The federal government offers a variety of lending solutions for students pursuing a degree from accredited colleges and universities. For graduate or professional degree students who qualify, Direct Grad PLUS loans are available from the Department of Education. Direct Grad PLUS loans are intended to help those who do not have the financial means to pay for their graduate or professional degree out of pocket or don’t receive enough financial aid from other sources. Graduate students are able to apply for a Direct Grad PLUS loan so long as they are enrolled in an eligible school at least half-time and do not have a negative credit history.
Applying for a Direct Grad PLUS loan is relatively straightforward, and it begins with completing the Free Application for Federal Student Aid known as the FAFSA. The FAFSA form can be filled out online or as a paper application and includes information about a borrower’s education background, income, resident state, and which year of school they will be attending in the upcoming year. After the FAFSA is completed it is submitted to the school where the student will pursue his or her degree. The school is then able to determine the amount of financial aid, including Direct Grad PLUS loans, available to the student.
Keep in mind, all borrowers requesting a Direct Grad PLUS loan are required to undergo a credit check. This involves a review of past credit information like on-time payments, credit utilization, and financial details that may prove to be a risk factor for the Department of Education. When adverse credit is an issue, borrowers may involve a cosigner, but it is not a requirement.
One of the benefits of taking out a Direct Grad PLUS loan to help fund a graduate or professional degree program is the fixed nature of the loan. Each Direct Grad PLUS loan offers a fixed interest rate that does not fluctuate over the repayment period. For the 2017-2018 school year, Direct Grad PLUS loans have a fixed interest rate of 7 percent. However, it is important to note that interest begins accruing from the date the loan proceeds are received, not when repayment begins. If borrowers are not able to pay the interest while the loan is deferred then it is capitalized, meaning the amount is added to the total loan balance. This can increase the total cost of the loan over the long run.
There is a fee associated with taking out a Direct Grad PLUS loan currently set at 4.276 percent. Most borrowers ask for a greater loan amount to help cover the fee at the time of application. Students enrolled in a graduate or professional degree program may borrow up to the total cost of attendance, less any additional financial aid received from the Department of Education or other sources. The total cost of attendance may include room and board, tuition, equipment, transportation, personal expenses, books, or other supplies.
Because Direct Grad PLUS loans are made available through the federal government, borrowers have several options for repayment. Something to note is that Direct Grad PLUS loans are deferred while a student is enrolled at least half-time in an eligible graduate program, meaning no payments are due. A grace period of six months begins after the student leaves half-time status or graduates. Once the grace period ends, repayment plan options include:
- Standard repayment
- Extended repayment
- Graduated repayment
- Income-contingent repayment
- Income-based repayment
- Revised Pay-As-You-Earn
Each repayment plan option for Direct Grad PLUS loans has benefits and drawbacks that should be evaluated before they are selected. In some cases, borrowers who select an income-based repayment program, including Pay-As-You-Earn, Revised Pay-As-You-Earn, Income-contingent, and Income-based options, may be eligible for loan forgiveness after several years of on-time, consistent repayment.
Direct Grad PLUS loans offer an affordable option for students pursuing a graduate or professional degree at an eligible college or university. Borrowers should take the time to learn about the qualification requirements as well as the total cost of borrowing and repayment plan options available before selecting these loans as a method to help pay for school.