Your Guide to GradPLUS Loans
When undergraduate courses are complete and graduation ceremonies have come to a close, students have a variety of options to consider. They might choose to enter the workforce and find a job in their chosen field, or they might choose to take a year off to explore the world, if they can afford it. Some might even choose to find a placeholder job, so they can catch their breath and pay back a little debt before getting a “real job.”
Some students, however, choose to go right back into the classroom, just as soon as they’ve finished their undergraduate studies. Moving on and becoming a graduate students 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 can help.
Why Go to Graduate School?
Desire for more knowledge
Sense of accomplishment
Love of learning
Mastery of a specific topic
Desire to do research
Credential for a specific career
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.
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 2014-2016 school year, for example, fees for entering MBA students included:
|Yearly tuition (not including summer)||$47,590.00|
|(Average) health insurance fee||$2.400.00|
|TOTAL YEARLY COST TO ATTEND||$51,076.00|
Former loan payments
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:
- 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, so these GradPLUS loans can be an attractive option for some students.
- Fill out the Free Application for Federal Student Aid (FAFSA)
- Wait for the award letter to come back
- Determine the cost of attendance for graduate school that year
- Maximize borrowing of lower-cost federal loan options, such as Stafford loans
- Subtract all other forms of aid from the cost of attendance
- 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
- Sign the Master Promissory Note for the loan amount
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.
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 percent 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.
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 top-tier credit – at this point in time, these borrowers will presently be charged less interest, but if interest rates continue to climb, this benefit decreases or disappears altogether
- 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 6.84%
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 subsidized and/or unsubsidized Stafford loan amount; however, the student is not required to receive a Stafford 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 4.292% 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 Stafford loans, however, students may be eligible for an economic hardship forbearance.