Everything You Ought to Know About Grad PLUS Loans

When a student plans to attend graduate school or professional school, they also have to decide how to pay for it, probably with Grad PLUS Loans. The costs of graduate and professional school can be tasking, so many students end up needing some financial aid.

Grad PLUS Loans

One of the options for graduate students is the Grad PLUS Loan, which is a federal student loan.

What is a Grad PLUS Loan?

The Grad PLUS Loan is part of the Direct PLUS Loan program. Generally, PLUS Loans are federal student loans designed to help students pay for graduate or professional education costs. They can be used by parents of undergraduates also, to help their child pay for the cost of an education.

With the Grad PLUS Loan or any Fediral Direct Loan, the lender is the United States Department of Education.

The maximum amount that can be borrowed for the PLUS Loan is the cost of attendance, which is determined by the tuition and fees charged by the graduate or professional school which is attended, minus any other financial aid or assistance being received.

Key Benefits of the Grad PLUS Loan:

  • The interest rate is fixed at 7.08% for the 2019-2020 academic year
  • Loan payments can be deferred while you are enrolled on at least a half-time basis in an accredited graduate school or professional school
  • A cosigner isn’t required
  • Multiple repayment plans (including income-based) available
  • The interest paid on the loan may be tax deductible

How to Apply for a Grad PLUS Loan

The following are the steps required to apply for a Graduate PLUS Loan.

  • Before starting the process of applying for the Grad PLUS Loan, you should have completed and submitted the FAFSA.
  • Create an FSA ID by going to the Department of Education website. Once you’ve created an FSA ID and logged in, you have the option to choose to apply for a PLUS Loan. Here you’ll enter the amount of the loan you’re requesting as well as the school you plan to attend.
  • You’ll need to include the award year the loan will be for, and you can choose between borrowing the maximum amount for you’re eligible or a certain loan amount.
  • At this point, your credit will be checked, and you will find out whether or not you’re eligible for this loan based on your credit history.
  • If you’re eligible for the PLUS Loan, you will sign a Master Promissory Note or MPN. This is a contract that outlines the terms of your loan.
  • If you’re a graduate student receiving this loan for the first time, you’ll also have to complete entrance counseling.

Frequently Asked Questions

Frequently Asked Questions about grad plus loans

– Am I Eligible for Grad PLUS Loans?

To receive a grad PLUS loan, you must

  • be a graduate or professional student enrolled at least half-time at an eligible school in a program leading to a graduate or professional degree or certificate;
  • not have an adverse credit history (unless you meet certain additional eligibility requirements); and
  • meet the general eligibility requirements for federal student aid.

– What is the Current Interest Rate?

For Direct PLUS Loans first disbursed on or after July 1, 2019, and before July 1, 2020, the interest rate will be 7.08%. This is a fixed interest rate for the period of the loan.

– How Much Can I Borrow?

The maximum PLUS loan amount you can receive is the cost of attendance (which is determined by the school) minus any other financial assistance that you receive.

– When Do I Begin Repaying My Loan?

You do not have to start making payments until six months after you graduate, leave school, or drop below half-time enrollment.

During any period when you are not required to make payments, interest will accrue on your loan. You may choose to pay the accrued interest or allow the interest to be capitalized, that is added to your loan principal balance when you have to start making payments. Your loan servicer will notify you when your first payment is up.

– Can I Still Receive Grad Plus Loans If I Have An Adverse Credit History?

Your Credit will be checked  during the application process. If you have an adverse credit history, you may still receive a grad PLUS loan through one of these two options given:

  1. Obtaining an endorser who doesn’t have an adverse credit history. An endorser is someone who agrees to repay the grad PLUS loan if you don’t repay it.
  2. Documenting to the satisfaction of the United States Department of Education that there are extenuating circumstances relating to your adverse credit history.

Using either option 1 or option 2, you also must complete credit counseling for PLUS loan borrowers on the StudentLoans.gov website.

– Apart From Interest, Is There A Charge For This Loan?

Sure, there is a loan fee on all Direct PLUS Loans. The loan fee is a percentage of the loan amount and is proportionately removed from each loan disbursement. The percentage differs  depending on when the loan is first disbursed, as shown in the chart below.

Loan Fees for Direct PLUS Loans
First Disbursement Date Loan Fee
On or after Oct. 1, 2018, and before Oct. 1, 2019 4.248%
On or after Oct. 1, 2019, and before Oct. 1, 2020 4.236%

Loans first disbursed before Oct. 1, 2018, have a different loan fees.

– How Will I Receive My Loan?

The school will first apply grad PLUS loan funds to your school account to pay for tuition, fees, room and board, and any other school charges. If any loan funds remain, your school will give them to you to help you pay other education expenses.

– What Happens After I Receive My Loan?

After you receive your grad PLUS loan, you will be reached by your loan servicer (you will repay your loan to the loan servicer). Your loan servicer will provide regular updates on the status of your grad PLUS loan.

– What Types of Loan Repayment Plans Are Available?

There are diffrent repayment options available that are designed to meet the individual needs of borrowers, including income-driven repayment plans that determine your monthly payment amount based on your income and family size.

Your loan servicer can help explain which repayment options are available to you. Generally, you will have 10 to 25 years to repay your loan, depending on the repayment plan that you choose.

– What if I Have Trouble Repaying My Loan?

If you have trouble making  your scheduled loan payments, contact your loan servicer immediately. Your servicer can help you understand your options for keeping your loan in a good standing.

Example, you may wish to change your repayment plan to lower your monthly payment or request a deferment or forbearance that allows you to temporarily stop or lower the payments on your loan.

– Can I Cancel The Loan If I Decide That I Don’t Need It or If I Need Less Than The Amount Offered?

Yes. Before your loan money is disbursed, you may cancel maybe all or part of your loan at any time by notifying the school. After your loan is disbursed, you can cancel all or part of the loan within certain time frames.

You’ll receive your promissory note and additional information from the school will explain the procedures and time frames for canceling your loan.

– Can My Loan Ever Be Forgiven (Canceled) or Discharged?

Under certain conditions, you may be eligible to have all or part of your loan forgiven that is canceled or discharged.

Where Can I Find Information About The Grad Plus Loans I’ve Received?

See “My Federal Student Aid” to view information about all of the federal student loans and other financial aid you have received and to get contact information for your loan servicer.

Does Grad PLUS Loans Make Sense for You?

Finally, if you’re planning to attend graduate school you should first check to see if you’re eligible for Direct Unsubsidized Loans.

Bottom Line: Does Grad PLUS Loans Make Sense for You?

These are recommended as the first option for graduate and professional students before you think of applying for a PLUS loan because they offer lower interest rates. After that you can look into your other graduate student loan options.

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