I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.
See all posts Frank GogolUnderstanding Grad PLUS Loans: A Simple Guide
Updated on October 13, 2023
Written by
Written by
Reviewed by
Rohit Mittal
Reviewed by
Rohit Mittal
Rohit Mittal is the co-founder and CEO of Stilt. Rohit has extensive experience in credit risk analytics and data science. He spent years building credit risk and fraud models for top U.S. banks. In his current role, he defines the overall business strategy, leads debt and capital fundraising efforts, leads product development, and leads other customer-related aspects for the company. Stilt is backed by Y Combinator and has raised a total of $275M in debt and equity funding to date.
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At a Glance: Grad PLUS Loans are federal loans for graduate and professional students to fund their education. They cover expenses like tuition, room, board, and more. Unique to Grad PLUS Loans: they require a credit check, have higher interest rates than some federal loans, and allow borrowing up to the full grad school cost minus other aid. To apply, complete the FAFSA and the Direct PLUS Loan Application. Repayment begins after disbursement but is typically deferred for students attending half-time or more, with several repayment and forgiveness options available.
If you’re thinking about attending graduate school or are already knee-deep in your advanced studies, you might be wondering how to cover the hefty costs associated with it. Beyond scholarships, assistantships, and standard federal loans, there’s another option you might have come across: Grad PLUS Loans. Let’s dive into this topic with a simple and informative perspective.
What Are Grad PLUS Loans?
Grad PLUS Loans are federal loans that graduate and professional students can use to pay for graduate school expenses. They are a part of the U.S. Department of Education’s Direct Loan Program. Unlike other federal student loans, Grad PLUS Loans require a credit check.
What Can You Use Them For?
Similar to other federal student loans, Grad PLUS Loans can be used for school-related expenses. These loans, which are obtained from the U.S. Department of Education, can help students deal with any remaining expenses for attending grad school.
Some of the costs they cover include:
- Tuition
- Room and board
- Books
- Transportation
- Equipment and technology
- Other expenses related to grad school
How Do Grad PLUS Loans Differ from Other Federal Student Loans?
There are a few key differences that set Grad PLUS Loans apart. These include:
Credit Checks
As mentioned earlier, these loans require a credit check. If you have an adverse credit history, you might need an endorser (similar to a co-signer) to get the loan.
Interest Rate
Grad PLUS Loans typically have a higher interest rate than Direct Unsubsidized Loans for graduate students. It’s wise to compare current rates before deciding.
Borrowing Limit
One of the most appealing features of Grad PLUS Loans is that you can borrow up to the full cost of your graduate education minus any other financial aid received. This means that if scholarships or other federal loans don’t cover all your costs, then Grad PLUS can fill in the gaps.
How to Apply for a Grad PLUS Loan
Are you convinced that Grad PLUS Loans are the right choice for you? Here are the steps to take to apply:
- Complete the Free Application for Federal Student Aid (FAFSA).
- If you get approved for financial aid, and you decide to pursue a Grad PLUS Loan, you need to complete the Direct PLUS Loan Application.
- If you’re granted the loan, you must also sign a Master Promissory Note (MPN) that outlines the terms of the loan.
Grad PLUS Loan Repayment
The repayment of your Grad PLUS Loans will start right away, but you have some options that can help you and the possibility of loan forgiveness for many fields including professors and teachers..
Start Date
Repayment begins once the loan is fully disbursed. However, for graduate students, repayment is typically deferred while you’re in school at least half-time and for an additional six months after you graduate, leave school, or drop below half-time enrollment.
Options
You have various repayment plans, including income-driven plans that set your monthly payment based on your income and family size.
Loan Forgiveness
Grad PLUS Loans are eligible for Public Service Loan Forgiveness if you work in certain public service jobs and make 120 qualifying monthly payments.
Things to Consider When Choosing a Grad PLUS Loan
While Grad PLUS Loans offer you a way to cover the full cost of your graduate education, remember that they typically come with a higher interest rate than other federal student loans. So, it’s important to borrow only what you truly need and have a repayment strategy in place.
9 Alternatives to Use When Grad PLUS Loans Aren’t an Option
Unfortunately, Grad PLUS loans aren’t always enough to cover the costs of your education. Sometimes, they’re not even an option. Luckily, there’s a number of alternatives to Grad PLUS loans that you can consider. These are:
1. Federal Direct Unsubsidized Loans
These are federal loans available to both undergraduate and graduate students, regardless of financial need.
- Pros: Typically have lower interest rates than Grad PLUS Loans, and no credit check is required.
- Cons: There are borrowing limits. For graduate and professional students, the limit is usually $20,500 per year.
2. Scholarships and Fellowships
Scholarships and fellowships represent free money awarded to students based on academic merit, specific talents, or other criteria.
- Pros: You don’t need to repay scholarships or fellowships.
- Cons: Highly competitive and may require applications, essays, or other qualifications.
3. Graduate Assistantships
Graduate assistantships are positions offered by colleges where students teach or do research in exchange for a stipend.
- Pros: They provide work experience, tuition waivers or discounts, and sometimes health benefits.
- Cons: Can be demanding and might impact the time available for studies.
4. Private Student Loans
Private student loans include loans offered by banks, credit unions, or other private lenders.
- Pros: Might offer competitive interest rates for borrowers with excellent credit.
- Cons: Typically have higher interest rates than federal loans, might require a co-signer, and don’t come with federal benefits like income-driven repayment plans.
5. Employer Tuition Reimbursement
Some employers also offer tuition reimbursement as a part of their benefits package.
- Pros: Helps reduce or eliminate the cost of graduate school.
- Cons: May come with stipulations, such as staying with the company for a certain period after completing the program.
6. Work-Study Programs
Work-study programs are federal and state-sponsored programs that allow students to work part-time jobs in their field of study.
- Pros: Earn money while gaining relevant work experience.
- Cons: Limited availability and might not cover all educational costs.
7. Payment Plans
Many schools offer monthly payment plans that allow students to spread out the cost of tuition over several months.
- Pros: They’re helpful in managing tuition costs without taking on debt.
- Cons: They require upfront planning and regular payments.
8. Personal Savings
If you don’t want to take out a loan and get in debt, you can start using your personal funds to pay for graduate school. For this to work, you must start saving in advance and make sure you have enough to cover all expenses.
- Pros: No debt or interest accrual.
- Cons: Might deplete savings and not be enough to cover all costs.
9. Military Benefits
If you’re a veteran, active-duty service member, or a dependent, you might be eligible for educational benefits through programs like the Post-9/11 GI Bill.
- Pros: Can cover a significant portion of educational expenses.
- Cons: Requires military service and might not cover all educational expenses.
Private Student Loans As an Alternative to Grad PLUS Loans
Navigating the world of higher education can sometimes come with financial hurdles, especially when certain federal loan options like the Grad PLUS loans aren’t within reach. However, several private lenders step up to fill this gap, offering tailored solutions to students looking to fund their advanced degrees. Here’s a look at some top contenders in the private student loan sector for those in such situations.
AmOne (Best for Okay to Good Credit)
AmOne serves as a robust platform for students who have credit ratings that sit in the okay to good spectrum. Functioning as a liaison between borrowers and an assortment of lenders, AmOne simplifies the loan-seeking process. Their strength lies in helping students access a network that could present them with reasonable loan options, even without the availability of Grad PLUS loans.
Check rate
on website
on website
Spring Loans (Best for Bad Credit and No Credit)
Graduate students who may not have had the opportunity to build a strong credit history, or those who’ve encountered credit challenges, will find Spring Loans a welcoming platform. By adopting an approach that goes beyond just credit scores, Spring Loans presents solutions for those students who are determined to continue their education irrespective of past financial setbacks.
Check rate
on website
on website
First Premier Lending (Best for Bad Credit)
First Premier Lending extends its lending hand primarily to those students who’ve had a bumpy credit journey. By taking into account more comprehensive financial aspects and not just credit history, they offer a chance for students to secure the funds they need. Their nuanced understanding of borrower needs makes them a notable option when traditional routes, like the Grad PLUS loans, are closed.
Check rate
on website
on website
First Premier Lending Personal Loan
Min. credit score
None
Fixed APR
27.00%
Variable APR
N/A
Sallie Mae (Best for Good to Great Credit)
A name synonymous with student loans, Sallie Mae caters predominantly to those with commendable credit backgrounds. Recognizing the diverse financial needs of graduate students, they offer tailored loan products with competitive rates and flexible repayment terms. Even in the absence of Grad PLUS loans, Sallie Mae stands as a dependable financier for ambitious grad students.
Check rate
on website
on website
Sallie Mae Undergraduate Student Loan
Min. credit score
Mid-600's
Fixed APR
4.50-15.49%
Variable APR
6.37-16.70%
College Ave (Best for Good Credit)
Renowned for its student-centric approach, College Ave offers tailored loan solutions for those possessing good credit scores. With transparent terms, competitive rates, and a simplified application process, they make the daunting task of securing educational finances a tad easier. For students unable to access Grad PLUS loans, College Ave emerges as a sound alternative, ensuring academic aspirations aren’t halted.
Check rate
on website
on website
College Ave Private Undergraduate Student Loan
Min. credit score
600 or better
Fixed APR
5.05% - 16.99%
Variable APR
5.59% - 16.99%
Final Thoughts
Graduate school is an investment in your future. While the costs might seem daunting, financial aids like Grad PLUS Loans can provide significant support. However, as with any loan, it’s crucial to understand the terms, be mindful of the amount you borrow, and plan for repayment. Good luck in your academic pursuits!
Frank Gogol
I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.