A Grad PLUS loan is a federal Direct Loan that lets a student in a master’s, doctoral, or professional program borrow up to the school’s full cost of attendance minus any other financial aid, at a fixed interest rate set each July. Here is how Grad PLUS loans work in practice: you apply through the Department of Education, pass a credit check (or add an endorser), sign a Master Promissory Note, and the school receives the money directly. Interest starts accruing at disbursement, repayment formally begins right after the loan is fully disbursed, and an automatic in-school deferment plus a six-month post-enrollment period pushes your first bill out until well after you finish. One boundary worth knowing up front: Congress ended the program in the 2025 budget reconciliation law, so no new Grad PLUS loans will be disbursed after June 30, 2026. Existing loans keep their original terms.
Who Can Borrow
You must be enrolled at least half-time in a graduate or professional degree program at a school that participates in the federal Direct Loan Program. You also have to meet federal student aid citizenship rules, which cover U.S. citizens, U.S. nationals, and certain noncitizens such as green card holders, refugees, asylees, and T-visa holders.1Federal Student Aid. Student Citizenship Status Anyone outside those categories isn’t eligible for federal student aid at all.
You can’t be in default on an existing federal student loan. If you are, you’ll need to clear that first by paying it off, rehabilitating it, consolidating it, or making satisfactory repayment arrangements.2Federal Student Aid. Federal Student Aid Eligibility for Borrowers with Defaulted Loans
The Credit Check
Unlike Direct Unsubsidized Loans, Grad PLUS involves a credit check. The Department of Education doesn’t look at your credit score. It pulls your credit report and looks for specific negative marks that add up to “adverse credit history”:
- One or more delinquent accounts with a combined outstanding balance above $2,085 that are 90 or more days past due, or that were placed in collection or charged off within the past two years.
- A loan default, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal student loan within the past five years.
Any of those marks results in an initial denial.3Federal Student Aid. Student and Parent Eligibility for Direct Loans
You still have two ways forward. You can add an endorser, someone who agrees to repay if you don’t. The endorser has to be a U.S. citizen or eligible noncitizen with no adverse credit history of their own, and you’ll need to sign a new Master Promissory Note for each loan when an endorser is involved. Or you can appeal by documenting extenuating circumstances such as identity theft, credit reporting errors, or accounts that don’t belong to you, with supporting documents showing what happened and what you’re doing about it.4Federal Student Aid. PLUS Loans: What to Do if You’re Denied Based on Adverse Credit History
Either route triggers a requirement to complete special PLUS credit counseling before the loan is disbursed. That’s separate from the standard entrance counseling first-time Grad PLUS borrowers also have to complete.5Federal Student Aid. Direct Loan Counseling
Interest Rate, Fees, and How Much You Can Borrow
The rate is fixed for the life of each loan, but a new rate is set each academic year based on the 10-year Treasury note yield plus 4.60 percentage points, capped at 10.50%. For loans first disbursed between July 1, 2025, and June 30, 2026, the fixed rate is 8.94%.6Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 A loan disbursed in September 2025 keeps that 8.94% rate for its entire repayment period, even if the next academic year’s rate is lower.
There’s also an origination fee of 4.228%, deducted from each disbursement before the money reaches your school.7Federal Student Aid. Direct PLUS Loans for Graduate or Professional Students On a $10,000 disbursement, $422.80 comes off the top; the school receives $9,577.20, but you still owe $10,000. That fee raises the real cost of borrowing above the stated interest rate.
The school’s financial aid office sets your borrowing limit by adding up cost of attendance (tuition, fees, housing, books, transportation, personal expenses) and subtracting any other aid you’re getting. Whatever’s left is the maximum Grad PLUS amount. There’s no aggregate lifetime cap the way there is with Direct Unsubsidized Loans, which limit graduate borrowing to $20,500 per year and $138,500 total.
How to Apply
File the Free Application for Federal Student Aid (FAFSA) for the current academic year, using your school’s six-digit federal school code so your data reaches the right financial aid office.
Then go to studentaid.gov and complete the Grad PLUS loan request. Log in with your FSA ID and provide your Social Security number, address, and contact information. Submitting the request runs the automated credit check; if nothing adverse turns up, you and the school get a credit approval notice.
You’ll sign a Master Promissory Note, the legally binding agreement between you and the Department of Education. The MPN asks for two personal references who’ve known you for at least three years, live at different U.S. addresses, and don’t live with you. After the MPN is signed and credit is approved, the school certifies your enrollment and the loan amount. Funds go directly to the school for tuition and fees, and the bursar’s office issues any leftover to you.
Repayment, Deferment, and Accruing Interest
Repayment technically begins the day after the final disbursement, without a formal grace period. In practice, though, you get an automatic in-school deferment while enrolled at least half-time, plus another six months after you graduate or drop below half-time.8eCFR. 34 CFR Part 685 – William D. Ford Federal Direct Loan Program The effect is a lot like a grace period, but the legal distinction matters because of how interest works.
Interest accrues from the day of disbursement, including in school, during the six-month post-enrollment period, and through any deferment or forbearance. You owe all of it. Any unpaid interest capitalizes when you enter active repayment, meaning it’s added to your principal, and future interest is charged on the higher balance. Paying even a small amount toward interest while you’re in school can meaningfully reduce total cost.
If you don’t pick a plan, the servicer puts you on the Standard Repayment Plan: fixed monthly payments over up to 10 years.9Federal Student Aid. Standard Plan For large Grad PLUS balances, those payments can be substantial.
Income-driven repayment (IDR) plans set your monthly payment as a percentage of discretionary income and stretch repayment to 20 or 25 years, with any remaining balance forgiven at the end.10Federal Student Aid. Questions and Answers About IDR Plans The forgiven amount at the end of an IDR term is potentially taxable, though the tax treatment of forgiven student debt has been in flux. The available IDR menu is also changing under the 2025 reconciliation law, which repealed the SAVE plan and restricted new borrower access to PAYE, ICR, and IBR going forward.11Federal Student Aid. Big Updates to Federal Student Aid If you already have Grad PLUS loans and are on an IDR plan, check the Department of Education’s transition guidance for the enrollment cutoffs that apply to your loan.
A Direct Consolidation Loan combines multiple federal loans into one, with a fixed rate calculated as the weighted average of your existing rates rounded up to the nearest one-eighth of a percent. Consolidation can lengthen your repayment period, lowering monthly payments but raising total interest paid. For Grad PLUS borrowers, consolidation has historically been the way to unlock certain IDR plans and forgiveness paths that unconsolidated PLUS loans couldn’t access.
Forgiveness and Discharge
Public Service Loan Forgiveness (PSLF) cancels the remaining balance after 120 qualifying monthly payments made under an IDR plan on Direct Loans while you work full-time for a qualifying government agency or nonprofit.12Federal Student Aid. Do I Qualify for Public Service Loan Forgiveness (PSLF)? PSLF forgiveness is tax-free, unlike forgiveness at the end of a standard IDR term.
Total and Permanent Disability (TPD) discharge is available if you can document total and permanent disability through the VA (a 100% disability rating or individual unemployability), the Social Security Administration (SSDI or SSI benefits meeting certain criteria), or a licensed physician, nurse practitioner, or physician assistant certifying that you can’t perform substantial work and that your condition has lasted or is expected to last at least five years.13Federal Student Aid. How To Qualify and Apply for Total and Permanent Disability (TPD) Discharge
If the borrower dies, the remaining balance is discharged once the Department receives a certified death certificate or verification through an approved federal or state database, and any payments received after the date of death are returned to the estate.14eCFR. 34 CFR 685.212 – Discharge of a Loan Obligation
The Interest Deduction at Tax Time
Interest you pay on a Grad PLUS loan is tax-deductible up to $2,500 a year as an above-the-line deduction, so you don’t have to itemize to claim it. For tax year 2026, the full deduction is available to single filers with modified adjusted gross income at or below $85,000 and joint filers at or below $175,000, phasing out completely at $100,000 for single filers and $205,000 for joint filers.15Internal Revenue Service. Publication 970 Tax Benefits for Education
If you pay $600 or more in interest during the year, your servicer sends Form 1098-E by the end of January.16Internal Revenue Service. Instructions for Forms 1098-E and 1098-T Below that threshold, you can still claim the deduction; you’ll just track the amount yourself through your servicer’s website or monthly statements.
What Changes After June 2026
No new Grad PLUS loans will be disbursed on or after July 1, 2026.11Federal Student Aid. Big Updates to Federal Student Aid In place of Grad PLUS, Congress raised the borrowing limits on Direct Unsubsidized Loans for graduate and professional students: graduate students can borrow up to $20,500 per year with a $100,000 aggregate cap, and professional students up to $50,000 per year with a $200,000 aggregate cap. Direct Unsubsidized Loans don’t require a credit check, which removes the PLUS hurdle. But the aggregate caps are a significant change from Grad PLUS, which had no lifetime limit at all, so students in expensive programs may face a gap that only private loans can fill.
If you already have Grad PLUS loans, none of this changes your repayment terms or your access to forgiveness. Your existing loans stay Direct Loans on the terms you originally borrowed.