A Grad PLUS loan is a federal student loan that graduate students can use to pay for their courses. It has a fixed interest rate and can be taken up to the total cost of attendance as determined by the school, minus other financial aid received. To be eligible for a Grad PLUS loan, students must complete the Free Application for Federal Student Aid (FAFSA) form and meet other requirements. PLUS loans can be a good option for those with limited income or who have been denied FAFSA funding. These loans offer a range of benefits, including relatively favorable interest rates and the possibility of loan forgiveness for some graduates who work in public service. But they are also subject to strict credit eligibility requirements and come with a loan origination fee.
If you have an adverse credit history, you may be able to get a Grad PLUS loan by finding an endorser with a better credit rating or documenting extenuating circumstances. You will need to certify on the FAFSA that you have no outstanding debts with the Department of Education and will be using the loan for educational purposes only. The first payment on your PLUS loan is due 60 days after the last disbursement or, if you drop below half-time enrollment, six months after you leave your course.
Who Qualifies for a Grad PLUS Loan?
The government does not set a minimum Grad PLUS loan credit score, but borrowers with an adverse credit history might not qualify. This adverse credit could include a foreclosure, repossession, bankruptcy discharge, wage garnishment, tax lien or collection. The Department of Education will run a credit check on your application. Applicants with an adverse credit history may be able to mitigate the impact of their bad credit by getting an endorser or by explaining extenuating circumstances. Applicants will also need to complete entrance counseling.
Once approved, the borrower will be assigned a loan servicer. The student loan servicer will help borrowers understand the terms of their loans, including repayment options like income-driven plans.
How Much Do You Get for a Grad PLUS Loan?
The amount that a student can borrow for their Grad PLUS loan is determined by their school’s cost of attendance minus other financial aid. This includes tuition, books, room and board, travel to and from school, technology and other miscellaneous costs.
Students apply for a Grad PLUS loan by filling out the Free Application for Federal Student Aid (FAFSA). The U.S. Department of Education then checks a student’s credit history to make sure they don’t have a bankruptcy, a student loan default or delinquency, or an adverse credit report. Students who do not meet these criteria can still qualify for a Grad PLUS loan if they get an endorser or explain extenuating circumstances.
When a student receives their loan, they will pay an origination fee to the government. This is typically 4.228% of the total loan amount. Interest also begins to accrue as soon as the loan funds are disbursed. Students can choose to pay the interest or allow it to capitalize, meaning that it will be added to the principal of the loan.
Unlike other student loans, you don’t start repaying your Grad PLUS loan until six months after you graduate or drop below half-time status. At that point, you will be contacted by your loan servicer to set up a repayment plan. If you are unable to afford your loan payments, you may be able to choose an income-based repayment plan or deferment option.
Difference Between PLUS Loan and GRAD PLUS Loan
There are a few differences between PLUS and GRAD PLUS loans. The biggest difference is that the latter is a federal loan made to graduate and professional students, while the former is a federal loan made to parents of undergraduate students. In almost every other way, though, the two loans are identical. They’re both borrowed to help pay for school and have a set interest rate, loan fees, repayment plans, etc.
A PLUS loan is also different from other federal student loans in that it’s awarded on the basis of creditworthiness, rather than financial need. For that reason, a PLUS loan typically has a higher interest rate and loan origination fee than other federal student loans.
Another key difference is that borrowers are required to undergo a credit check when applying for a PLUS loan. If a borrower has an adverse credit history, they may have to submit evidence of extenuating circumstances in order to qualify for the loan.
Finally, borrowers are required to sign a Direct PLUS Loan Master Promissory Note when they receive their first disbursement of funds. This document is an agreement to repay the loan according to the terms of the loan. Borrowers can choose from a number of repayment options, including the standard repayment plan which pays off the loan within 10 years.