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The Complete Guide To PLUS Loans: Everything You Need To Know
Updated On September 14, 2022
Editorial Note: This content is based solely on the author's opinions and is not provided, approved, endorsed or reviewed by any financial institution or partner.
PLUS Loans are federal student loans for graduate students and parents of dependent undergraduate students. In this complete guide to PLUS Loans, you will learn everything you need to know about PLUS Loans.
When a graduate student borrows a PLUS Loan, it’s called a Grad PLUS Loan and can be used to pay the cost of graduate school. Conversely, when a parent borrows a PLUS loan for a dependent, the student loan is called a Parent PLUS Loan and can be used to pay for college.
Understanding all your options for PLUS Loans can help you save money and time as you navigate the cost of college or graduate school.
In this complete guide to PLUS Loans, you will learn:
- What is a PLUS Loan?
- Who is eligible for Direct PLUS Loans?
- What are the loan terms for Direct PLUS Loans?
- How to apply for Direct PLUS Loans
- Are there payment plans for PLUS Loans?
- Do PLUS Loans qualify for student loan forgiveness?
- How to refinance PLUS Loans
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What is a PLUS Loan?
A PLUS Loan is a unsubsidized Direct federal student loan that is available to both graduate students and parents of dependent college students. There are two types of PLUS Loans:
- Grad PLUS Loans; and
- Parent PLUS Loans
Grad PLUS Loans are available for a graduate or professional degree, while Parent PLUS Loans are available for a college degree. Whether you borrow a Grad PLUS Loan or Parent PLUS Loan, the U.S. Department of Education is your lender. Since PLUS Loans are unsubsidized student loans, student loan interest will accrue immediately after the PLUS Loan is disbursed and while the student is enrolled in school.
Both PLUS Loans and Parent PLUS Loans have an origination fee, which is a processing fee that is deducted from the amount of the PLUS Loan you borrow. Before borrowing a PLUS Loan, students should borrow Direct Loans first because they have a lower interest rate.
Who is eligible for Direct PLUS Loans?
Before you apply for a PLUS Loan, it’s important to understand who is eligible for Direct PLUS Loans. The eligibility criteria to get a Direct PLUS Loan can vary depending whether you borrow a Grad PLUS Loan or Parent PLUS Loan.
Grad PLUS Loans: Eligibility
To qualify for a Grad PLUS Loan, you must:
- Enrollment: Be enrolled at least half-time in an eligible graduate school or professional school degree program.
- Academics: Dependent must make “satisfactory academic progress” to be eligible for federal student aid.
- FAFSA: The parent and the dependent student must complete the Free Application for Federal Student Aid (FAFSA).
- Credit Check: Pass a credit check. If you have an adverse credit history and don’t pass a credit check, then you still can be approved for a Grad PLUS Loan if you explain your financial circumstances and credit history.
- Financial Need: A Grad PLUS Loan isn’t based on financial need.
- No student loan default: You can’t be in student loan default on a federal student loan.
- Citizenship: You must be a U.S. citizen or eligible non-citizen and have a Social Security Number.
Parent PLUS Loans: Eligibility
To qualify for a Parent PLUS Loan, you must:
- Enrollment: Be the biological or adoptive parent of a student who is enrolled at least half-time at an eligible school. Grandparents are ineligible to borrow Parent PLUS Loans. However, a step-parent of a dependent undergraduate student who is married to a biological parent is eligible to borrow a Parent PLUS Loan.
- Academics: Dependent must make “satisfactory academic progress” to be eligible for federal student aid.
- FAFSA: The parent and the dependent student must complete the Free Application for Federal Student Aid (FAFSA).
- Credit Check: Pass a credit check. If you have an adverse credit history and don’t pass a credit check, then you still can be approved for a Parent PLUS Loan if you explain your financial circumstances and credit history.
- Financial Need: A Parent PLUS Loan isn’t based on financial need.
- No student loan default: The parent or undergraduate student can’t be in student loan default on a federal student loan.
- Citizenship: You must be a U.S. citizen or eligible non-citizen and have a Social Security Number.
What are the loan terms for Direct PLUS Loans?
When you borrow a Direct PLUS Loan, you can borrow to cover any education expenses that are not covered by the student’s financial aid package, up to the full cost of attendance (as determined by the school).
Here’s everything you need to know about loan terms for Direct PLUS Loans:
- Maximum Loan Amount: The maximum loan amount for a PLUS Loan is the cost of attendance less other financial aid received. However, there is no total limit for how much you can borrow for a PLUS Loan.
- Interest Rate: PLUS Loans have a fixed interest rate, which means the interest rate on your PLUS Loan won’t change over the life of your student loan. Congress sets the interest rate on PLUS Loans every July 1 based on an auction of the 10-Year Treasury. You can get a 0.25% student loan interest rate discount on your PLUS Loan when you enroll in autopay, which automatically deducts your student loan payment from your bank account to pay your lender.
- Maximum Loan Term: You can repay a PLUS Loan for up to 30 years, depending on your student loan repayment plan.
- Fees: PLUS Loans have an origination fee of approximately 4% of the loan amount.
- Prepayment Penalties: PLUS Loans don’t have prepayment penalties. So, you can pay off a PLUS Loan any time with no additional fees.
How to apply for Direct PLUS Loans
To apply for Direct PLUS Loans, you should take the following steps:
Grad PLUS Loans
- Log in to the Student Aid website
- Sign in with your Federal Student Aid ID and password.
- Under Apply For Aid, choose “Apply for a Grad PLUS Loan”
- Complete the application, and this will start the process for a credit check
- Once approved, you must complete and submit a Master Promissory Note, which governs the terms and conditions of your Grad PLUS Loan, on the Student Aid website
- Select the start button next to the “PLUS MPN for Graduate/Professional Students”
- Complete and submit the Master Promissory Note
Parent PLUS Loans
- Log in to the Student Aid website
- Sign in with your Federal Student Aid ID and password (not your dependent’s ID and password)
- Under Apply For Aid, choose “Apply for a Parent PLUS Loan”
- Select the start button next to “I am a Parent of an Undergraduate Student”
- Complete the application, and this will start the process for a credit check
- Once approved, you must complete and submit a Master Promissory Note, which governs the terms and conditions of your Parent PLUS Loan, on the Student Aid website
- Under Complete The Aid Process, select “MPN for Parents”
- Select the start button next to “I am a Parent of an Undergraduate Student”
- Complete and submit the Master Promissory Note
Are there payment plans for PLUS Loans?
There are several options for payments plans for PLUS Loans depending on whether you borrow a Grad PLUS Loan or a Parent PLUS Loan.
Grad PLUS Loans
Student loan borrowers with Grad PLUS Loans have access to the following major student loan repayment plans:
- Standard Repayment
- Graduated Repayment
- Extended Repayment
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
Parent PLUS Loans
Borrowers of Parent PLUS loans qualify for three repayment plan options:
- Standard Repayment
- Graduated Repayment
- Extended Repayment
If you consolidate your Parent PLUS Loan into a Direct Consolidation Loan, you can also qualify for Income-Contingent Repayment (ICR).
Do PLUS Loans qualify for student loan forgiveness?
Yes, PLUS Loans qualify for student loan forgiveness.
For example, if you have a Grad PLUS Loan or a Parent PLUS Loan owned by the U.S. Department of Education, you can qualify for public service loan forgiveness. To become eligible for public service loan forgiveness, you must be employed by a qualified non-profit or public service employer and make at least 120 monthly student loan payments.
If you have a PLUS Loan owned by the U.S. Department of Education, you can also qualify for Biden’s wide-scale student loan forgiveness plan.
Income-Contingent Repayment (ICR) is the only income-driven repayment plan that is available for Parent PLUS Loan borrowers. To qualify for ICR, you must first consolidate your Parent PLUS Loans into a Direct Consolidation Loan. Through ICR, you can get student loan forgiveness after you meet the requirements of this income-driven repayment plan.
How to refinance PLUS Loans
Refinancing Parent PLUS Loans is the best way to get a lower interest rate and lower student loan payment.
PLUS Loans have relatively high interest rates, which is one main reason why you should refinance PLUS Loans. To qualify for PLUS loan refinancing, you should have good credit (at least a 650 credit score), be employed or have a signed job offer, have stable and recurring monthly income, and have enough monthly cash flow to pay your PLUS Loans and other life expenses.
When you refinance a PLUS Loan, your new loan will be a private student loan, meaning you will no longer have a federal student loan and access to income-driven repayment or student loan forgiveness, for example.
There are three ways to refinance PLUS Loans:
- Refinance Grad Plus Loans
- Refinance Parent PLUS Loans in your name
- Refinance Parent PLUS Loans in your child’s name
Refinance Grad Plus Loans
You can refinance Grad PLUS Loans to get a lower interest rate, lower student loan payment or both. The process to refinance is the same as student loan refinancing. You exchange your current Grad PLUS Loan for a new student loan with a new interest rate. The goal of refinancing is to save money and pay off student loans fast.
Refinance Parent PLUS Loans in your name
Refinancing a Parent PLUS Loan comes with two options. The standard way to refinance is to refinance Parent PLUS Loans in your name. Borrowing a Parent PLUS Loan is your financial responsibility to repay. Your Parent PLUS Loan won’t automatically transfer to your dependent upon completion of the dependent’s degree program.
When your refinance, you can get a lower interest rate, lower monthly payment or both. Parent PLUS Refinancing helps you exchange your current Parent PLUS Loans for a new, single student loan with a lower interest rate.
Refinance Parent PLUS Loans in your child’s name
While you can’t directly transfer a Parent PLUS Loan to a child, you can refinance a Parent PLUS Loan in your child’s name. To refinance Parent PLUS Loan in your child’s name, your child must be able to qualify for student loan refinancing.
Therefore, your child must be employed or have a signed job offer, have good to excellent credit (at least a 650-credit score), have stable and recurring monthly income, and generate enough monthly cash flow to cover living expenses, student loan payments and other debt obligations.
However, only certain lenders will refinance a Parent PLUS Loan in your child’s name. So, make sure to compare Parent PLUS Refinancing lenders carefully to find the best match.
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