Everything You Need to Know About Grad PLUS Loans

Grace Lemire
Grace Lemire

Grace Lemire is a freelance writer and editor with over five years of experience in the personal finance industry. She has been featured on a variety of publications, including NPR, CNN, FinanceBuzz, Dollar Geek, Pangea, and True Finance. Her work focuses on the intersection of personal finance and technology. In 2023, Grace was nominated for the Best Personal Finance Advice award in Debt.com’s FinTok Awards.

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August 10, 2022

As if paying for undergrad wasn’t bad enough, now you have to pay for grad school! (*cries in student debt*)

One of the options you may have for paying for grad school is a Grad PLUS loan. Let’s break down what a Grad PLUS loan is, who is eligible for one, and what it’s like to actually borrow one.

What is a Grad PLUS Loan?

A Grad PLUS loan is a federal loan, funded by the federal government, designed specifically for students pursuing graduate or professional school. 

Who is Eligible for a Grad Plus Loan?

In order to be eligible for a Grad PLUS loan, students must:

  1. Fill out the FAFSA
  2. Exhibit creditworthiness

After filling out the FAFSA, lenders will check the student’s credit history to determine eligibility. Students with good credit history often find it easier to borrow from this program. Similarly, students with poor credit history often find it more challenging to borrow from this program.

Having poor credit doesn’t mean you’re out of luck, though. Typically, bringing on a creditworthy cosigner allows students with poor credit to borrow funds through a Grad PLUS loan.

Unlike some undergraduate student loans, demonstrating financial need is not part of the eligibility requirements for Grad PLUS loans.

How Much Can I Borrow in a Grad PLUS Loan?

Grad PLUS loans can cover the entire cost of attendance minus any other financial aid a student has.

For example, if the cost of attendance at your respective grad school was $30,000 and you received $10,000 in university scholarships, you could potentially pay the entire remaining $20,000 through a Grad PLUS loan.

What are the Interest Rates on Grad PLUS Loans?

Grad PLUS loans have a fixed interest rate set by the federal government. This fixed interest rate can shift, however, as the government makes changes to the interest rate each academic year. 

The interest rates on Grad PLUS loans do tend to be higher than other federal student loans. For example, for the July 2019 – July 2020 academic year, the rate was 7.08%.1

What Fees are There for Grad PLUS Loans?

One major fee you should be aware of when taking out a Grad PLUS loan is the origination fee. An origination fee is an upfront fee a lender charges to process a new loan. On a Grad PLUS loan, this origination fee tends to be around 4.3% of the total loan amount.

For example, if you are borrowing $20,000 in a Grad PLUS loan, you will pay $860 in origination fees. This fee will show up as part of your outstanding loan balance.

What are the Repayment Options for Grad PLUS Loans?

The typical repayment plan for Grad PLUS Loans is the standard repayment term of 10 years. This operates similarly to federal undergraduate student loans.

You may also be eligible for the typical repayment plans offered by the Department of Education such as the income-driven repayment plan, pay-as-you-earn plan, or graduated repayment plan.

Similar to federal undergraduate student loans, there is a grace period of 6 months after you graduate (or leave school) before payments are required. 

It’s important to think realistically when choosing a repayment plan. While it may be ideal to make large payments each month, it may not make sense financially to do so. Pick what makes most sense.

Final Thoughts

As always, you should try to borrow as little as possible, and always look for scholarships and grants first. When loans become the final option, make sure to compare loan rates with Sparrow before jumping into any student loan.

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