Your Guide to GradPLUS Loans

Becoming a graduate student is an impressive undertaking, and obtaining an advanced degree can be very helpful, if not necessary, to succeed in certain fields. But paying for that graduate education can sometimes be difficult, which is where a GradPLUS loan might help.


Why Go to Graduate School?

Academic Reasons
There are a number of reasons students could cite when asked why they’d choose to stay in the classroom instead of entering the workforce. Sometimes, students have purely academic reasons that drive their decision to enter graduate programs, such as:

large-green-bulletDesire for more knowledge

large-green-bulletSense of accomplishment

large-green-bulletLove of learning

large-green-bulletMastery of a specific topic

large-green-bulletDesire to do research

large-green-bulletCredential for a specific career

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Sometimes, however, students go to graduate school for financial reasons. Evidence suggests that these students could reap big pocketbook-based rewards for their decision to stay in school for just a few more years.

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In addition to simply getting and keeping jobs, people who have an advanced education also tend to make a little more money each year, and numbers from the National Center for Education Statistics suggest that the advanced earnings can come remarkably early in a person’s career.
annual income bachelors vs masters degree
These people might make a little more money because they tend to be in positions of leadership. According to Forbes, Emerging Culture, Worldwide Success, reported by, Statistic Brain, nearly 75% of CEOs have Bachelor’s degree or higher.
CEO Education Stats 2014

In larger companies like those featured in the S&P 500, many high-ranking executives will have gone to business school and obtained an MBA. It’s certainly possible to obtain a leadership position and pull down a hefty salary without an advanced degree, of course. Many people manage to do so. But these statistics do seem to suggest that the most successful companies might look for an advanced education when they have a spot to fill. Going to graduate school could be quite helpful as a result.


Finding the Funding

While getting an advanced degree can help with future earning potential, the programs also tend to be remarkably expensive.

At Duke University in the 2015-2016 school year, for example, fees for entering MBA students included:

Yearly tuition (not including summer) $47,590.00
Transcript fee $40.00
Health fee $752.00
(Average) health insurance fee $2.400.00
Activity fee $34.00
Recreation fee $260.00
TOTAL YEARLY COST TO ATTEND $51,076.00

Source: http://gradschool.duke.edu/financial-support/cost-attend

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In addition, students who attend graduate school may have a number of responsibilities to attend to, and all of these obligations might make working while going to school quite difficult.

School Home Life To Do List

An article produced by The New York Times also suggests that the average graduate school student is 32 years old. Students like this might have other debts to pay, including:

large-green-bullet Car payments

large-green-bullet Mortgage payments

large-green-bullet Former loan payments

large-green-bullet Credit card debt


GradPLUS Loans Can Help

As described by the U.S. Department of Education, GradPLUS loans are designed to help students afford graduate and professional programs. These loans come directly from the federal government, and aren’t loans students were eligible for when they were enrolled in undergraduate courses of study.

GradPLUS loans are generally used to pay for tuition, but the funds can also be used to pay for other educational costs, such as:

Using a GradPLUS loan

Key Details

It almost goes without saying, but GradPLUS loans aren’t grants, so they must be repaid. The interest rate on GradPLUS loans is based on federal legislation, and is currently tied to the performance of the 10-year Treasury yield, so the fixed rate for new loans is reset each year. In general, it’s best for students to limit the amount of money they borrow, so they won’t be stuck with a big bill at the end of their schooling. However, these loans also come with benefits, such as:
  • Flexible repayment plans
  • Deferred payments while students are enrolled in school full-time
  • Loan forgiveness, if students meet requirements after graduation
  • Forgiveness of debt if the student dies or is disabled

Private loans may not come with all of these bells and whistles, but interest rates and lack of origination fees can make private student loans a cheaper alternative to GradPLUS loans. Make sure to research private student loan options before you commit to a GradPLUS loan.


Getting Started

Applying for a GradPLUS loan
Applying for a GradPLUS loan is relatively easy. Students need to:

  1. Fill out the Free Application for Federal Student Aid (FAFSA)
  2. Wait for the award letter to come back
  3. Determine the cost of attendance for graduate school that year
  4. Maximize borrowing of lower-cost federal loan options, such as Stafford loans
  5. Subtract all other forms of aid from the cost of attendance
  6. If there is a gap between all other forms of aid and the student’s expected contribution, notify the school that a GradPLUS loan is needed
  7. Sign the Master Promissory Note for the loan amount
There can be a few complications, however, as these loans are dependent upon a student’s credit history. Those who have a poor credit rating might be denied a GradPLUS loan, and poor credit could stem from almost anything, including:
bad credit denied loans

Students with these strikes against them will find it difficult to obtain a loan, and as such, they should apply with an endorser to increase their chances of approval.

GradPLUS Loan Cosigner


Other Options

While they are federal student loans, GradPLUS loans are not a guaranteed source of funding for graduate students. In fact, an article produced by Inside Higher Ed suggests that about 50% of PLUS loan borrowers are rejected.

Thankfully, these students have other options for funding their graduate education. For example, some students with poor credit and a willing cosigner may be eligible for private loans, even if they’re not eligible for a GradPLUS loan.

If you’re in need of a private loan, check out our student loan comparison tool. It allows you to research and compare a variety of different private loan options, so you can find the loan that best fits your financial profile.


Frequently Asked Questions
Should I choose GradPLUS or a private loan?

You might want to choose a private loan if:

  • You are comfortable with the possibility of interest rates increasing beyond the interest rate cap of the GradPLUS loan
  • You have very good to excellent credit – at this point in time, private student loans for borrowers with strong credit often have lower interest rates (and no origination fees) vs GradPLUS loans
  • You believe that there is very little possibility that you may use the deferment or forbearance options
  • You plan to only borrow the loan for a short time

You might want to choose a GradPLUS loan if:

  • You like the certainty that a fixed-rate loan provides
  • If your credit is good, fair, or poor, your cost will likely be lower
  • You like the protection that the greater deferment and forbearance options provide
  • The repayment incentives offered may bring the repayment interest rate cost to less than 7%

I’m in a certificate or continuing education program, not a graduate program. Can I use a GradPLUS loan?

You must be enrolled at least half-time in a graduate or professional program leading to a master’s degree (or law, medical, or other professional degree) to be eligible to borrow a GradPLUS loan.

Do I need to complete the FAFSA to apply for a GradPLUS loan?

Yes, in order to be eligible for the GradPLUS loan, you must file the FAFSA.

Additionally, you must apply for and the school must determine the student’s eligibility for the maximum annual unsubsidized Direct loan amount; however, the student is not required to receive a Direct loan as a condition of receiving a GradPLUS loan.

How much can I borrow using GradPLUS?

The eligible loan amount cannot exceed your total cost of attendance.

Is there a credit check for GradPLUS loans?

Yes, there is a credit check for GradPLUS loans that primarily checks for any signs of “adverse credit.”

What is a GradPLUS loan endorser?

An endorser is any creditworthy individual who agrees to become a co-party to the GradPLUS loan of the applicant. This is most often used if the applicants themselves have been denied due to adverse credit.

*Note that there is not currently a release provision for endorsers, meaning that they will remain subject to the terms of the loan until it is paid off or consolidated.

Are there fees on GradPLUS loans?

The federal regulations call for a 4.264% origination fee to be charged on the loan amount. The fee is structured in such a way that it is charged against the loan amount and the fee is removed prior to disbursement. Basically, the money is taken out up front.

When do I have to begin repaying a GradPLUS loan?

In most cases, the first payment is required within 60 days after the final loan disbursement for the enrollment period for which you borrowed. But, most lenders will offer to defer payment of these loans while you are attending school at least half-time. There is currently no provision for a grace period on the GradPLUS loan, which means that students would begin repayment immediately upon graduation or if they drop below half-time status. As with Federal Direct loans, however, students may be eligible for an economic hardship forbearance.


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