The Federal Direct GradPLUS Loan may be borrowed by a graduate student to pay educational expenses at an eligible college and may be a viable financing option for some graduate students. Students must pass a credit analysis and be approved for the loan – applicants must not have any negative credit history, as determined by the U.S. Department of Education: thus, GradPLUS Loans are not guaranteed until after a graduate student has applied for the loan and has been approved. The loan is in the student’s name and social security number, thus the graduate student is fully responsible for repaying the loan.
There are no set annual borrowing limits. Students can borrow up to the total Cost of Attendance (COA) minus other financial aid received. The loan offers a fixed interest rate of 7.9%, and there is a fee of 4% of the loan amount, deducted proportionately each time a loan disbursement is made. To give an example, for a $10,000 GradPLUS Loan, there would be a fee of $400 total (4% of the loan amount) which would yield a net loan amount of $9,600. At a two-semester college, $4,800 would be disbursed each semester. The $400 fee is withheld by the U.S. Department of Education.
The repayment period for a Direct Graduate PLUS Loan begins at the time the Graduate PLUS loan is fully disbursed, and the first payment is due within 60 days after the final disbursement. However, graduate students may defer repayment if enrolled at least half-time at their college. For Direct Graduate PLUS Loans that were first disbursed on or after July 1, 2008, students may also defer repayment for an additional six months after ceasing to be enrolled at least half-time.
There are several repayment plans that are designed to meet the different needs of individual graduate student borrowers. Generally, borrowers will have ten to twenty-five years to repay the Direct Graduate PLUS Loan, depending on the repayment plan is chosen by the borrower.
A GradPLUS Loan can help pay college expenses. The maximum that a parent can borrow cannot exceed the difference between the total Cost of Attendance (COA) and the total amount of financial aid received, as determined by the college. Remember that students must demonstrate eligibility by passing a credit check facilitated by the U.S. Department of Education.
Please be an informed borrower! Read the Master Promissory Note (MPN) and loan disclosures very carefully. When you sign a loan promissory note, it is a legal document that binds you to repay the loan including all accrued and capitalized interest in addition to any fees, if applicable. Limit borrowing to only what you absolutely need. Failure to repay a federal loan, or late payment of a loan, will negatively affect your credit.
If considering a GradPLUS Loan, please be sure to use the loan calculators as a guide prior to buying so you have a good sense of your repayment obligations before borrowing.
Check out Financial Aid Sense, a practical guide about financial aid and the college financing process.