Graduate and professional school can be incredibly expensive. That’s why thousands of graduate students each year borrow Direct Graduate PLUS Loans to help pay for their programs. They differ from Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Parent PLUS Loans in a number of ways.
Here, we explore Direct Graduate PLUS Loans so that you will have all of the information you need to make an informed decision when you apply for and accept financial aid to pay for your college education.
What is a Direct Graduate PLUS Loan?
Direct Graduate PLUS Loans are a special type of federal student loan created under the William D. Ford Federal Direct Loan Program. These loans are made available to eligible graduate students, and are designed to help fill the gaps and pay for college expenses that are not covered by other forms of financial aid, such as Direct Unsubsidized Loans.
If you borrow a Direct Graduate PLUS Loan, you do not need to make regular monthly payments while you are enrolled at least half time in school or during your sixth month grace period after you leave school.
Your loan will begin accruing interest immediately after disbursement. If this interest is not paid, then it will be capitalized, or added to your loan principal, at which point it will begin accruing interest of its own.
What is the interest rate on a Direct Graduate PLUS Loan?
Federal student loan interest rates vary depending on the year in which they were disbursed. They are set by Congress.
Direct Graduate PLUS Loans that were disbursed between July 1,2019 and July 1, 2020 carry an interest rate of 7.08%, which is higher than Direct Unsubsidized Loans made to graduate or professional students. Those disbursed between July 1, 2018 and July 1, 2019 carry an interest rate of 7.6%.
Do Direct Graduate PLUS Loans have any fees?
In addition to interest, you will be charged a loan origination fee. This fee is a percentage of the total loan amount. The loan origination fee varies by year:
- For loans disbursed between October 1, 2018 and October 1, 2019 it is 4.248%
- For loans disbursed between October 1, 2019 and October 1, 2020 it is 4.236%
It is worth nothing that this is a substantially higher loan origination fee than is charged for Direct Unsubsidized Loans.
How much can you borrow?
The total amount that a parent can borrow through a Direct Graduate PLUS Loan will be equal to the total cost of attendance, minus any other financial aid that you have received. Your school will determine the cost of attendance.
Typically, your school will determine exactly how much you can borrow each year and notify you of this amount in your financial aid package.
Direct Graduate PLUS Loan Eligibility
To qualify for a Direct Graduate PLUS Loan, you must:
- Be a graduate or professional student who is enrolled at least half time in a degree- or certificate-awarding program
- Not have an adverse credit history
- Meet general requirements for receiving financial aid, including citizenship requirements
Graduate and professional students who have adverse credit history may still qualify for a PLUS Loan if they are able to obtain an endorsement from someone who does not have an adverse credit history. This is similar to having a cosigner. Additionally, if you are able to demonstrate extenuating circumstances that have led to your damaged credit history, you may be considered eligible.
How to Apply for a Direct Graduate PLUS Loan
Unfortunately, if you need to apply for a Direct Graduate PLUS Loan, there is a separate application process outside of the regular FAFSA application. Graduate and professional students can complete an Direct PLUS Loan application here.
You must first complete a FAFSA application before applying for a Direct Graduate PLUS Loan.
Direct Graduate PLUS Loan Repayment Plans
When you borrow a Direct Graduate PLUS Loan, the U.S. Department of Education is your lender. That being said, your loan will be serviced by one of 11 federal student loan servicers. Your servicer will accept your monthly payments, advise you of your repayment options, and otherwise manage your loan.
Borrowers with Direct Graduate PLUS Loans are typically eligible to enroll in the following repayment plans:
- Standard Repayment Plan
- Graduate Repayment Plan
- Extended Repayment Plan
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
If you would like to change the repayment plan on your Direct Graduate PLUS Loan, simply contact your loan servicer.
Direct Graduate PLUS Loan Refinancing and Consolidation
There is no federal student loan refinancing program. In order to refinance your Direct Graduate PLUS Loan, you would need to turn to a private lender who would essentially convert your loan into a private loan. While this may bring benefits such as a lower interest rate or lower monthly payments, it also means that you will be losing certain benefits carried by federal loans, such as the ability to place your loans in deferment or forbearance. Therefore, it’s important to weigh the pros and cons of refinancing before you make a decision.
Student loan consolidation is a process in which you combine multiple federal student loans into a single new loan, called a Direct Consolidation Loan. This new loan’s balance will be the total of all of its component loans, added up. The interest rate that it carries will be the weighted average of all of the loans that make it up.
Direct Graduate PLUS Loans can be consolidated under this program.
Direct Graduate PLUS Loan History
The Higher Education Act of 1965 created the Federal Guaranteed Student Loan program, which made federally-backed student loans available to college students. This program was renamed the Robert T. Stafford Student Loan Program in 1988. Direct Graduate PLUS Loans are managed by this program.
Alternatives to Direct Graduate PLUS Loans
Because Direct Graduate PLUS Loans carry higher interest rates and higher loan origination fees compared to Direct Unsubsidized Loans, graduate and professional students should first borrow money through that program before turning to PLUS Loans.
If you do not wish to borrow a Direct Graduate PLUS Loan, or are perhaps ineligible, you may be able to borrow a private student loan to make up the difference. Private loans will typically be more expensive than a Parent Graduate Loan.