Ultimate Guide To Grad PLUS Loans: Everything You Need To Know Before You Apply

By Mentor Staff | Edited By Mentor Staff

Updated On September 29, 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.

How do we make money? The products featured on this website are from our partners who compensate us. This may impact which companies we review, the products we evaluate, and where and how a product appears on a page. We receive compensation from a partner when you apply for and receive a product through Mentor. This helps us to support our website, offer free content, tools and calculators, and continue to be one of the leading sources on personal finance.

Grad PLUS Loans are a smart option to pay for graduate school. What are Grad PLUS Loans? Grad PLUS Loans are federal student loans issued by the U.S. Department of Education that you can use to pay for graduate school.

However, before you apply for a Grad PLUS Loans, it’s important to understand the advantages and disadvantages.

Top Picks For Private Student Loans

December 2022

Variable APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Variable APR means that your interest rate can fluctuate over time, which can increase or decrease your monthly student loan payment. Typically, a variable-rate loan has a lower introductory rate than a fixed-loan rate loan. Variable APR includes a 0.25% discount when you enroll in autopay.
Fixed APR ?APR, or Annual Percentage Rate, is the price you pay to borrow money. Fixed APR means that your interest rate will always stay the same. Even if interest rates change, your interest rate or monthly payment will not. Fixed APR includes a 0.25% discount when you enroll in autopay.
APR
3.24% - 14.86%
3.99% - 14.96%
3.24% - 14.96%

View Details

on College Ave's website

Overview

Variable APR:
3.24% - 14.86%
Fixed APR:
3.99% - 14.96%
Loan Type:
Graduate, Undergraduate
Minimum Loan Amount:
$1,000
Loan Terms:
5, 8, 10, 15 years
Origination Fees:
No
Prepayment Fees:
No
Co-signer Option:
No

Details

  • Student loans available to graduate, bachelors and associates degrees
  • Deferment and forbearance options may be available
  • Grace period for undergraduates: 6 months
  • Grace period for graduate students: 9 months
  • Flexible student loan repayment options
4.49% - 13.88%
4.99% - 14.83%
4.49% - 14.83%

View Details

on SoFi's website

Overview

Variable APR:
4.49% - 13.88%
Fixed APR:
4.99% - 14.83%
Loan Type:
Graduate, Undergraduate
Minimum Loan Amount:
$5,000
Loan Terms:
5, 10 and 15 years
Origination Fees:
None
Prepayment Fees:
None
Co-signer Option:
Yes

Details

  • Offer college, graduate school, law school, MBA and Parent student loans
  • Flexible repayment options
  • No late fees
  • Autopay rate discount
  • Free perks such as career planning and job search assistance
4.36% - 10.24%
3.99% - 10.32%
3.99% - 10.32%

View Details

on LendKey's website

Overview

Variable APR:
4.36% - 10.24%
Fixed APR:
3.99% - 10.32%
Loan Type:
Graduate, Undergraduate
Minimum Loan Amount:
$5,000
Loan Terms:
10
Origination Fees:
No
Prepayment Fees:
No
Co-signer Option:
Yes

Details

  • Low rates from community lenders like credit unions and community banks
  • Get lower rates with a co-signer
  • Ability to pause payments for up to 18 months if you become unemployed
  • May consider your academic credentials to help you get a lower rate
  • If you repay 10% of your loan before your loan enters full repayment period, 1.0% APR is dropped from your current interest rate
5.49% - 12.62%
5.99% - 12.85%
5.49% - 12.85%

View Details

on Citizens' website

Overview

Variable APR:
5.49% - 12.62%
Fixed APR:
5.99% - 12.85%
Loan Type:
Graduate, Undergraduate
Minimum Loan Amount:
$1,000
Loan Terms:
5, 10, 15 years
Origination Fees:
None
Prepayment Fees:
None
Co-signer Option:
Yes

Details

  • Student loans for college, graduate, medical/dental, law, MBA and Parent Loans
  • Flexible repayment options
  • Multi-year approval: no need to apply annually
  • Cosigner option
  • Forbearance and deferment options
4.72% - 14.98%
4.62% - 16.75%
4.62% - 16.75%

View Details

on Ascent's website

Overview

Variable APR:
4.72% - 14.98%
Fixed APR:
4.62% - 16.75%
Loan Type:
Graduate, Undergraduate
Minimum Loan Amount:
$2,001
Loan Terms:
5, 7, 10, 12, 15, 20 years
Origination Fees:
No
Prepayment Fees:
No
Co-signer Option:
Yes

Details

  • Student loan repayment while in school
  • 1% cash back on student loan principal at graduation
  • Co-signer release after 12 consecutive payments
  • Financial hardship forbearance available
  • No minimum income or credit score
  • Apply with or without a co-signer

Disclosures: College Ave | SoFi | LendKey | Citizens | Ascent

In this ultimate guide to Grad PLUS Loans, you will learn everything you need to know, including:

What are Grad PLUS Loans?

Grad PLUS Loans are Direct Loans that graduate students can use to pay for education expenses that are not covered by other financial aid. A Grad PLUS Loan, which is also known as a Direct PLUS Loan, is available to both graduate and professional students.

For example, Grad PLUS Loans are available for graduate and professional programs such as law school, business school, medical school, nursing school, dental school and many other types of graduate degrees.

Since Grad PLUS Loans are considered federal student loans, they are available through the U.S. Department of Education. Federal student loans such as PLUS Loans offer several benefits, including income-driven repayment and student loan forbearance.

How to apply for Grad PLUS Loans

To apply for a Grad PLUS Loan, you should complete the Free Application for Federal Student Aid (FAFSA). You can apply online, and the application takes about 30 minutes to complete.

The information you submit with the FAFSA will be sent to the schools that you select. For example, you will provide income information, which will help determine your eligibility for financial aid.

Before you apply for Grad PLUS Loans, it’s important to understand your loan terms, amount you would like to borrow, and your interest rate.

How much can you borrow

You may be wondering how much you can borrow with a PLUS Loan.

With PLUS Loans, the good news is that you can borrow up to the full cost of attendance, less than other financial aid that you receive. In comparison, Direct Loans for graduate school are capped at $20,500 per year, with a maximum lifetime limit of $138,500.

If you qualify for PLUS Loans, you may wonder whether you can pay for graduate school entirely with federal student loans. The answer is yes. That said, once you borrow the maximum amount of federal student loans, you may want to consider private student loans as an alternative option.

How to qualify for Grad PLUS Loans

If want to know how to qualify for Grad PLUS Loans, it’s important to know that your credit worthiness matters.

In comparison to Direct unsubsidized loans, for example, Grad PLUS Loans require that you don’t have an adverse credit history. Otherwise, you may be required to have an “endorser” (or co-signer) who has a good credit history.

What you should you do if you have bad credit? First, you can explain in writing to the U.S. Department of Education why you have an adverse credit history and how you should be able to qualify for a Grad PLUS Loan.

Second, you can take proactive steps to increase your credit score. For example, you could consolidate your credit card debt with a personal loan. Alternatively, you could make several on-time payments to establish a positive credit history.

Do Grad PLUS Loans have any fees?

You should be aware that Grad PLUS Loans have fees. Specifically, you will pay an origination fee when you borrow a Grad PLUS Loan.

The origination fee is approximately 4% and is applied to the total amount of your Grad PLUS Loan. Therefore, when you borrow a Grad PLUS Loan, the net amount you receive will be less the amount you borrowed due to the origination fee.

Do Grad PLUS Loans have fixed interest rates?

Grad PLUS Loans have fixed interest rates. Like other federal student loans, Grad PLUS Loans have a fixed interest rate that will stay the same regardless of any change in underlying interest rates.

However, having an excellent credit score won’t get you a lower interest rate on your Grad PLUS Loans. Why? The federal government doesn’t underwrite student loans based on your credit score. Each eligible Grad PLUS borrower will get the same interest rate regardless of their credit score.

If you have excellent credit, you can get a lower interest rate when you borrow private student loans. Unlike federal student loans, private lenders can offer you a lower interest rate based on your credit score and history of financial responsibility.

In contrast to federal student loans, private student loans are available with either a fixed interest rate or a variable interest rate.

Alternatives to Grad PLUS Loans

There are several alternatives to Grad PLUS Loans. Graduate school is expensive, so you should find every possible way to pay for your degree. If you don’t qualify for a Grad PLUS Loan or you are concerned about the relatively high interest rate, then you should explore these alternative options:

Consider private student loans

Private student loans may offer lower interest rates than Grad PLUS Loans. If you have good to excellent credit, you could save money with a private student loan compared to a Grad PLUS Loan. However, private student loans don’t come with the benefits of a federal student loan such as income-driven repayment and student loan forgiveness.

Explore scholarships and grants

Scholarships and grants are beneficial because you don’t need to repay them. Before you apply for student loans, make sure to maximize your scholarships and grants. Scholarships and grants may be available through non-profit organizations, private companies and your school.

Borrow the maximum amount of Direct Loans

Before borrowing a Grad PLUS Loan, you should borrow the maximum amount of Direct PLUS Loans. Why? Generally, Direct PLUS Loans have a lower interest rate than Grad PLUS Loans, which can save you money. Importantly, Direct PLUS Loans are unsubsidized, which means that student loan interest will accrue while you’re in school.

Get a job

Getting a job or a side hustle could help pay for graduate school. If you’re a student, you could work part-time to help pay for grad school. Every dollar helps to pay off student loans and make the cost of grad school lower.

Let's mentor your money

Get the latest personal finance advice delivered directly to your inbox.