The Federal Grad PLUS Loan, also called a Graduate PLUS loan, is a federal student loan available to graduate and professional school students. It offers a low, fixed interest rate.
Eligibility for the Federal Grad PLUS loan does not depend on demonstrated financial need, but borrowers must file the Free Application for Federal Student Aid (FAFSA) to qualify. Borrowers must also pass a simple credit check and have exhausted their Federal Stafford Loan eligibility.
The Federal Grad PLUS loan allows graduate and professional students to borrow up to the total cost of education, including tuition, fees, room and board, books, supplies, equipment, personal expenses and transportation, minus other student aid received.
Key benefits of the Federal Grad PLUS loan include:
Loan eligibility and the loan limits are not based on demonstrated financial need. They are also not based on income levels, debt-to-income ratios or credit scores. No collateral is required. Federal Grad PLUS loan borrowers do, however, have to pass a simple credit check, which requires the borrower not to have an adverse credit history. (Note that if a Federal Grad PLUS loan borrower is denied a Federal Grad PLUS loan because of an adverse credit history, the borrower does not become eligible for increased unsubsidized Federal Stafford Loan limits, unlike the increase in an undergraduate student’s unsubsidized Federal Stafford Loan limits that occurs with a Federal Parent PLUS loan denial.)
Federal Grad PLUS loans may be borrowed by graduate and professional students. These include students in masters and doctoral degree programs, as well as students pursuing advanced degrees in business (including MBA programs), law (J.D. or L.L.B.), medicine (M.D. or D.O.), nursing and veterinary medicine (D.V.M.).
The annual limit on a Federal Grad PLUS Loan is equal to the student’s total cost of attendance minus any other financial aid received. For example, if the graduate school has an annual total cost of attendance of $50,000 and the graduate student receives $20,500 in Federal Stafford Loans and no other financial aid, the graduate student can borrow up to, but no more than, $50,000 - $20,500 = $29,500 in Federal Grad PLUS loans.
The money for the Federal Grad PLUS loan comes from the U.S. Department of Education’s Direct Loan program.
The Direct Loan program sends the loan funds to the student’s school to be credited to his or her account. In most cases, the loan will be disbursed in at least two installments, with no installment greater than half the loan amount. The funds will first be applied to the graduate student’s tuition and fees. If the student is living in college-owned student housing, the money will also be applied to room and board, and, with the student’s permission, other school charges. If any loan funds remain in the student’s account, the credit balance will be refunded to the student by check, cash, debit card or electronic funds transfer (EFT) to the student’s bank account. The refund must be used to pay for the student’s education expenses, such as textbooks, supplies and equipment.
To qualify for a Federal Grad PLUS Loan, the borrower must not have an adverse credit history. An adverse credit history is defined in the regulations as being 90 days or more delinquent on any debt, or having a credit report that shows a derogatory event (e.g., default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or write-off of a Title IV debt) during the five years preceding the date of the credit report). Note that Federal Grad PLUS loans do not use any kind of a debt-to-income ratio or FICO score, unlike private student loans.
If the borrower has an adverse credit history, the borrower may still qualify for a Federal Grad PLUS loan by obtaining a cosigner (called an endorser) who does not have an adverse credit history. Graduate students who do not have an adverse credit history do not need a cosigner to apply for the loan. If a graduate student is denied a Federal Grad PLUS loan, he or she can re-apply with a qualified cosigner.
Can a Grad PLUS loan be cancelled if the borrower changes his/her mind?
Yes. The borrower can cancel the loan or reduce the loan amount by returning funds to the lender.
The graduate school must notify the student when it credits the student’s account with Federal Grad PLUS Loan funds. This notification must be sent to the student no earlier than 30 days before, and no later than 30 days after, the school credits the student’s account. The student 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 academic term. Ask the school about the first day of the payment period.)
The interest rates on the Federal Grad PLUS loan are fixed. Each year’s loans will have a different fixed rate. The interest rates on Federal Grad PLUS Loans made during the 2015-2016 award year are fixed at 6.84%. Interest is charged on the loan from the date the first disbursement is made until the loan is repaid in full.
Repayment on a Federal Grad PLUS loan is deferred while the borrower is enrolled at least half-time. Repayment begins when the borrower graduates or drops below half-time enrollment status.
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