Grad PLUS Loans: How They Work, Eligibility, Interest Rates, and Repayment

A Grad PLUS Loan is a federal student loan for graduate and professional students who need to borrow more money after using their available Direct Unsubsidized Loans. Offered through the U.S. Department of Education, Grad PLUS Loans can help cover the remaining cost of attendance, including tuition, fees, housing, books, and other eligible education expenses.

If your federal Direct Unsubsidized Loan isn't enough to pay for graduate school, a Grad PLUS Loan may help fill the gap. Before you borrow, it's important to understand how these loans work, who qualifies, how much you can borrow, current interest rates and fees, repayment options, and how they compare with other ways to pay for graduate school.

What is a Grad PLUS loan?

A Grad PLUS Loan is a federal student loan that helps graduate and professional students pay for education expenses not covered by other financial aid. It is part of the Federal Direct PLUS Loan Program and is offered by the U.S. Department of Education.

Unlike some federal student loans, Grad PLUS Loans are not based on financial need. Instead, eligible students can generally borrow up to their school's cost of attendance minus any scholarships, grants, and other financial aid they receive. Before applying, students must first use any available Direct Unsubsidized Loans for which they qualify.

To be eligible for a Grad PLUS Loan, you must be enrolled at least half-time in an eligible graduate or professional degree or certificate program, complete the Free Application for Federal Student Aid (FAFSA), and pass a credit check or meet the requirements for an endorser or credit appeal if you have adverse credit history.

Although Grad PLUS Loans and Parent PLUS Loans are both part of the Federal Direct PLUS Loan Program, they are designed for different borrowers. A Grad PLUS Loan is borrowed and repaid by the graduate or professional student. A Parent PLUS Loan is borrowed by the parent of a dependent undergraduate student to help pay for that student's education.

Grad PLUS Loans are intended to help close the funding gap when other federal student aid isn't enough to cover the full cost of graduate school. Because they include federal borrower protections, flexible repayment plans, and potential eligibility for loan forgiveness programs, many students consider them before turning to private student loans.

Related resources:

• Direct Unsubsidized Loans

• Parent PLUS Loans

• Federal Student Loans: Your Complete Guide

How does a Grad PLUS loan work?

A Grad PLUS Loan works by letting eligible graduate and professional students borrow federal loan funds through the U.S. Department of Education. The school confirms how much the student can borrow, and the loan is applied to approved education costs.

Complete the FAFSA

Start by completing the Free Application for Federal Student Aid (FAFSA). Your school uses the FAFSA to review your eligibility for federal student aid, including Direct Unsubsidized Loans and Grad PLUS Loans.

Apply for a Grad PLUS loan

After completing the FAFSA, you can apply for a Grad PLUS Loan through the federal student aid website. Some schools may have extra steps, so check your financial aid office’s instructions before you apply.

Credit review

Grad PLUS Loans require a credit check. You do not need to show financial need, but you generally cannot have an adverse credit history unless you qualify with an endorser or successfully appeal the decision.

School certification

Your school reviews your loan request and confirms the amount you can borrow. In most cases, the maximum amount is your school’s cost of attendance minus any other financial aid you receive.

Sign the Master Promissory Note

Before the loan is finalized, you must sign a Master Promissory Note. This is your agreement to repay the loan, including interest and fees.

Loan disbursement

Once approved, the loan funds are sent to your school. The school applies the money to tuition, fees, and other school charges first. If money is left over, it may be sent to you for other approved education expenses, such as books, supplies, housing, or transportation.

Who is eligible for a Grad PLUS loan?

To qualify for a Grad PLUS Loan, you must meet the basic eligibility requirements for federal student aid and satisfy the program's credit requirements. Unlike some other federal student loans, Grad PLUS Loans are not based on financial need.

You may be eligible for a Grad PLUS Loan if you:

• Are enrolled at least half-time in an eligible graduate or professional degree or certificate program.

• Complete the Free Application for Federal Student Aid (FAFSA) for the academic year you plan to attend.
• Do not have an adverse credit history or qualify through an approved endorser or credit appeal.
• Are a U.S. citizen, U.S. national, or eligible non-citizen with a valid Social Security number, unless an exception applies.
• Maintain satisfactory academic progress as defined by your school.

• Meet the general eligibility requirements for federal student aid, including not being in default on a federal student loan.

What if you have adverse credit?

Having an adverse credit history doesn't always mean you'll be denied a Grad PLUS Loan. You may still qualify if you obtain an endorser who agrees to repay the loan if you don't, or if you successfully document extenuating circumstances through the federal credit appeal process. If your loan is approved after an endorser or appeal, you'll also be required to complete PLUS credit counseling before the loan is disbursed.

How much can you borrow? 

With a Grad PLUS Loan, you can generally borrow up to your school's full cost of attendance minus any other financial aid you receive. The cost of attendance is the total estimated cost of going to school for one academic year.

Cost of attendance may include tuition, fees, books, supplies, housing, food, transportation, loan fees, and certain personal expenses. Your school sets this amount.

Grad PLUS Loans do not have a set annual or lifetime borrowing cap like some other federal student loans. However, you cannot borrow more than your school-certified cost of attendance after other aid is subtracted.

Here is a simple example:

In this example, the student could borrow up to $14,500 in Grad PLUS Loan funds for the academic year. You do not have to borrow the full amount offered. Borrowing less can help lower your total repayment cost after graduation.

What does a Grad PLUS loan cost? 

Before borrowing a Grad PLUS Loan, it's important to understand the total cost. In addition to repaying the amount you borrow, you'll also pay interest and an origination fee. Both are set by the federal government and can affect how much your loan costs over time.

Interest rates

Grad PLUS Loans have fixed interest rates, which means your interest rate won't change over the life of the loan. However, the rate for new Grad PLUS Loans is set each year by the U.S. Department of Education, so it may be different depending on when you borrow.

You can find the current interest rate for new Grad PLUS Loans on the Federal Student Aid website before you apply.

Origination fee

A Grad PLUS Loan also includes an origination fee, which is a percentage of the loan amount charged by the U.S. Department of Education to process the loan.

The fee is deducted before your loan is disbursed. For example, if you borrow $10,000, you'll receive slightly less than $10,000 because the origination fee is withheld. However, you'll still be responsible for repaying the full amount you borrowed, plus any interest that accrues.

When interest starts accruing

Interest begins accruing as soon as your Grad PLUS Loan is disbursed. Even if you're still enrolled in school or your payments are deferred, interest continues to accumulate.

You can choose to make interest payments while you're in school to help reduce the total amount you'll repay over the life of the loan. If you don't pay the interest as it accrues, it may be added to your loan balance in certain situations, increasing the total cost of borrowing.

Repaying a Grad PLUS loan 

Repayment for a Grad PLUS Loan typically begins after you leave school, graduate, or drop below half-time enrollment. Although payments are generally deferred while you're enrolled at least half-time, interest continues to accrue during this period.

Once repayment begins, you can choose from several federal repayment plans based on your financial situation and long-term goals.

Automatic deferment

If you're enrolled at least half-time in an eligible graduate or professional program, your Grad PLUS Loan is generally placed into automatic deferment. After you graduate, leave school, or drop below half-time enrollment, you'll usually receive an additional six-month deferment before your first payment is due.

Standard repayment plan

The Standard Repayment Plan divides your loan into fixed monthly payments over 10 years. Because the repayment period is shorter, you'll typically pay less interest over the life of the loan than with longer repayment plans.

Graduated repayment plan

With the Graduated Repayment Plan, monthly payments start lower and increase every two years. This option may work well if you expect your income to grow after graduation.

Extended repayment plan

Eligible borrowers can choose the Extended Repayment Plan, which stretches payments over as long as 25 years. This lowers your monthly payment but increases the total interest you'll pay over time.

Income-Driven repayment plans

Income-driven repayment (IDR) plans base your monthly payment on your income and family size rather than the amount you borrowed. Depending on the plan, any remaining balance may be eligible for forgiveness after you meet the program's requirements.

Can Grad PLUS loans be forgiven or consolidated? 

Grad PLUS Loans may qualify for federal loan forgiveness programs and can be consolidated with other eligible federal student loans. However, it's important to understand how these options work before making a decision.

Loan forgiveness

If you work for a qualifying government agency or nonprofit organization, your Grad PLUS Loan may be eligible for Public Service Loan Forgiveness (PSLF). Borrowers who meet all program requirements, including making the required number of qualifying payments while working for an eligible employer, may have their remaining loan balance forgiven.

Grad PLUS Loans may also qualify for income-driven repayment (IDR) forgiveness. Under an eligible income-driven repayment plan, any remaining balance may be forgiven after you make the required number of qualifying payments. Program requirements and repayment timelines vary by plan.

Loan consolidation

You can combine your Grad PLUS Loan with other eligible federal student loans through a Federal Direct Consolidation Loan. Consolidation won't reduce the amount you owe, but it can simplify repayment by combining multiple federal loans into a single monthly payment. In some cases, consolidation may also be required to access certain repayment options.

Should you refinance?

Some borrowers consider refinancing their Grad PLUS Loan with a private lender to secure a lower interest rate. While refinancing may reduce your monthly payment or overall borrowing costs if you qualify, it also means giving up valuable federal benefits.

Before refinancing, consider that you'll generally lose access to:

• Income-driven repayment plans

• Public Service Loan Forgiveness (PSLF)
• Federal deferment and forbearance options

• Other federal borrower protections

For many borrowers, keeping federal loan benefits may outweigh the potential savings of refinancing with a private lender. Carefully compare your options before making a decision.

Pros and cons of Grad PLUS loans

Grad PLUS Loans can make graduate school more affordable by covering education costs that other financial aid doesn't. However, like any type of borrowing, they come with costs and responsibilities. Comparing the benefits and drawbacks can help you decide whether a Grad PLUS Loan is the right choice for your situation.

No single student loan is right for everyone. Before borrowing a Grad PLUS Loan, compare it with other federal aid, scholarships, employer tuition assistance, and private student loans to find the option that best fits your financial needs.

Grad PLUS loans vs. other ways to pay for graduate school 

A Grad PLUS Loan is just one way to pay for graduate school. Before borrowing, compare all available funding options, including federal student loans, scholarships, employer benefits, and private loans. In many cases, it's a good idea to maximize scholarships, grants, and other federal student aid before considering additional borrowing.

Before applying for a Grad PLUS Loan, consider all available sources of funding. Scholarships, fellowships, assistantships, and employer tuition assistance can reduce the amount you need to borrow. If you still have a funding gap after using your available Direct Unsubsidized Loans, a Grad PLUS Loan may provide additional financing while preserving access to important federal borrower protections.

Related resources:

• Direct Unsubsidized Loans

• Parent PLUS Loans
• Federal Student Loans Guide
• Private Student Loans
• Scholarships and Grants for Graduate Students

• Student Loan Repayment Plans

Should you get a Grad PLUS loan? 

A Grad PLUS Loan can be a helpful way to pay for graduate school, but it isn't the right choice for everyone. Before borrowing, compare all of your financial aid options and consider how much you'll be able to comfortably repay after graduation.

A Grad PLUS Loan may make sense if you:

• Have already borrowed the maximum amount available through your Direct Unsubsidized Loan.

• Need additional funding to cover your school's full cost of attendance.
• Want access to federal borrower protections, such as income-driven repayment plans, deferment, and forbearance.
• May qualify for Public Service Loan Forgiveness (PSLF) or another federal loan forgiveness program.

• Prefer the benefits of a federal student loan over relying on a private student loan.

A Grad PLUS Loan may not be the best choice if you:

• Still have opportunities to reduce your costs through scholarships, grants, fellowships, or assistantships.

• Qualify for employer tuition assistance or reimbursement benefits.

• Can meet your education expenses with a lower-cost borrowing option that better fits your financial situation.

No matter which option you choose, borrow only what you need. Reducing the amount you borrow today can lower your monthly payments and the total interest you pay after graduation.