A Direct PLUS Loan is a federal loan that lets a parent of a dependent undergraduate, or a graduate or professional student, borrow up to the school’s cost of attendance minus any other financial aid. It requires a credit check, carries a fixed interest rate set each July, and charges an origination fee that comes off the top of each disbursement. Interest starts accruing the day the money is sent to the school, and repayment begins 60 days after the final disbursement of the academic year unless you request a deferment.
Who Can Borrow
PLUS Loans come in two versions. Parent PLUS goes to the biological, adoptive, or in some cases stepparent of a dependent undergraduate enrolled at least half-time. Grad PLUS goes directly to a graduate or professional student, also enrolled at least half-time.1Federal Student Aid. Parent PLUS Loans2eCFR. 34 CFR 685.200 – Borrower Eligibility
Both types require a FAFSA on file. Graduate students have to hit their maximum eligibility for Direct Unsubsidized Loans before a Grad PLUS is available.2eCFR. 34 CFR 685.200 – Borrower Eligibility The borrower must be a U.S. citizen, U.S. national, or eligible noncitizen.3Federal Student Aid Handbook. U.S. Citizenship and Eligible Noncitizens
The Credit Check
PLUS is the only federal student loan that runs a credit check, and the Department of Education isn’t scoring you the way a mortgage lender would. It looks for specific negatives called adverse credit history, and the rule has two parts with different lookback windows.
The two-year window covers debts with a combined outstanding balance over $2,085 that are 90 or more days delinquent, in collection, or charged off. The five-year window covers heavier events: a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal student loan.2eCFR. 34 CFR 685.200 – Borrower Eligibility
That split trips people up. A collection account from three years ago won’t disqualify you. A bankruptcy discharge from four years ago will.
If You’re Denied
A denial is not the end. You have three paths, and you only need one.
- Add an endorser. This is a co-signer who agrees to repay if you don’t. The endorser must be a citizen or eligible noncitizen with no adverse credit of their own, and for Parent PLUS the student can’t fill this role. If you default, the endorser is on the hook for the same collection actions you would be, including wage garnishment.4Federal Student Aid. Endorser Addendum to Federal PLUS Loan Application and Master Promissory Note
- Appeal based on extenuating circumstances, such as errors on your credit report, accounts that aren’t yours, or identity theft. You file the appeal online with supporting documentation.5Federal Student Aid. PLUS Loans: What to Do if You’re Denied Based on Adverse Credit History
- Complete PLUS Credit Counseling. Whichever of the first two routes you take, this counseling is also required before the loan can be approved.5Federal Student Aid. PLUS Loans: What to Do if You’re Denied Based on Adverse Credit History
If a parent’s PLUS application is denied and none of the alternatives pan out, the dependent undergraduate may become eligible for additional Direct Unsubsidized Loan funds. Ask the school’s financial aid office.
What It Costs
PLUS interest rates are fixed for the life of each loan but reset every July 1 based on the 10-year Treasury note auction. 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 That’s meaningfully higher than Direct Subsidized and Unsubsidized rates for the same window, which is worth remembering when comparing PLUS against private lending.
On top of that, PLUS Loans carry a 4.228% origination fee for loans first disbursed before October 1, 2026. The fee is deducted proportionally from each disbursement, so you receive less than the full loan amount but still owe interest on the entire balance. On a $20,000 loan, roughly $846 comes off the top before the money reaches the school. Origination fees may change after October 1, 2026, under recent legislation, so verify the current figure at StudentAid.gov if you’re borrowing later in the year.
Interest starts accruing the day funds are disbursed, including while the student is still in school. There is no government-paid interest period the way there is with Direct Subsidized Loans. Every month you’re not paying, the balance is growing.
How Much You Can Borrow
The limit is the student’s cost of attendance minus any other financial aid received. PLUS has no fixed annual or aggregate dollar cap like the Direct Subsidized and Unsubsidized programs.7eCFR. 34 CFR 685.203 – Loan Limits The flexibility cuts both ways: you can close the whole gap, and you can also borrow more than makes sense.
Cost of attendance is set by each school and reaches beyond tuition. Federal law includes room and board, books and supplies, transportation, and personal expenses, plus allowances for dependent care and for disability-related costs like special services, equipment, and personal assistance not covered by other agencies.8Office of the Law Revision Counsel. 20 USC 1087ll – Cost of Attendance If your real costs are higher than the school’s standard budget, ask the financial aid office about an adjustment.
Applying and Disbursement
The application lives at StudentAid.gov. Parents log in with their own FSA ID, not the student’s; graduate students log in with theirs. The credit check runs automatically when you submit. If approved, you complete a Master Promissory Note, the contract that commits you to repay. A single MPN can cover PLUS Loans for up to 10 years, though you’ll still submit a new PLUS application, and undergo a new credit check, every academic year.9Federal Student Aid Handbook. Volume 4 – Disbursing FSA Funds
Funds go directly to the school. The school applies the money first to institutional charges such as tuition, fees, and on-campus housing or meals.9Federal Student Aid Handbook. Volume 4 – Disbursing FSA Funds Anything left over is refunded to the borrower for Parent PLUS or to the student for Grad PLUS, depending on the setup. Most schools disburse in at least two installments per academic year, typically at the start of each semester.
When Repayment Starts
Standard repayment begins 60 days after the final disbursement for the academic year. Your loan servicer sends billing statements with the monthly payment and repayment term.
Both Parent PLUS and Grad PLUS borrowers can request an in-school deferment while the student is enrolled at least half-time. For Parent PLUS, this deferment is not automatic. You or the school submit the request to the servicer, and it’s granted in one-year increments that need to be renewed. The deferment then extends for six months after the student drops below half-time.10Federal Student Aid. Parent PLUS Borrower Deferment Request
Interest keeps piling up during deferment. If you don’t pay it as it accrues, it capitalizes when repayment starts, meaning it gets added to your principal and you then owe interest on the larger amount. On a $30,000 PLUS Loan at roughly 9%, four years of deferred interest can add more than $10,000 to the balance. Even small interest-only payments during school can save thousands over the life of the loan.
Repayment Plans and Forgiveness
This is where the two borrower types diverge sharply, and where costly mistakes get made.
Grad PLUS
Graduate and professional students who borrowed PLUS directly have access to the same repayment plans available for other Direct Loans, including income-driven repayment plans that cap monthly payments at a percentage of discretionary income. Grad PLUS Loans are also directly eligible for Public Service Loan Forgiveness, which forgives the remaining balance after 120 qualifying payments made while working full-time for a qualifying public service employer.11Federal Student Aid. Are Direct PLUS Loans Eligible for PSLF
Parent PLUS
Parent PLUS is more restricted. The only income-driven plan available to parent borrowers is Income-Contingent Repayment, and you can only reach ICR by first consolidating the Parent PLUS Loan into a Direct Consolidation Loan.12Consumer Financial Protection Bureau. Options for Repaying Your Parent PLUS Loans ICR sets payments at the lesser of 20% of discretionary income or what you’d pay on a 12-year fixed plan, with forgiveness after 25 years of qualifying payments.
Parent PLUS can qualify for PSLF, but again only after consolidation and enrollment in an eligible repayment plan.11Federal Student Aid. Are Direct PLUS Loans Eligible for PSLF One warning matters here: if you consolidate a Parent PLUS Loan together with your own federal student loans from when you were a student, you’ll lose repayment plan options and reset the qualifying payment clock on PSLF for the non-Parent PLUS portion. Keep them in separate consolidations.
When a PLUS Loan Can Be Discharged
A Parent PLUS Loan is discharged if either the parent borrower or the student on whose behalf the loan was taken dies. The servicer accepts an original, certified copy, or photocopy of the death certificate.13Federal Student Aid. Discharge Due to Death The same death discharge applies to Grad PLUS if the borrower dies.
Total and permanent disability of the borrower is another basis. If the borrower qualifies under the Department of Education’s disability discharge process, both the borrower and any endorser are released.14eCFR. 34 CFR 685.212 – Discharge of a Loan Obligation4Federal Student Aid. Endorser Addendum to Federal PLUS Loan Application and Master Promissory Note
Deducting the Interest at Tax Time
Interest paid on PLUS Loans is potentially tax-deductible, up to $2,500 a year, and you don’t have to itemize to claim it. For tax year 2026, the deduction phases out for single filers with modified adjusted gross income between $85,000 and $100,000, and for joint filers between $175,000 and $205,000.15Internal Revenue Service. Publication 970 – Tax Benefits for Education For a Parent PLUS Loan, the parent claims the deduction, not the student, because the parent is the person legally obligated on the loan.