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How federal Direct Grad PLUS Loans work

Cover up to 100% of your grad school costs — as long as you pass a credit check.

Updated Feb 18, 2021

Fact checked

Direct Grad PLUS Loans could be your best option if you’ve already reached your Direct Unsubsidized Loan limit. While more expensive than unsubsidized loans, the fixed 5.3% interest rate might be lower than a private student loan — especially without a cosigner. But you need to have a clean credit record to qualify.

How do Grad PLUS Loans work?

A Grad PLUS Loan works something like a mix of a federal and private student loan for graduate and professional students.

Like federal Direct Subsidized and Unsubsidized Loans, everyone who qualifies for a Grad PLUS Loan gets the same rate, origination fee and repayment terms. But like many private student loans, there’s annual and lifetime limits to how much you can borrow, and you might not qualify with bad credit — unless you have an endorser.

These loans can be useful for graduate students who’ve run out of Direct Unsubsidized funds, but are ineligible for a competitive rate on a private loan.

How much can I borrow?

You can borrow up to 100% of your school-certified cost of attendance (COA) after subtracting any additional financial aid like scholarships, grants and work-study.

You can find this information in the financial aid package you received from your school. Didn’t get in yet? Most schools typically list an estimated cost of attendance for the current or coming academic year on their financial aid website.

How much does it cost?

When it comes to cost, there are two factors to consider: interest rate and fees.

Interest rate: 5.3%
Origination fee: 4.236%

The interest rate is the percentage of your unpaid loan balance you pay each year. It starts adding up as soon as the Department of Education (DoE) disburses your funds. Along with Parent PLUS Loans, Grad PLUS Loans have the highest interest rate of federal loans.

The DoE subtracts the origination fee directly from your funds. This means you’ll have to pay back a higher amount than your school actually receives. Grad PLUS Loans have the highest origination fee among federal student loan offerings.

Am I eligible for a Grad PLUS Loan?

You must meet the following criteria to qualify for a Grad PLUS Loan:

Graduate or professional student
Enrolled at least half time at a Title IV school
No adverse credit history
Meet other general eligibility requirements for federal student aid

Can I get a Grad PLUS Loan with bad credit?

Having a clean credit report might be a requirement for Grad PLUS Loans, but it still might be possible to qualify even if you have bad credit.

If you don’t pass the DoE’s credit check, you can either:

Bring on an endorser. An endorser is like a cosigner — someone with good credit who agrees to repay the loan if you can’t. If you bring on an endorser, you’re also required to complete PLUS Loan credit counseling.
Provide documentation showing your negative credit mark was a mistake. Sometimes creditors misreport to the credit bureaus. If there’s a mistake on your report, send the DoE documents confirming the error.
Explain the situation. If your bad credit is through circumstances unrelated to your reliability — such as a divorce — provide a statement and documents that give details about the situation. In this case, you’re also required to complete PLUS Loan credit counseling.

The DoE considers any negative marks on your credit report to be adverse credit history. These include:
- Charge-offs
- Accounts sent to collections
- Delinquencies longer than 90 days
- Defaults — even if they’ve been paid off
- Repossessions
- Voluntary surrenders
- Foreclosures
- Wage garnishments
- Bankruptcy discharges
- Tax liens

What are my repayment options with Grad PLUS Loans?

Repayments on Grad PLUS Loans become due six months after you graduate, leave school or otherwise drop below half time. After your grace period is up, you can choose between one of the following repayment options:

Repayment program	Terms	How it works	Eligible for federal forgiveness?
Standard Repayment Plan	10 years	Make the same fixed repayment each month.	Teacher Loan Forgiveness
Graduated Repayment Plan	10 years	Make repayments that increase over time — usually every two years.	Teacher Loan Forgiveness
Extended Repayment Plan	25 years	Make either fixed repayments or repayments that increase over time — usually every two years.	Teacher Loan Forgiveness
Revised Pay As You Earn (REPAYE) Repayment Plan	25 years	Make monthly payments of 10% of your income until the loan term is up. The DoE forgives the remaining balance after the term is up.	Teacher Loan Forgiveness REPAYE forgiveness Public Service Loan Forgiveness (PSLF)
Pay As You Earn (PAYE) Repayment Plan	20 years	Make monthly payments of 10% of your income or what you’d pay on a Standard Repayment Plan — whichever is less. The DoE forgives the remaining balance after the term is up.	Teacher Loan Forgiveness PAYE forgiveness PSLF
Income-Based Repayment (IBR) Plan	20 years	Make monthly payments of 10% of your income or what you’d pay on a Standard Repayment Plan — whichever is less. The DoE forgives any remaining balance after the term is up.	Teacher Loan Forgiveness IBR forgiveness PSLF
Income-Contingent Repayment (ICR) Plan	25 years	Make monthly payments of 20% of your income or what you’d pay on a 12-year plan with fixed repayments — whichever is less. The DoE forgives any remaining balance after the term is up.	Teacher Loan Forgiveness ICR forgiveness PSLF

Federal student loan repayment plans explained

Does the Grad PLUS Loan program offer deferment or forbearance?

Yes, Grad PLUS Loans are eligible for almost all types of deferment offered for federal loans. The one exception is Parent PLUS deferment, which allows parent borrowers to defer their loans until six months after their child leaves school.

Deferment and forbearance allow you to pause your Grad PLUS Loan repayments when you hit a temporary financial roadblock — such as attending a graduate fellowship program, residency or joining the Peace Corps.

Is interest capitalized during deferment and my grace period?

It is. This means all of the interest that adds up between the time your loan is disbursed and when you make your first repayment gets added to your loan balance. Since interest payments are based on your loan balance, you’re effectively paying interest on interest.

Interest capitalization also occurs when you apply for deferment or forbearance, unless you opt to make interest-only repayments.

Can I qualify for forgiveness with a Grad PLUS Loan?

You can, though having a Grad PLUS Loan alone isn’t enough. Eligibility for most forgiveness programs depends on your career and typically involves a service commitment. However, you can qualify for forgiveness after making 20 to 25 years of income-based repayments.

Federal loans fall short? Cover the gap with private student loans

Name	APR	Min. Credit Score	Loan amount	Loan Term
Stride Funding Income Share Agreement	As low as 2%	None	Up to $25,000	2 to 10 years	A student loan alternative for graduate students based on your future salary.	Get started More Info	Compare	loading Fetching your data...
EDvestinU Private Student Loans	4.092% to 8.609% with autopay	675	$1,000 - $200,000	7 to 20 years	Straightforward student loans for undergraduate and graduate students.	Get started More Info	Compare	loading Fetching your data...
CommonBond Private Student Loans	3.74% to 10.74%	700	$5,000 - $500,000	5 to 15 years	Finance your college education through this lender with a strong social mission and terms that fit your budget.	Get started More Info	Compare	loading Fetching your data...
Edvisors Private Student Loan Marketplace	Varies by lender	Varies by lender	Varies by lender	Varies by lender	Quickly compare private lenders for your school and apply for the right student loan.	Get started More Info	Compare	loading Fetching your data...
Credible Labs Inc. (Student Loan Platform)	Starting at 0.99% with autopay	Good to excellent credit	Starting at $1,000	5 to 20 years	Get prequalified rates from private lenders offering student loans with no origination or prepayment fees.	Get started More Info	Compare	loading Fetching your data...

Compare up to 4 providers

Bottom line

Grad PLUS Loans are ideal for graduate and professional students who’ve reached their Direct Unsubsidized Loan limit. Rates might be higher than unsubsidized loans, but they’re not as high as private loan rates can get for borrowers with a limited credit history. And you can cover all of your school-related costs.

Want to explore more options? Read our guide to student loans.

Frequently asked questions

Contact your school’s financial aid department before you apply, as the application process can vary. You can typically apply for a Grad PLUS Loan by filling out the Graduate/Professional Direct PLUS Loan Application through the DoE’s Federal Student Aid website.
However, you’re usually required to fill out the FAFSA first. And some schools might have a separate or additional application for you to complete.

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Anna Serio

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Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.

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How federal Direct Grad PLUS Loans work

Cover up to 100% of your grad school costs — as long as you pass a credit check.

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