App version: 0.1.0

All You Need to Know About Grad PLUS Loans

What Is a Graduate Plus Loan & How Does It Work?
Melissa Brock
Melissa BrockUpdated November 27, 2024
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Graduate PLUS, or Grad Plus, is a type of federal student aid. A Grad PLUS Loan can help professional and graduate students cover the gap between the money they already have in hand to pay for college and the rest of the amount needed to cover college costs. If you're considering a Grad PLUS Loan, it's a good idea to learn everything you can now. The average student loan debt when it comes to graduate school is staggering: more than $94,000 per federal borrower, according to educationdata.org. The average debt among PhD holders is $89,526.It’s an opportunity to ask yourself: Will you be able to repay this loan in your planned occupation?  

What Is a Grad PLUS Loan? 

A Grad PLUS Loan is a federal student loan for eligible graduate or professional students. In order to qualify for a Grad PLUS Loan, you must meet specific requirements. You must be a graduate or professional student enrolled at least half-time in an eligible program where you will earn a graduate or professional degree or certificate. Federal Student Aid, the federal government entity administering Grad PLUS, says you must meet general eligibility requirements to receive federal student aid. A Grad PLUS Loan is not a form of need-based financial aid, which means that financial status or income is not the basis for awarding money. They recommend you not have a record of poor credit repayment (an adverse credit history).The interest rate for a Grad PLUS loan is 9.08% for loans disbursed between July 1, 2024 and  July 1, 2025.

Grad PLUS vs PLUS Loan 

The difference between the Grad PLUS Loan and the Direct PLUS Loan is that the parents of undergraduate students take out the Direct PLUS Loan to pay for undergraduate school, whereas graduate and professional students can use the Grad PLUS Loan to pay for graduate or professional school. The interest rate is the same for both.

Things You Need to Know About Grad PLUS Loans 

Before you apply for a Grad PLUS Loan, it's a good idea to examine a few facts about them, including how to apply, the amount you can borrow, credit requirements, interest rules, consolidation, entrance counseling, and more. 

A FAFSA Document Is Required to Unlock Grad PLUS Loans 

You must file the Free Application for Federal Student Aid (FAFSA®) in order to get a Grad PLUS Loan. The FAFSA is a free form that you complete in order to qualify for federal financial aid for undergraduate or graduate school.You can start the FAFSA beginning on the day it opens every year — typically October 1. The FAFSA will ask you to fill out various personal and financial information, including your driver’s license number, Social Security number, tax returns, bank account balances, investments, and other assets.You may also be required to fill out other financial aid applications for any grad schools you're considering attending.Learn more about how the FAFSA works before you apply. 

You Can Borrow up to the Full Cost of Attendance 

You can borrow a maximum of the full cost of attendance, minus other financial assistance you receive (such as getting a scholarship or a grant). The institution you attend for graduate or professional school will determine the amount you can receive. One of the best ways to understand all the various parts of your financial aid award is to meet with the financial aid office at the schools you have on your list. They will walk you through all of the details of the Grad PLUS Loan and any other types of aid you are eligible to receive.Again, it is worth evaluating the worth of a large grad-school debt in the career marketplace before proceeding.

To Qualify, You Must Show That You Are Creditworthy 

While there are no hard-and-fast credit requirements to qualify for a Grad PLUS Loan, certain "black marks" on your credit history may keep you from qualifying for a Grad PLUS Loan. This may include debts that haven't been repaid, late payments, bankruptcy, or charge-offs. A charge-off is an assessment by a creditor that a debt will likely never be able to be collected.Even though you do not need to prove a specific credit score in order to take on a Grad PLUS Loan, it's a good idea to increase your credit score or work to maintain a good credit score before you file the FAFSA.

Interest Begins to Accrue As Soon As Your Loan Is Disbursed 

Interest will accrue on your loan immediately after it is disbursed. "Disbursed" refers to when a school pays out a federal student loan to you by putting it into your school account or paying you directly. Once the interest begins accruing, you can either allow your accrued interest to build, which will continue to add to your principal loan balance over time, or you could make interest-only payments. Making interest-only payments will help decrease the total amount of interest you'll pay over the life of your loan. Your loan service provider, which is the entity that manages your loans, can help you set up automatic payments to make the loan payments.

A Loan Origination Charge Must Be Paid 

You'll pay a loan origination fee in order to receive a Grad PLUS Loan. An origination fee is the money you pay for the lender to lend to you. The origination fee is expressed as a percentage of the loan total. The percentage for all Direct PLUS loans first disbursed on or after Oct. 1, 2020, is 4.228%. Loans first disbursed before that date had different loan fees.

The Interest Rate on Graduate PLUS Loans Is Fixed 

For Direct PLUS Loans first disbursed on or after July 1, 2024, and before July 1, 2025, the interest rate is 9.08%. This is a fixed interest rate for the life of the loan.A fixed interest rate is an interest rate that never changes throughout the life of the loan. It is unlike a variable interest rate, which changes depending on benchmark interest rates. The Secured Overnight Financing Rate (SOFR) is the benchmark interest rate that affects variable interest rate loans.  A fixed interest rate offers several benefits, including that you know what to expect when you make your monthly student loan payments — your payment will stay the same.

Consolidation of Grad PLUS Loans 

If you have multiple federal student loans, you can consolidate them into one loan with a fixed interest rate through a Direct Consolidation Loan. Filling out the Federal Direct Consolidation Loan Application and Promissory Note allows you to select the loans that you want to consolidate and confirms your new repayment obligations under the Direct Consolidation Loan. Loan consolidation also allows you to still access various loan repayment options (including the option to extend your loan term) and forgiveness programs. Loan forgiveness means that you would no longer be required to pay back your student loans. However, it's important to read through the rules related to forgiveness options. 

What Does a Graduate PLUS Loan Cover? 

A Graduate PLUS loan covers the cost of attendance at your graduate or professional school as well as living expenses and other needs, such as books and supplies. For example, you can use the Graduate PLUS loan to pay for tuition, room, board, supplies, and other qualified expenses.  If you have a question about an expense and whether or not it will be covered, it's a good idea to check with the financial aid office of the college or university you plan to attend.Check out federal vs. private student loans for more information on the differences between them and the disadvantages of refinancing student loans. 

Benefits of a Grad PLUS Loan

There are some benefits of obtaining Grad PLUS Loans, including the following: 
  • You can still get a Grad PLUS Loan even if you have bad credit. You can either have someone endorse your loan or you can document the extenuating circumstances related to your adverse credit history to the Department of Education. An endorser is someone who agrees to repay the Grad PLUS loan if you do not repay it.
  • You have several repayment options available to you. You're not stuck with one payment plan option after you graduate. You may want to match your monthly payment amount to the size of your family and income, through an income-based repayment plan. Or you might want to choose a graduated repayment plan, where your loan payments start out smaller and get larger. No matter what, you'll generally have between 10 to 25 years to repay your loan. Check with your loan service provider to learn more about your loan repayment options.
  • The borrowing process is simple. You don't have to spend an exhaustive amount of time applying for a Grad PLUS Loan. In fact, the application process takes around 20 minutes to complete.
  • It offers perks that private student loans cannot offer. Taking on a Grad PLUS Loan means you can take advantage of loan consolidation and flexible repayment options. You may also have your loan forgiven, canceled, or discharged.
Learn more: Can you refinance federal student loans?

How to Apply for a Grad PLUS Loan 

Here’s a quick look at how to apply for a Graduate PLUS loan, step by step.Application The application process involves submitting the following information online: 
  • Award year
  • An authorization of your school to use your Direct PLUS Loan to satisfy other educational charges beyond tuition and fees
  • School information
  • Reason for submitting the application
  • Amount requested
  • Loan period
  • Your mailing address
  • Your contact information
  • Employer information
You'll have a chance to review all of the information you input before you submit. The form also notifies you of a credit check. You'll also acknowledge that you've read through a few notices, including the Gramm-Leach-Bliley Act Notice, Privacy Act Notice, Financial Privacy Act Notice, and Paperwork Reduction Act Notice. You must read and agree to the listed certifications and authorizations.

Entrance Counseling 

You must complete entrance counseling if you have not received a subsidized, unsubsidized, or PLUS loan before.In entrance counseling, you'll estimate the cost of attendance through your graduate or professional school, learn about paying for your education and how interest accrues and capitalizes, and how to prepare for grad school loan repayment. You'll also learn more about the consequences of not repaying your loan.Many advise that you examine the likelihood of a certain income coming from your graduate school program when you take on paying large tuition bills funded by loans. Will you be able to make large monthly payments, perhaps for decades?

Complete the Master Promissory Note 

Once you learn of your eligibility for a Grad PLUS loan, you must sign a Direct PLUS Loan Master Promissory Note (MPN) online. Through the MPN, you agree to the terms and conditions of your loan, which means you legally agree to repay the Direct PLUS Loans you receive.

Student Loan Options with Lantern 

Finding the most helpful student loans is important, particularly during or after graduate or professional school. Lantern by SoFi can help you identify the student loan refinancing option that makes the most sense for your financial situation. Note: If you refinance your federal loan, you forfeit forgiveness programs and government income-driven payment plans.Looking for an alternative option after taking out a Grad PLUS student loan? Learn more about student loan refinance options.

Frequently Asked Questions

What are the available alternative options to pay for your graduate degree?
Who is eligible for Graduate PLUS Loan?
How much can I borrow with a Graduate PLUS Loan?
What kind of credit do I need?
Photo credit: iStock/nd3000
LNTSLR-Q424-014

About the Author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.
Share this article: