What is a Grad PLUS Loan?

Grad PLUS loans are a type of Direct PLUS (Parent Loan for Undergrad Students) loan available to graduate students. To receive a Grad PLUS loan as a student, you must be a graduate student of at least half-time status at an eligible school, studying a program that leads to a graduate degree or certificate.

Loan Amounts Based on School Costs

Although you don’t have to show financial need to qualify for a Grad PLUS loan, you must fill out the Free Application for Federal Student Aid (FAFSA®) form before applying for it.

Many other loan options cap the amount of financial aid that will be loaned, but PLUS loan amounts are driven by the cost of attending the school, which means students can get much larger loans. The maximum loan amount you may receive is the cost of attendance, minus any other financial aid you receive.

Beyond tuition, fees, and room and board, the cost of attending school includes books, supplies, equipment, transportation, and general personal expenses.

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Eligibility for Direct PLUS Loans

Grad PLUS Loans come from the William D. Ford Federal Direct Loan Program, with funds borrowed from the U.S. Department of Education.

To get a Grad PLUS Loan, a student can’t have poor credit, but that doesn’t have to be the end of the line. They’d just need an endorser with good credit to vouch for the loan or provide documentation to the U.S. Department of Education of extenuating circumstances that caused adverse credit issues. Credit counseling on the StudentLoans.gov website is mandatory with either of these options.

If you are eligible for a Grad PLUS Loan, you must sign a Loan Master Promissory Note in which you agree to the loan terms. A student who has not previously received a PLUS loan must also complete entrance counseling.

After you receive your loan, your loan servicer, to whom you will repay the loan, will contact you. The loan servicer will provide regular updates on the loan’s status.

The school will receive the loan funds and place them in your school account for tuition, fees, room and board, and other charges from the school. Any remaining funds will be disbursed to you for other educational expenses.

Interest Accrues on Loans Before Payments are Due

Interest will accrue on the loan even before payments on the loan are required. Borrowers may pay the accrued interest or start paying it along with the principal balance when the loan payments become due.

The interest rate on loans provided between July 1, 2017, and July 1, 2018, is 7 percent. This rate is fixed for the duration of the loan. The loan fee is 4.24 percent for the year beginning Oct. 1, 2017, and ending Oct. 1, 2018.

You won’t have to make any loan payments while you are enrolled in school on at least a half-time basis, and you won’t be required to make any payments for six months after you graduate, leave school, or carry a course load that’s less than half-time enrollment.

Loaner beware: the interest rates for PLUS loans are among the highest for federal student loans.

Available Repayment Plans For Grad PLUS Loans

Repayment plans for Grad PLUS loans are generally between 10 and 25 years. Several repayment plans are available and can be explained in detail by the loan servicer.

In a Standard Repayment Plan, you’ll generally pay fixed amounts to pay off your loan within 10 years. With the Graduated Repayment Plan, your payments will start out lower and increase over time. You’ll still pay off the loan within 10 years, but you’ll pay more in that time period. The Extended Repayment Plan features either fixed or graduated payments over 25 years. Your payments will be lower than with 10-year-plans, but you’ll pay more over time.

Other repayment plans include the Pay As You Earn Repayment Plan, Revised Pay As You Earn Repayment Plan, Income-Based Repayment Plan, Income-Contingent Repayment Plan, and Income-Sensitive Repayment Plans.

A Grad PLUS Loan can help graduate students take the next step in their education to achieve their dreams. But before you sign up, make sure this is the loan that will best benefit you.

“Repayment Options.” Fordham University, 23 June 2015. Web. 27 Feb. 2018.