Grad PLUS Loan

Grad PLUS Loans are a popular option for graduate students seeking financial assistance for their education in the United States. These loans are designed to help cover the gap between the cost of attendance and other financial aid options, such as grants and scholarships. Offered by the U.S. Department of Education, Grad PLUS Loans are federally backed and provide graduate students with the opportunity to borrow up to the full cost of their education, including tuition, fees, and other related expenses. However, it’s essential to understand the specific details surrounding these loans, including eligibility, interest rates, and repayment options, before applying.

In this article, we’ll walk you through everything you need to know about Grad PLUS Loans, ensuring that you make an informed decision before applying in 2025. From the differences between Grad PLUS Loans and other federal student loans to how to apply, repay, and more, we’ve got you covered.

Things You Should Know About Grad PLUS Loans

What Is a Grad PLUS Loan?
A Grad PLUS Loan is a federal loan designed for graduate and professional students. Unlike undergraduate loans, Grad PLUS Loans do not have an annual borrowing limit based on the cost of attendance, allowing students to borrow the full amount needed for their education. The loan is credit-based, and students with a strong credit history may have better chances of approval.

Key Features:

Available to Graduate and Professional Students: Students pursuing graduate or professional degrees are eligible to apply for Grad PLUS Loans.
Federal Loan: These loans are backed by the federal government, offering more favorable terms compared to private loans.
Loan Amount: Grad PLUS Loans cover the total cost of attendance (including tuition, fees, room, and board) minus any other financial aid the student receives.

Difference Between a PLUS Loan and a Grad PLUS Loan

Understanding the Differences:
Many people confuse the Grad PLUS Loan with the regular PLUS Loan, which is available to parents of dependent undergraduate students. While both loans are federal and share some similarities, there are key differences:

Eligibility: PLUS Loans are available to parents of undergraduate students, while Grad PLUS Loans are available to graduate and professional students.
Repayment: Repayment for Grad PLUS Loans starts immediately, while the regular PLUS Loan allows parents to defer payments until after their child graduates.
Loan Limits: Grad PLUS Loans offer a higher borrowing limit, allowing students to cover the full cost of their education.

Eligibility and Costs of a Grad PLUS Loan

To qualify for a Grad PLUS Loan, students must meet specific criteria:

U.S. Citizenship: You must be a U.S. citizen or an eligible non-citizen.
Enrollment: You must be enrolled at least half-time in a graduate or professional degree program at an accredited institution.
Credit Check: A credit check is required, but the standard for approval is more lenient than for private loans. Applicants with a negative credit history may still qualify if they meet certain conditions.
No Defaulted Federal Loans: You must not be in default on any federal student loans.

Costs to Consider:

Loan Fees: Grad PLUS Loans come with an origination fee, which is deducted from the loan amount before disbursement.
Interest Rates: These loans come with a fixed interest rate that is typically higher than undergraduate federal loans.

Loan Type	Interest Rate	Loan Fee	Eligibility
Grad PLUS Loan	Fixed at 7.54%	4.228%	Graduate & Professional Students
PLUS Loan (for parents)	Fixed at 7.54%	4.228%	Parents of Undergraduates

Interest Rates

The interest rate for Grad PLUS Loans is fixed and set by the federal government. For loans disbursed between July 1, 2024, and June 30, 2025, the interest rate is 7.54%. The rate remains the same for the life of the loan, meaning you won’t face unexpected increases.

Interest is Capitalized: Interest on Grad PLUS Loans is capitalized, meaning it’s added to the principal balance of the loan, which can increase the overall cost of borrowing over time.
Grace Period: Graduate students may be eligible for deferment of payments while enrolled at least half-time in school. However, interest will continue to accumulate during this period.

What to Know Before You Apply in 2025

Before applying for a Grad PLUS Loan, it’s essential to understand the process and requirements:

Credit Check: A credit check is required, but it is less stringent than those used by private lenders. A history of bankruptcy, late payments, or defaults may prevent approval.
Borrowing Limit: You can borrow up to the full cost of attendance, but it’s important to evaluate whether you truly need the entire amount.
Interest Accumulation: Interest will begin accruing as soon as the loan is disbursed, so consider whether you can afford to pay interest during school or whether you’ll defer it until graduation.

How to Apply for a Grad PLUS Loan

Applying for a Grad PLUS Loan is a straightforward process. Here’s a step-by-step guide:

Complete the FAFSA: Fill out the Free Application for Federal Student Aid (FAFSA), as this is required for federal loan eligibility.
Apply Online: Go to the official Federal Student Aid website and complete the Grad PLUS Loan application.
Credit Check: The Department of Education will perform a credit check. If you have an adverse credit history, you may need a co-signer or a documented extenuating circumstance.
Loan Counseling: Graduate students must complete entrance counseling before receiving the loan.

Grad PLUS Loans Repayment Options

Repayment for Grad PLUS Loans typically begins six months after you leave school or drop below half-time enrollment. Here are the main repayment options:

Standard Repayment Plan: Fixed monthly payments over 10 years.
Graduated Repayment Plan: Lower payments that increase every two years.
Income-Driven Repayment Plans: Monthly payments based on income, potentially extending the repayment period to 20 or 25 years.

Pros and Cons

Pros:

No Borrowing Limits: Borrow up to the full cost of attendance.
Fixed Interest Rate: Predictable payments over the life of the loan.
Federal Protection: Includes federal protections like forbearance, deferment, and access to income-driven repayment plans.

Cons:

Credit Check: While more lenient than private loans, a credit check may still disqualify some applicants.
High Interest Rates: Higher rates compared to other federal student loans.
Interest Accrual: Interest accumulates while you’re in school.

Can Grad PLUS Loans Be Consolidated?

Yes, Grad PLUS Loans can be consolidated through a Direct Consolidation Loan. Consolidating your loans can simplify your repayment and may lower your monthly payments by extending the loan term.

Considerations:

Loan Forgiveness: Consolidation may affect eligibility for loan forgiveness programs.
Interest Rate: The new interest rate will be the weighted average of your existing loan rates, rounded up to the nearest one-eighth percent.

Alternatives to Grad PLUS Loans

Federal Stafford Loans: These loans are often available with lower interest rates and more flexible terms.
Private Loans: Some private lenders offer loans with competitive interest rates and terms.
Scholarships and Grants: Always explore other funding options before borrowing.

Scholarships and Grants

Before taking out a loan, consider applying for scholarships and grants, which do not need to be repaid. Many organizations offer funding specifically for graduate students.

Additional Tips

Compare Lenders: Explore both federal and private loan options to find the best rates and terms for your needs.
Monitor Your Loan Balance: Keep track of your loan balance and interest accrual to understand the full cost of your education.

Financial Advantages

Grad PLUS Loans offer several financial advantages, including:

Fixed Interest Rates: Know exactly what your payments will be each month.
Flexible Repayment Plans: Tailor your payments to your financial situation.
Eligibility for Forgiveness Programs: In some cases, Grad PLUS Loans may be eligible for Public Service Loan Forgiveness (PSLF).

Other Things You Need to Know About Applying for Grad PLUS Loans

Before applying, keep in mind:

Eligibility Requirements: You must be enrolled at least half-time and meet other federal criteria.
Annual Borrowing Limits: Unlike other federal loans, there are no specific borrowing limits for Grad PLUS Loans, but borrowing too much can lead to a high debt burden post-graduation.

FAQ

Is a Grad PLUS loan better than an unsubsidized loan?
Grad PLUS Loans are generally better for graduate students who need to borrow more than what other loans, like unsubsidized loans, cover. However, they come with a higher interest rate.

What are the benefits of Grad PLUS loans?
Grad PLUS Loans provide flexible borrowing limits, access to federal protections, and multiple repayment options.

How long does it take to get approved for a Grad PLUS loan?
Approval is typically immediate if there are no issues with your credit. However, processing can take a few days.

Are Grad PLUS Loans eligible for loan forgiveness?
Yes, if you meet certain criteria, including working in public service, Grad PLUS Loans may be eligible for loan forgiveness under programs like PSLF.

Grad PLUS Loans Explained – What to Know Before You Apply