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3 Important Things You Should Know About Grad PLUS Loan

Written by Animesh Prasad

The journey on which Animesh embarked to become an engineer ended up with him turning into a content writer. As he progressed to his final year, he realized engineering isn't really his forte and pursued his love for writing. He has a deep interest in finance and loves traveling.

June 18, 2021

The Federal Direct Graduate PLUS Loan (Grad PLUS Loan) is a fixed interest loan programme that enables graduate or professional students to borrow directly from the U.S. Department of Education to help pay for their educational expenses. If you are also looking to pay for your graduate school then a graduate PLUS loan could be a viable way to opt. Let’s have a look at everything you need to know regarding this incredible option. 

About The Grad PLUS Loan

A Direct PLUS Loan is commonly referred to as a Grad PLUS loan when made to a graduate or professional student. Here are a few more things about this loan. 

  • The Grad PLUS Loan has several benefits such as a fixed interest rate, high credit approval rate and streamlined application process. 
  • Loan payments can be deferred while in school at least half-time and it also has flexible repayment options.
  • However, do note that this loan is only available to U.S. citizens and permanent residents. 
  • The Direct PLUS Loan is unsubsidized, so interest accrues while the student is enrolled at least half-time and during deferment periods.
  • As a part of the Federal Direct Loan Program, this loan would also conveniently become part of your loan account that contains your Federal Direct Subsidized/Unsubsidized Loans, thus reducing your number of lenders. 

The borrowing process of this loan is relatively simple. Also, the benefits associated with federal student loans are generally more generous than what’s offered with many private student loans. This makes graduate PLUS loans a very attractive choice.

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Eligibility Criteria For A Grad PLUS Loan

In order 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 programme 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.
  • have the required credit score needed for grad plus loan.

Your eligibility for a Grad PLUS loan is determined when you fill out the Free Application for Federal Student Aid (FAFSA). As a part of this Grad PLUS Loan application, you will have access to all the benefits of typical federal loans, including eligibility for income-driven repayment.

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How Much Can You Borrow?

The maximum PLUS loan amount you can borrow is the cost of attendance (determined by the school) minus any other financial assistance you receive. This means theoretically you can borrow up to the full amount of the cost of attendance.

Note: Always remember that the total sum you borrow via the Grad PLUS loan will have to be paid back eventually. Hence, it is recommended that you decline all or part of the loan prior to disbursement if you find it to be unnecessary.

What Is The Current Grad PLUS Loan Interest Rate?

For Direct PLUS Loans first disbursed on or after July 1, 2021, and before July 1, 2022, the interest rate is 6.28%. This is a fixed interest rate for the entire life of the loan.

You may also like to read: Interest-Free Loans for Students – Yes They Exist!

When Do You Have To Start Repaying The Loan?

You are not required to start making payments until six months after you graduate, leave school, or drop below half-time enrollment. This period is basically the Grace Period, during which you are expected to get your finances in place. 

Read More: Student Loan Grace Period Extension Ways

During any period when you’re not asked to make payments, interest will continue to accrue on your loan. You may choose to pay the accrued interest or allow the interest to be capitalized (added to your loan principal balance) when you have to start making payments. 

How Will You Receive The Loan?

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

Recommended Reading: What Happens To Unused Student Loan Money?

What Are Your Options After Grad PLUS Loan Denials?

Obtain an Endorser (Co-Signer)

If your Direct PLUS application is denied, you can obtain an endorser. If you are going to obtain an endorser, the following three items must be completed.

  • A New Master Promissory Note if You Pursue an Endorser
  • Direct PLUS Credit Counseling
  • Endorser Addendum

In this article we provide you with a detailed analysis about how to go about Understanding University Offers.

Seek a Credit Appeal

You can prove mitigating circumstances in some situations by filing an appeal with the US Department of Education through the studentaid.gov website. Borrowers who have had their credit rejected by the Department of Education might document one of the following situations:

  • Information showing that credit reporting used in the credit denial is incorrect and/or has been corrected.
  • Extenuating circumstances exist relating to the adverse credit history of the primary PLUS borrower.

Few More Important Things To Know About The Direct Grad PLUS Loan

Here are some miscellaneous must-know things about Grad PLUS loans.

  1. You must demonstrate creditworthiness to qualify

As opposed to Federal Direct Unsubsidized Loans, graduate PLUS loans require evidence that you don’t have an adverse credit history. A credit check will be performed during the application process. 

If at all you have a poor credit history, you may be required to find an “endorser” (or cosigner) with a better credit history, or document the critical circumstances that resulted in your adverse credit history. 

Must Read: Credit Score And Its Importance In The US

  1. Interest accrues from the moment your loan is disbursed

Although you’re not required to make payments if you’re enrolled in a graduate programme at least half-time, interest on your grad PLUS loan begins accruing the moment your loan is disbursed.

  1. You must pay a loan origination fee

Beyond the interest that is already accruing on your grad PLUS loan, an origination fee is deducted when your loan is disbursed, so you’ll receive a little less than what you actually borrow. The loan fee is a percentage of the loan amount and is proportionately deducted from each loan disbursement. While the fee can change, it was 4.228% of the loan amount for the 2020-2021 academic year.

You can apply for the Grad PLUS Loan here: Apply for a PLUS Loan for Graduate or Professional Students.

Hope you found this blog helpful. If you have any further questions please feel free to ask them in the comment section below. 

Thank you for reading this blog ‘Grad PLUS Loan’. If you enjoyed reading this blog and would like to continue reading more about education loans then do check out our following blogs.

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