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What Is a Grad PLUS Loan?

Wanting to go to grad school? Thinking about taking out a Grad PLUS loan to help pay your way?

I’m all for higher education and pursuing a degree that will help you grow in your career. But if you’re considering taking out student loans to make it happen, let me stop you right there.

Even if Grad PLUS loans are available to you, it doesn’t mean they’re your best option. And student loans in general may seem like a great way to fast-track your graduate degree, but they come at a huge cost (and I’m not just talking about the price of tuition).

I’m here to give you all the facts about Grad PLUS loans so you can make the best decision when it comes to paying for your education. Because you deserve to leave grad school with a useful degree—not crazy amounts of debt.

What Is a Grad PLUS Loan?

A Grad PLUS loan is a federal loan given to graduate or professional students to help cover any gaps in school costs after they max out scholarships and other financial aid. Grad PLUS loans are actually a type of Direct PLUS loan.

People typically turn to Grad PLUS loans once they’ve hit the federal limit for Direct unsubsidized loans (which is $20,500 a year for grad students).1 But even though they’re called PLUS loans, they’re not really a plus—because they just mean more debt for you (student loans plus more student loans).

You might think, What’s one more loan in the grand scheme of things? After all, by the time you’re considering a Grad PLUS loan, you’ve probably already racked up a student loan bill the length of a CVS receipt. But every student loan you take out is another weight pulling you down. And if you’re still carrying around student loans from undergrad, you could be looking at decades of payments!

So, before you jump into taking out more student loans, here are some things you should know about how Grad PLUS loans work:2

  • A Grad PLUS loan lets you borrow up to the full cost of your college attendance.
  • Approval for Grad PLUS loans is based on your credit history.
  • You must pay a loan origination fee (right now, the fee is 4.228% of the loan).
  • Grad PLUS loans have a fixed interest rate (the current interest rate for all Direct PLUS loans is 7.54%).
  • Interest starts collecting the moment you get your Grad PLUS loan.
  • You can consolidate Grad PLUS loans.

What Does a Grad PLUS Loan Cover?

A Grad PLUS loan will let you borrow up to the full cost of your college attendance, minus any other financial aid you’re able to get (like scholarships and grants) or other student loans you take out beforehand. The exact amount you’re able to borrow depends on the school, but the money can usually go toward things like tuition and fees, room and board, books and supplies, technology, and other equipment.

But just because you can borrow up to the full amount, doesn’t mean you should. A Grad PLUS loan may help you get through grad school now. But it will definitely come back to bite you later in the form of massive student loan payments and interest. And there are plenty of ways you can not only go to school without loans (which I’ll get into in a minute) but also save money while in school.

How Do I Apply for a Grad PLUS Loan?

To apply for a Grad PLUS loan, you must:3

Most schools want you to apply for Grad PLUS loans directly through the Federal Student Aid website, while some schools have their own specific application process. You’ll also have to sign a Master Promissory Note to agree to the loan terms (yeah, it’s as intimidating and legally binding as it sounds).

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Taking out a Grad PLUS loan is no joke. And borrowing money for school, especially at such a high interest rate, has the potential to put you in a lot of debt fast. Trust me, you’re better off avoiding these loans (or any loans for that matter) altogether.

Can Grad PLUS Loans Be Forgiven?

Grad PLUS loans can be forgiven under Biden’s new student loan plan—up to $20,000, depending on your income and whether you received a Pell Grant or not. But if you’ve still got student loans from undergrad, those will be forgiven first under this policy.

Grad PLUS loans are also technically eligible for income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), but they are certainly not guaranteed to be forgiven through either. For one thing, income-driven repayment plans typically take about 20–25 years to complete. Even then, there are a lot of conditions around whether or not your debt will actually be forgiven.

And in order to qualify for PSLF, you have to work for an approved employer—which in most cases won’t pay a ton of money. So, unless you can use your graduate degree to increase your nonprofit salary or you work for the government, you’re most likely not going to have your loans forgiven that way.

Should I Apply for a Grad PLUS Loan?

Short answer: No. If you haven’t realized by now, Grad PLUS loans are just another way to go even deeper into student loan debt. If you’re like most people, you’re probably banking on getting a good-paying job after grad school so you can pay off all your student loans. But that doesn’t always work out. And it may take a while to find the right job and work your way up to a higher salary. Or you may get a year into grad school and realize you don’t really want to be a college professor or work on Wall Street anymore. But you’ll still have student loans to pay off regardless. Ouch.

Plus, by the time you finish school, you’ve already racked up a ton of interest. And when you’ve got a huge student loan with a huge interest rate, that debt can grow faster than you can make progress. Just ask the doctors, dentists and lawyers out there who are still paying off their student loans from decades earlier.

The truth is, student loans are straight-up dangerous. They steal your paycheck and your peace, hanging over your head for years and forcing you to pay a ton of extra money in interest.

Alternatives to a Grad PLUS Loan

Now, I’m not saying you should give up on the idea of getting a graduate or professional degree. But I want you to be smart about it. You can fund your education without taking out a Grad PLUS loan. Here are some ways you can go to grad school debt-free and stay debt-free.

Choose the Right School

Probably the best way to avoid taking out student loans is to pick a school you can actually afford. Remember, you’re not choosing a school for their football team, their dining plan or their beautiful campus—you’re choosing a school that will help you further your education and career. And the degree itself is more important than where you got it from. So do your research and look for grad programs that fit in your price range.

Consider Graduate Certificates

Are you sure grad school is the right choice? Depending on your goal, you might look into graduate certificates. A graduate certificate isn’t the same thing as an actual graduate degree. But if you want to learn more about a particular field or expand your skill level, graduate certificates are a more flexible and affordable option. It can also be a low-pressure way to get into a new field, and some graduate programs even accept graduate certificates as credits.

Still Fill Out the FAFSA

The FAFSA isn’t just for people applying for student loans. It’s also a great way to get financial aid (the good kind of financial aid that you don’t have to pay back later). And graduate and professional students can get in on some of this free money to use for school too! Go ahead and apply if you haven’t already.

Research Scholarships

High school seniors and college undergrads aren’t the only ones who can qualify for scholarships. There are plenty of scholarships out there for students who are earning their graduate or professional degrees. I recommend using databases like Scholarship Owl to find the scholarships you’re most likely to qualify for. Just by taking the time to search and apply, you can help cut the cost of tuition and other school expenses way down.

Look Into Graduate Assistantships

Graduate assistantships are paid positions for grad students that allow you to work part time at a school while also earning your degree. Assistants usually help out professors with various tasks, conduct research, host events, and even teach some classes. It’s a great way to get even more involved in your field of study, make connections, and get extra hands-on experience. Each assistantship has different requirements, but most schools will offer a tuition waiver and some sort of stipend to help cover school expenses.

Ask Your Employer

If you’re employed full time and are interested in getting a degree in the same field as your current job, you should look into tuition reimbursement programs. Yes, there are actually companies that will cover part (or all) of your tuition, especially if it will help you pour your skills back into the company. You’ll need to do some research on the front end to figure out exactly what degrees they will pay for and how they’ll pay for them. But this can be a great way to grow your education and your career for a fraction of the cost.

Cash Flow Your Tuition

Even if you can’t get all your tuition covered, you can still get a grad degree by paying for it out of pocket. Kristina, are you serious? I sure am! Believe it or not, cash flowing your degree is totally possible. You just need to take it one semester at a time and save up enough money to pay for your classes up front.

This helps you break up your education into affordable chunks and go at your own pace. Plus, there are so many ways to save up for school. Then, it’s just a matter of going to class, working your day job or side hustle, cutting expenses where you can, and focusing on staying out of debt. I know that sounds like a lot, but if you take it one step at a time, you can make it happen.

You’re also going to need a budget if you want to cash flow your degree. By making a plan for your money every month, you can tell your money where to go and find areas to cut back—so you can save toward your goal faster!

Ready to save for your first semester of grad school and earn your debt-free degree? Start budgeting for free with EveryDollar.

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Kristina  Ellis

About the author

Kristina Ellis

Kristina Ellis is a bestselling author who believes no student should be burdened by loans. Drawing from her experience of earning over $500K in college scholarships, Kristina helps thousands of students graduate debt-free through her syndicated columns, podcast appearances, online courses and books. She’s a co-host of The Ramsey Show, the second-largest talk show in America, which reaches 18 million weekly listeners, and she appeared in the award-winning documentary Borrowed Future. Kristina has appeared on NBC News, Business Insider, Fox & Friends, USA Today and Yahoo!, where she’s shared practical, real-world strategies for going to college without debt. Learn More.

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