Grad PLUS loan: Is it right for me?

A grad PLUS loan is a type of federal financial aid for graduate and professional students. While these loans have high borrowing limits and relatively relaxed eligibility requirements, they also carry the highest interest rates out of all federal student loans at 8.05% for the 2023-24 school year.  

In 2022-23, nearly 446,000 graduate students took out a grad PLUS loan compared to 1.3 million graduates who borrowed unsubsidized loans according to the College Board. 

If you need to borrow money for graduate school, a grad PLUS loan might be a good idea if:

• You’ve already maxed out federal unsubsidized student loans for graduates 
• Your credit isn’t good enough to qualify for a low-interest private student loan

Key facts: Grad PLUS loans 

What is a grad PLUS loan?

A grad PLUS loan is a federal loan issued by the U.S. Department of Education that’s meant to help graduate and professional students finance their degrees. You can borrow up to the cost of attendance, minus any other financial aid you receive. That can end up being quite a bit higher than the limits set for Direct Unsubsidized Loans, but the interest rates on grad PLUS loans are also higher.

Grad PLUS loans are a type of Direct PLUS loan, and, unlike most other types of federal loans, you’ll need to pass a credit check to qualify. However, credit requirements are more relaxed than those of most private student lenders, so even borrowers without stellar credit may still qualify.

Related: How to pay for grad school: 5 strategies

Pros and cons of grad PLUS loans

Am I eligible for a grad PLUS loan? 

To be eligible for a grad PLUS loan, you must be a graduate or professional student who’s enrolled at least half-time in an eligible degree or certification program.

You must also submit to a credit check, though there’s no minimum credit score you need to meet. Instead, you can’t have “adverse credit.” This can include owing a delinquent debt in the last two years, or having a default, bankruptcy, foreclosure, tax lien, or wage garnishment in the last five years.

How does interest work on grad PLUS loans? 

Interest on grad PLUS loans starts accruing daily starting from the day of disbursement. You’re responsible for paying all of the interest charges. If approved for a grad PLUS loan, expect the following terms for the 2023-24 school year:

• Fixed interest rate: 8.05% for loans disbursed between July 1, 2023 and July 1, 2024
• Loan fee: 4.228% for loans disbursed on or after October 1, 2020

What do grad PLUS loans cover?

With a grad PLUS loan, you can borrow up to your school’s total cost of attendance. The funds can be used to cover any costs related to your graduate education, including:

• Tuition
• Room and board
• Textbooks and supplies
• Computers or software
• Living expenses like housing, food, and transportation

However, you shouldn’t use these loans to pay for non-education expenses like entertainment or personal travel. Not only is that against the terms of your loan, but you’ll have to repay every dollar you spend with interest. 

Check out: How much can I borrow in student loans? 

Compare graduate student loan options 

If you need help paying for grad school, you have a few types of student loans to choose from. There are two federal graduate loan options available: Grad PLUS loans and Direct Unsubsidized Loans. You might also take out private student loans from an online lender or bank, but these come with some important differences. 

• Federal student loans such as grad PLUS loans and unsubsidized loans offer special protections for student loan borrowers, including forgiveness opportunities, income-driven repayment, and more flexible deferment and forbearance options. Generally, private lenders can’t match these perks.
• Private student loans may be a good option for students who have good to excellent credit and a stable income. Borrowers who do may qualify for lower interest rates on a private loan than they might receive with federal options. Private lenders also often allow you to borrow up to the cost of attendance, so they can be a useful way to cover any gaps in funding.

Here’s a quick comparison of your graduate student loan options for the 2023-24 school year:

How do I apply for a grad PLUS loan?

There are a few key steps to the graduate PLUS loan application:

1. Fill out the Free Application for Federal Student Aid (FAFSA): The FAFSA is a form that must be submitted annually to be considered for federal student aid.
2. Review your eligibility: Generally, as long as you go to school at least half-time, meet the general requirements for federal student aid, and don’t have adverse credit, you can get a grad PLUS loan. 
3. Apply for a PLUS loan: Fill out the Direct PLUS loan application for graduates and include the amount you need to borrow.
4. Complete final steps: Once you’ve been approved for a PLUS loan, sign the promissory note. You may also need to complete entrance counseling online if this is the first PLUS loan you’re borrowing. 

Alternatives to grad PLUS loans

If you don’t want to take out a grad PLUS loan, you do have other options:

• Work during graduate school: Depending on your circumstances, you may be able to work full- or part-time while in school. Some graduate programs are specially designed for working professionals, and hold classes at night or online.
• Apply for scholarships and grants: The less money you have to borrow now, the better your finances will be after graduation. Research grants and scholarships you may qualify for, and apply to as many as you can to reduce your borrowing costs.
• Opt for Direct Unsubsidized Loans first: Consider maxing out your Direct Unsubsidized Loans before turning to PLUS loans. You can access similar perks, but unsubsidized loans offer lower interest rates and fees.
• Take out private student loans: If you have great credit, you may be able to get a private loan with a lower interest rate than what’s offered on PLUS loans. But remember, you won’t get the same protections you’d get with federal loans.

Check out: Best Graduate Student Loans of 2024

Grad PLUS loans FAQ

Can I consolidate or refinance grad PLUS loans?

Yes. You can consolidate federal loans, including grad PLUS loans, into a Direct Consolidation Loan. This combines your existing federal debt so that you only have one servicer and monthly payment. While you won’t significantly change your interest rate, you could extend your repayment term.

Another way to combine your loans is to refinance them — though to do so, you’d have to use a private lender, which would mean giving up federal borrower protections. But by privately refinancing, you could potentially lock in a lower interest rate or change your repayment term.

Is student loan forgiveness possible for grad PLUS loans?

Yes, grad PLUS loans offer paths to forgiveness. One option is Public Service Loan Forgiveness (PSLF). If you work for a government agency or a not-for-profit organization and make 120 qualifying payments, you could have the remainder of your debt forgiven.

Another option is signing up for an income-driven repayment plan. Your payments will be set at a percentage of your income, and after making payments for 20 or 25 years, any remaining debt can be forgiven.

Should I take out a grad PLUS loan?

It depends. In general, you should maximize free aid like scholarships and grants first. Then, federal student loans typically offer the next best option for many students. Direct Unsubsidized Loans carry lower interest rates and fees, so that might be your next step before turning to grad PLUS loans.

Federal Student Aid’s loan simulator tool can help you compare costs and see the impacts of borrowing federal loans.