Graduate PLUS Loan Eligibility: A Comprehensive Guide

The pursuit of graduate and professional degrees often requires significant financial investment. The Grad PLUS Loan is a federal loan designed to help students bridge the gap between their resources and the cost of their education. This article provides a detailed overview of Grad PLUS loans, their eligibility requirements, and alternative funding options.

What is a Grad PLUS Loan?

A Grad PLUS loan is a type of federal direct PLUS loan offered to eligible graduate and professional students enrolled in programs leading to a graduate degree or professional certificate. These programs include master's degrees, PhDs, and professional doctorates. The loan aims to cover education and living expenses incurred during studies.

Key Features of Grad PLUS Loans

Coverage: A Grad PLUS loan can cover the full cost of attendance for your graduate program, minus any other financial assistance received. There is no maximum dollar limit for Grad PLUS loan amounts.
Credit-Based: A Grad PLUS Loan is credit-based, requiring applicants to pass a simplified credit check.
Interest: Interest begins to accrue upon disbursement of the loan and is calculated daily by your loan servicer. Each academic year, Congress fixes an interest rate for federal direct PLUS loans.
Disbursement: Loan funds are disbursed by the Department of Education to the University approximately 10 days before the start of classes each semester. The loans are typically divided equally between fall and spring semesters.
Deferment: As long as you stay in school and enrolled for at least half-time study, you won’t need to pay off your loan. Once you begin paying off your Grad PLUS loan, you may be able to request a deferment or forbearance.
Master Promissory Note (MPN): If you’re eligible for a Grad PLUS Loan, you’ll need to agree to its terms by signing a Master Promissory Note (MPN). If you have an MPN that is over ten years old, you will need a new MPN.
Origination Fee: Grad PLUS loans come with a higher loan origination fee than other federal direct loans. This processing fee is calculated as a percentage of the loan amount and is subtracted from the loan balance in advance.

Eligibility Requirements for Grad PLUS Loans

To be eligible for a Grad PLUS loan, students must meet certain requirements:

Enrollment: Be a graduate or professional student enrolled at least half-time in a program leading to a graduate degree or professional certificate. Every college has a specific definition of what it means to be a part-time student. You can ask your school how many credit hours you need to get part-time status. The loan is available for the full academic year (summer, fall, and spring).
FAFSA Completion: The first thing you’ll need to do to be considered for a Grad PLUS loan is to submit the Free Application for Federal Student Aid or FAFSA. This is a form that has a range of questions about your financial situation (and your parent’s finances if you’re a dependent student) and uses this information to determine your eligibility for federal aid, including Grad PLUS loans. The FAFSA takes between three days and three weeks to be processed, depending on how you submit your form and whether you signed it with an FSA ID. You’ll then receive your Student Aid Report, and eventually, a financial aid award letter from any schools you’re admitted to. Once you receive your financial aid package, check it carefully and be sure to read all of the terms and conditions of the loan. You can choose to accept all or only a part of the loan amount that you’re offered.
Credit Check: Applicants must pass a simplified credit check. A Grad PLUS Loan is credit-based. Grad PLUS loans can be tougher to qualify for than regular federal student loans: In particular, they have tough credit requirements, and you won’t be eligible if you have an adverse credit history.

Overcoming Credit Challenges

There are a couple of workarounds that can let you get a Grad PLUS loan even if you have an adverse credit history. If a student does not meet the credit requirements on his/her own, they have options:

Obtain an Endorser: An endorser is someone who does not have an adverse credit history and agrees to repay the loan if the borrower does not repay it. You could get an endorser for your loan.
Appeal with Extenuating Circumstances: You may qualify for a Grad PLUS loan with an adverse credit history even if you don’t have an endorser if you can show the Department of Education that you have extenuating circumstances. history may appeal a credit denial.
Improve Credit Score: You could delay going to grad school in order to shore up your credit rating first.

Application Process

FAFSA Filing: The first step is to complete the FAFSA.
Grad PLUS Application: Students are not required to complete the Grad PLUS application online through Federal Student Aid. Once you’ve filed the FAFSA®, you can start a Grad PLUS Loan application.
Master Promissory Note (MPN): Once you’ve decided how much you want to borrow, you’ll need to officially accept the loan by signing a Master Promissory Note (MPN), signifying that you accept the terms of the loan.
Entrance Counseling: The final step to secure your Grad PLUS loan is entrance counseling. This is a mandatory process that is designed to ensure you understand the terms and conditions of not only your Grad PLUS loan but your federal student aid package overall.

Alternatives to Grad PLUS Loans

While Grad PLUS loans offer a way to finance graduate education, it’s important to consider alternatives:

Read also: Funding Your Graduate Education

529 Plan: A 529 plan is a tax-advantaged savings account where your funds are invested on your behalf. This is usually a good option for those who are looking to go to school down the track: you’ll need to save in advance and make deposits into the 529 savings plan. Furthermore, you’ll get more benefits the earlier you start your 529 accounts, as this gives your investments more time to grow. Having said that, it’s never too late to start a 529 savings plan.
Federal Unsubsidized Direct Loans: Another option is to apply for federal unsubsidized direct loans. Federal unsubsidized loans currently have significantly lower interest as well as origination fees than Grad PLUS loans. An advantage of these kinds of loans is that they have lower interest rates. However, unlike Grad PLUS loans, federal direct unsubsidized loans have set borrowing limits. Currently, the maximum you can borrow for graduate school is $20,500 per year, to a total lifetime limit of $138,500. Therefore, if you already took out federal unsubsidized loans for your undergraduate degree, you may not be eligible to borrow much or may have already hit your lifetime limit.
Private Student Loans: Another alternative to federal direct loans is to take out a private student loan to cover your graduate studies. Students can apply for private education loans, which are credit-based and have variable interest rates. Unlike grad PLUS loans, private student loans don’t have an origination fee. When comparing Grad PLUS loans and private loans, it’s important to consider a range of factors, not just the interest rate. However, keep in mind that a private loan won’t have the generous consumer protections that come with all Federal student loans, as well as income-driven repayment and student loan forgiveness for certain people.

Benefits and Risks of Grad PLUS Loans

Benefits

High Loan Limits: You can borrow up to the total cost of attendance for your course, less any federal financial aid you receive.
Federal Protections: A Grad PLUS loan comes with a number of benefits, such as relatively-favorable interest rates, a range of consumer protections from the federal government, and the possibility of loan forgiveness.
Deferment Options: Once you begin paying off your Grad PLUS loan, you may be able to request a deferment or forbearance. You can discuss your options with your student loan servicer to make sure you’re able to meet your payments.

Risks

Credit Requirements: Yes, you will need to meet certain requirements to be eligible for a Grad PLUS loan, and they can be harder to get than some other types of federal loans.
High Interest Rates and Fees: Additionally, the interest is higher than federal unsubsidized direct loans, and Grad PLUS loans come with a higher loan origination fee than other federal direct loans.
Debt Burden: Although this may sound like an easy and efficient way to secure funding for college, it can saddle you with a huge amount of student debt, especially considering the interest rates associated with these kinds of loans.
Bankruptcy Discharge: Unlike other types of federal student loans, Grad PLUS loans are very difficult to discharge, even if you file for bankruptcy. Having said that, you may be able to have some of your loan balance forgiven under the federal Public Service Loan Forgiveness program.

Interest Accrual and Repayment

Interest will accrue from the beginning of the loan term, unless there is a special payment and interest pause, such as the one granted by the federal government during the COVID-19 pandemic. If you don’t pay off the interest while you’re studying, it will be added to your loan principal, so it can be a good idea to make interest-only repayments while you’re in school.

Read also: Graduate Fees at CMU

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