The Grad PLUS loan is considered a type of federal student loan under the Direct Loan program of the U.S. Department of Education and is offered to graduate or professional students.
How Does the Grad PLUS Loan Work?
If you have applied for federal financial aid, your financial aid offer may include loans. Under the William D. Ford Direct Loan program, you can receive four types of direct loans, one of which is the Grad PLUS loan.
The federal government offers the Grad PLUS loan to graduate and professional students as well as parents of dependent undergraduate students; however, when it is offered to graduate or professional students, it is referred to as “Grad PLUS loans.”
With a Grad PLUS loan, you can borrow up to the cost of attendance at your educational institution, minus any other financial aid you receive. Like other federal student loan programs, the interest rate for this type of loan is fixed for the life of the loan and is tied to the long-term U.S. Treasury security rates.
If you qualify for a Grad PLUS loan, it will be disbursed and repaid as follows:
- Complete the “Master Promissory Note” to formally declare your intent to repay the loan. You will also need to undergo an entrance counseling session about your rights and responsibilities regarding the loan.
- The school will issue the loan proceeds in one or two disbursements per academic year, typically once per semester. With each disbursement, the school will deduct estimated issuance fees of a small percentage from the loan amount and apply enough funds to your student account to cover tuition costs, fees, housing, food, and other charges. If there are remaining funds, they are considered “credit balances,” and the school will disburse them to you in the form of a check to cover other educational expenses.
- You will typically begin repaying the loan six months after graduation, or when you drop below half-time enrollment, according to the agreed-upon repayment plan. You can choose from a number of repayment plans, including an income-driven repayment plan. You may also be able to defer payments or request forbearance to temporarily stop or reduce payments.
Note: You can cancel some or all of the loan proceeds you do not need within 120 days without paying any interest fees.
How to Obtain a Grad PLUS Loan
To obtain this type of loan, you must be a student enrolled or accepted for enrollment at least half-time in a degree or professional certificate program at an eligible university. You will also need to meet general eligibility criteria for federal student loans, including U.S. citizenship and a valid social security number. While you do not have to demonstrate financial need for this type of loan, you will need to show that there are no negative items on your credit report, such as defaults or bankruptcies within the past five years.
To determine your eligibility for federal student financial aid in general, first complete the Free Application for Federal Student Aid (FAFSA). Then you will need to open a Grad PLUS loan application to determine whether the school accepts this application or requires a different application process for receiving a Grad PLUS loan.
If the school accepts the Grad PLUS loan application, complete the application. As part of the process, you will be asked to specify the school, loan amount, and authorize the school to conduct a credit check. Your credit report will be reviewed for any negative items.
Note: If there are negative credit items on your report, you will need a co-signer (a person who can repay the loan if you cannot) for approval or the ability to demonstrate that the negative items are incorrect or that there are special circumstances that led to them.
Alternatives
Grad Plus Loan
If your annual cost for your college or vocational program falls within the annual limit for an unsubsidized federal loan ($20,500), this can be another option. Interest rates (in addition to origination fees) are lower on those loans compared to Grad Plus loans. Furthermore, it does not require a credit check, and your qualifications do not depend on financial need.
However, if you have excellent credit and can qualify for a private student loan, that may also be a good option, as you might be able to secure a lower interest rate if you are a well-qualified borrower. With private loans, you will not have access to income-driven repayment options or loan forgiveness or deferment. However, the higher earnings of some professionals and graduates may make such benefits unnecessary.
Note: In some cases, you may be able to reduce your private loan amount or avoid it altogether by paying for part or all of your educational costs through tutoring or obtaining a research grant.
Do I need a Grad Plus Loan?
Generally, students who need funding beyond unsubsidized federal student loans for their college or vocational study can benefit from a Grad Plus loan, especially if they do not qualify for private student loans. As long as you do not have a bad credit history, it should be possible to bridge the funding gap with the help of this loan. If your annual education costs fall within the annual limit of the unsubsidized federal loan, you can obtain a lower interest rate and lower origination fees by choosing this type of loan instead of a Grad Plus loan.
Carefully review your options as you determine whether a Grad Plus loan is the right choice for you. Look at alternatives, including private student loans, before making a final decision on how to finance your higher education.
Frequently Asked Questions (FAQs)
How much can I borrow with a Grad Plus loan?
The maximum amount you can borrow using a Grad Plus loan is the cost of attendance for your college program minus any other financial aid you may have received. The cost of attendance is determined by the college you are attending.
When can I apply for a Grad Plus loan?
To be eligible for a Grad Plus loan, you must complete the FAFSA form. FAFSA applications typically open in October for the following academic year. Most universities provide guidance and specific due dates for applying for Grad Plus loans, so check with your university. For example, the University of South Florida requires students to apply for a Grad Plus loan no sooner than 30-45 days before the semester starts.
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Sources:
Federal Student Aid. “Direct Plus Loans Are Federal Loans That Graduate or Professional Students Can Use to Help Pay for College or Career School.”
Federal Student Aid. “Master Promissory Note (MPN) Direct PLUS Loans William D. Ford Federal Direct Loan Program.”
Federal Student Aid. “You Must Meet Certain Requirements to Qualify for Federal Student Aid (Grants, Work-Study, and Loans).”
Federal Student Aid. “The U.S. Department of Education Offers Low-Interest Loans to Eligible Students to Help Cover the Cost of College or Career School.”
University of South Florida. “Federal Direct Graduate PLUS Loans.”
Source: https://www.thebalancemoney.com/your-guide-to-the-grad-plus-loan-4782604
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