A Grad PLUS loan is a federal loan from the U.S. Department of Education that lets a graduate or professional student borrow up to the school’s full cost of attendance, minus any other financial aid received. For loans first disbursed between July 1, 2025, and June 30, 2026, the fixed interest rate is 8.94%, and a 4.228% origination fee is deducted from each disbursement before the money reaches the school.1Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 You repay the full disbursed amount with interest after you leave school, with a six-month grace period before the first bill.
The structure matters because standard Direct Unsubsidized Loans cap out at $20,500 per year for graduate students. A Grad PLUS loan fills whatever gap remains, which is why it tends to be the vehicle law, medical, and other high-cost graduate students use for the bulk of their financing.
What It Costs
The 8.94% interest rate is fixed for the life of each loan. Once a loan is disbursed, that rate never changes. But the rate itself resets every year for newly disbursed loans. Congress wrote the formula: the high yield on the 10-year Treasury note from the May auction, plus a statutory add-on of 4.60 percentage points, capped at 10.50%.1Federal Student Aid. Interest Rates for Direct Loans First Disbursed Between July 1, 2025 and June 30, 2026 The 2026–2027 rate will be announced in late May or early June 2026 under the same formula.
The 4.228% origination fee is taken out of every disbursement.2Federal Student Aid. FY 26 Sequester-Required Changes to the Title IV Student Aid Programs On a $10,000 disbursement, $422.80 goes to the fee and $9,577.20 reaches your school, but you still owe the full $10,000. Over a long repayment term, the rate compounds in ways that surprise new borrowers. A $50,000 Grad PLUS balance at 8.94% repaid over ten years costs roughly $24,000 in interest alone.
Who Qualifies
You need to be enrolled at least half-time in a graduate or professional degree program at a school that participates in the Direct Loan Program.3Federal Student Aid Partners. Awarding Direct PLUS Loans to Grad PLUS Borrowers The program must lead to a recognized degree such as a master’s, doctorate, law, or medical degree. Certificate programs and undergraduate credentials don’t qualify.
You also can’t have an adverse credit history. This is not a conventional credit score review. The Department of Education looks for a specific list of negative events: bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or default on a federal student loan within the past five years. It also flags accounts that are 90 or more days delinquent or in collections, but only when the combined balance of those accounts exceeds an inflation-adjusted threshold (it was $2,085 when the current standard took effect in 2015).4Federal Student Aid. Early Implementation of Changes in Regulations on Adverse Credit History Under the Direct PLUS Loan Program A thin file or a low score by itself will not disqualify you.
If the credit check comes back adverse, you have two options. You can bring on an endorser, who agrees to repay the loan if you default and who must not have adverse credit of their own. Or you can submit documentation of extenuating circumstances and request reconsideration from the Department of Education.5Federal Register/Regulations Information System. Information Collection Request Regarding Changes to Adverse Credit History Regulations for PLUS Loans Either route requires additional PLUS loan counseling before funds are released.
How Much You Can Borrow
There is no fixed dollar cap. Your annual limit is your school’s cost of attendance (tuition, fees, room, board, books, transportation, and personal expenses) minus any other aid you receive.6eCFR. 34 CFR 685.203 – Loan Limits There’s also no aggregate lifetime cap specifically for Grad PLUS. The same cost-of-attendance formula applies across every year of enrollment.
That flexibility is the loan’s main appeal and its main risk. Nothing in the program stops you from borrowing well beyond what your eventual salary can comfortably repay.
How to Apply
The steps go in a specific order, and skipping one can delay funding by weeks.
File the FAFSA
You must have a completed Free Application for Federal Student Aid on file for the current academic year before you can apply for a Grad PLUS loan. The FAFSA sets your overall aid package, and your school uses it to calculate how much you’re eligible to borrow. You’ll need a Federal Student Aid (FSA) ID to file it and to sign loan documents. Create one at studentaid.gov if you don’t already have it.
Submit the Application and Sign the Master Promissory Note
Log into studentaid.gov with your FSA ID and open the Grad PLUS loan application. You’ll enter your school, enrollment details, employment, and residency information. After the application, you sign a Master Promissory Note (MPN), the binding agreement to repay the amount borrowed plus interest and fees.7U.S. Department of Education. Master Promissory Note (MPN) – Direct PLUS Loans
Complete Entrance Counseling
If this is your first Direct loan as a graduate student, you must complete entrance counseling before your school can release funds.8Federal Student Aid Handbook. Direct Loan Counseling It runs about 20 to 30 minutes online at studentaid.gov and covers your repayment obligations and what happens if you fall behind.
School Certification
The Department of Education forwards everything to your school’s financial aid office, which verifies your enrollment and certifies the loan amount against your cost of attendance. Processing times run from a few days to several weeks. Apply as early as the FAFSA opens to avoid last-minute gaps.
How the Money Reaches You
Funds go directly to your school, usually once per semester. The school first applies the money to tuition, fees, and on-campus housing. Anything left over is refunded to you for other educational expenses. Because the 4.228% origination fee is deducted proportionately from each disbursement, the amount credited to your account is slightly less than the loan amount you’ll owe.
Interest While You’re in School
You aren’t required to make payments while you’re enrolled at least half-time or during the six-month grace period after you leave. Interest accrues the whole time anyway. When your deferment ends, that unpaid interest capitalizes: it’s added to your principal, and from then on you pay interest on the larger balance.9Nelnet – Federal Student Aid. Interest Capitalization Two years of deferment on a $40,000 loan at 8.94% adds more than $7,000 to the balance before you’ve made a single payment.
You can head this off by making interest-only payments during school. Even small monthly amounts cut thousands off the total cost. If paying anything during school isn’t feasible, at least go in knowing your balance at graduation will be bigger than the amount you borrowed.
Repayment After You Leave School
Repayment begins after your six-month grace period. The plan you pick determines your monthly payment, your total interest, and whether forgiveness is on the table.
Standard Repayment
The default is a ten-year fixed schedule. It costs the least in total interest because the payoff period is shortest, but monthly payments can be steep. A $100,000 balance at 8.94% runs above $1,250 a month on this plan.
Extended and Graduated Repayment
With more than $30,000 in federal student loans, you can stretch payments out to 25 years under the Extended Repayment Plan.10Consumer Financial Protection Bureau. What Is an Extended Repayment Plan for Federal Student Loans Monthly payments shrink; total interest grows. Graduated Repayment starts lower and steps up every two years over a 10- or 25-year term. Neither leads to forgiveness.
Income-Driven Repayment
Income-driven repayment (IDR) caps monthly payments at a percentage of your discretionary income and forgives any remaining balance after 20 or 25 years of qualifying payments. For Grad PLUS loans disbursed before July 1, 2026, the available IDR options are Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). The SAVE plan, which had offered the most generous terms, was struck down by a federal appeals court in early 2026 and is no longer available.
For Grad PLUS loans disbursed on or after July 1, 2026, the new Repayment Assistance Plan (RAP) is expected to be the only IDR option. The details are still being finalized, so borrowers taking out new Grad PLUS loans for the 2026–2027 academic year should check studentaid.gov for current terms.
Forgiveness
Grad PLUS loans are Direct loans, so they qualify for Public Service Loan Forgiveness (PSLF). After 120 qualifying monthly payments (ten years) while working full-time for a qualifying employer, your remaining balance is forgiven. Qualifying employers include federal, state, and local government agencies and most nonprofits. PSLF forgiveness is tax-free.
The catch: you have to be on an IDR plan or the standard ten-year plan to earn qualifying payments. Since the standard plan pays the loan off in exactly ten years, PSLF only produces savings if you’re on an IDR plan with lower monthly payments that leave a balance behind at the ten-year mark. Submit your employment certification form annually so qualifying payments are tracked as you go.
IDR forgiveness after 20 or 25 years also wipes any remaining balance, but the tax treatment changed in 2026. The temporary exclusion that made forgiven balances tax-free under the American Rescue Plan expired at the end of 2025. Any amount forgiven under IDR in 2026 or later is treated as ordinary taxable income. If you have $80,000 forgiven after 25 years, you could face a five-figure tax bill in the year the forgiveness lands. Set aside money annually to avoid being blindsided.
Discharge for Death or Disability
Federal Grad PLUS loans are discharged if the borrower dies. A family member or estate representative sends proof of death to the loan servicer, and the balance is canceled. No one else is on the hook.11Federal Student Aid. What Happens to a Loan if the Borrower Dies
A borrower who becomes totally and permanently disabled can also apply for discharge. Qualifying documentation includes a physician, nurse practitioner, or physician assistant certification, or qualifying Social Security disability records. Veterans may be discharged automatically when the Department of Education receives VA data confirming a service-connected disability.12eCFR. 34 CFR 685.213 – Total and Permanent Disability Discharge A three-year monitoring period follows a disability discharge. Taking out a new federal loan or receiving a new TEACH Grant during that window can reinstate the discharged loan.
The Student Loan Interest Deduction
While you’re repaying, you can deduct up to $2,500 of student loan interest per year on your federal return. For 2026, the deduction phases out between $85,000 and $100,000 of modified adjusted gross income for single filers, and between $175,000 and $205,000 for joint filers.13Internal Revenue Service. Publication 970 – Tax Benefits for Education You don’t need to itemize; it’s an adjustment to income.