for returning students) at FAFSA.ed.gov. The FAFSA is a requirement to borrow from the Grad PLUS Loan program.

To obtain a Grad PLUS Loan, you should apply for a PLUS Loan at StudentLoans.gov or contact the financial aid office at your college or university. You will use the same FSA ID used to sign your FAFSA to apply for your Grad PLUS Loan.

Eligibility

Students enrolled in graduate school and professional school programs can take out Grad PLUS Loans.

Degree programs and common examples:

• Masters: M.A., M.S.
• Doctorate: Ph.D., Ed.D.
• Business: M.B.A.
• Law: LL.M., J.D., S.J.D.
• Medical: M.D., D.O.
• Dental: D.M.D., D.D.S.
• Nursing: M.S.N., D.N.P.
• Veterinary medicine: D.V.M.

Loan eligibility and the loan limits are not based on demonstrated financial need. Even wealthy students can borrow through the program.

Credit Requirements

To qualify for a Grad PLUS Loan, you can’t have an adverse credit history.

What causes an adverse credit history:

• A current delinquency of 90 or more days on more than $2,085 in total debt; or
• More than $2,085 in total debt in collections or charged off in the past two years (before the date of the credit report); or
• Default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student loan debt in the past five years (before the date of the credit report)

Cosigners

Even if you have an adverse credit history, you can still qualify for a Grad PLUS Loan by getting a cosigner (called an endorser) who does not have an adverse credit history. A cosigner is a co-borrower, equally obligated to repay the debt. If you don’t have an adverse credit history, you don’t need a cosigner to apply for the loan. If you get denied for a Grad PLUS Loan, you can re-apply with a qualified cosigner. (Note: If you are denied a Grad PLUS Loan because of an adverse credit history, you don’t become eligible for higher Direct Unsubsidized Loan limits.)

Interest Rates and Fees

The interest rates on Grad PLUS Loans are fixed and do not change over the life of the loan. The interest rate for the 2018-2019 academic year is 7.6%.

Every year on July 1, interest rates are reset based on current market rates. The interest rates are based on the 10-year Treasury Note (determined each year by the final auction prior to June 1) plus a fix margin (see table).

The interest on a Grad PLUS Loan starts to add up (accrue) from the date the loan is first disbursed. If you don’t pay the interest as it accrues, it will be capitalized (added to the loan balance), increasing the amount of the loan.

The current fee on Grad PLUS Loans is 4.248%. Fees are deducted from each loan disbursement. You can ask the college financial aid office to increase the loan amount to cover the fees, up to the annual loan limit.

Loan Limits: How Much You Can Borrow

The annual limit on a Grad PLUS Loan is equal to your school’s total cost of attendance (COA) minus any other financial aid received. There is no aggregate (cumulative) loan limit.

The cost of attendance includes:

• Tuition and fees
• Room and board
• Books
• Supplies
• Equipment
• Transportation
• Miscellaneous personal expenses

Example:

How Loan Funds are Distributed

The Direct Loan program sends the Grad PLUS Loan funds to your school to be credited to your student account. In most cases, the loan will be sent (disbursed) in at least two installments.

Loan funds are credited to your account in this order:

1. Tuition and fees
2. Room and board (if you are living in college-owned student housing)
3. Other school charges (with your permission)

If any loan funds remain in your account, the credit balance will be refunded to you by check, cash, debit card, or electronic funds transfer (EFT) to your bank account. Remember, the refund must be used to pay for your direct and indirect education expenses, such as textbooks, supplies, and equipment.

In-School Deferment and Grace Period

While you are enrolled in school at least half-time, your Grad PLUS Loan will be placed into deferment, which means you don’t have to make any payments. In addition, you don’t have to make payments during the 6-month grace period after you graduate or drop below half-time enrollment status. Just remember that interest on your loan will start to accrue (add up) as soon as all of the loan funds are sent to your school. Even though you aren’t making any payments, interest is still adding up.

Repayment

The standard repayment term on Grad PLUS Loans is 10 years. However, you can qualify for a longer repayment term if you consolidate the loans or have more than $30,000 in federal student loans with a single lender.

Unlike Parent PLUS Loans, Grad PLUS Loans are eligible for nearly all of the different repayment plans offered by the U.S. Department of Education.

Eligible repayment plans:

• Standard Repayment
• Extended Repayment
• Graduated Repayment
• Income-Contingent Repayment (ICR)
• Income-Based Repayment (IBR)
• Pay-As-You-Earn Repayment (PAYE)
• Revised Pay-As-You-Earn Repayment (REPAYE)

Can a Grad PLUS Loan be cancelled if I change my mind?

Yes. You can cancel the loan or reduce the loan amount by returning funds to the lender.

Your graduate school must notify you when it credits your student account with Grad PLUS Loan funds. This notification must be sent to you no earlier than 30 days before, and no later than 30 days after, the school credits your account. You may cancel all or a portion of the loan by informing the school within 14 days after the date the school sends this notice, or by the first day of the payment period, whichever is later. (The first day of the payment period is usually the first day of the term. Ask the school about the first day of the payment period.)

Comparison of Federal Student Loans for Graduate Students

* for loans borrowed through September 30, 2019

 Recommendations

1. File the FAFSA every year to maintain eligibility for student aid.
2. Take out the maximum amount of Direct Unsubsidized Loans and Perkins Loans (if eligible) before considering a Grad PLUS Loan.
3. Compare the costs and benefits of Grad PLUS Loans and private student loans. If you have excellent credit or a strong cosigner, you may get a lower interest rate with a private student loan.
4. If you are denied for a Grad PLUS Loan due to an adverse credit history, find a cosigner (also called an endorser) and reapply.