Federal PLUS Loans are a significant component of the U.S. federal student aid system, designed to help families and students bridge the gap in financing higher education. The program is designed for undergraduate and graduate students, and the following overview of what to expect when using these programs can help you make an informed decision.
Who Offers Federal PLUS Loans?
Federal PLUS Loans are federal student loans offered through the U.S. Department of Education’s William D. Ford Federal Direct Loan Program. The term “PLUS” originally stood for “Parent Loan for Undergraduate Students,” but today, the program includes two main types:
- Parent PLUS Loans: For parents of dependent undergraduate students.
- Grad PLUS Loans: For graduate and professional students.
Both types are designed to cover educational expenses not met by other forms of financial aid, such as scholarships, grants, and subsidized or unsubsidized federal loans.
Who Is Eligible for a PLUS Loan?
Parent PLUS Loans
You must be the biological or adoptive parents of a student who is enrolled half-time in an undergraduate program at an eligible educational institution in order to qualify. Both parent and student must be U.S. citizens or eligible non-citizens, and the parent must not have an adverse credit history. Income and credit scores are not considered, but a basic credit check is required.
Grad PLUS Loans
Grad PLUS Loans are available to graduate or professional students who are enrolled at least half-time in an eligible program. Like Parent PLUS Loans, applicants must be U.S. citizens or eligible non-citizens and must not have a good credit rating. Those will poor credit may still qualify by obtaining a co-signer or by documenting extenuating circumstances.
Both types of PLUS Loans require the student (and parent, if applicable) to first complete the Free Application for Federal Student Aid (FAFSA).
How Much Can You Borrow?
One of the most attractive features of PLUS Loans is their generous borrowing limit. Borrowers can take out up to the full cost of attendance at their chosen institution, minus any other financial aid received. This includes tuition, room and board, fees, books, and other education-related expenses. There is no aggregate (lifetime) limit to how much you can borrow through PLUS Loans 267.
Interest Rates and Fees
PLUS Loans have a fixed interest rate that is set by the federal government each year. For loans disbursed between July 1, 2024, and July 1, 2025, the interest rate is 9.08% for both Parent PLUS and Grad PLUS Loans. This rate is higher than undergraduate federal loans but often lower than private student loans for borrowers with average credit.
In addition to interest, PLUS Loans carry an origination fee. As of 2025, the fee is 4.228% of the total loan amount, which is deducted from each disbursement. This fee is significantly higher than the fee for federal Stafford loans.
How Are PLUS Loans Disbursed?
Loan funds are sent directly to the educational institution, which applies them to tuition, fees, and (if applicable) room and board. Any remaining balance is then refunded to the parent (for Parent PLUS) or to the student (for Grad PLUS) unless the parent authorizes the school to release the funds to the student.
Repayment Terms and Options
Parent PLUS Loans
Repayment on Parent PLUS Loans typically begins within 60 days after the loan is fully disbursed. However, parents can request to defer payments while the student is enrolled at least half-time and for six months after the student graduates or drops below half-time enrollment. Interest accrues during all periods, including deferment.
Repayment plans include:
- Standard (10-year) repayment
- Extended repayment
- Graduated repayment
- Income-Contingent Repayment (ICR) is applicable only if the loan is consolidated into a Direct Consolidation Loan
Parent PLUS Loans are not eligible for most income-driven repayment plans unless consolidated, and the responsibility for repayment remains with the parent, not the student.
Grad PLUS Loans
Grad PLUS Loans offer more flexible repayment options, including all federal income-driven repayment plans (such as Income-Based Repayment and Pay As You Earn). Repayment begins six months after the student graduates, leaves school, or drops below half-time enrollment.
Both types of PLUS Loans may be eligible for Public Service Loan Forgiveness (PSLF) if consolidated and if the borrower meets other PSLF requirements.
Pros and Cons of PLUS Loans
Pros
- High borrowing limits: Can cover the full cost of attendance minus other aid.
- Fixed interest rates: Rates remain the same throughout the loan term.
- Flexible use: Funds can be used for tuition, fees, room and board, books, and more.
- Available regardless of financial need: No need to demonstrate financial hardship.
Cons
- Higher interest rates and fees: More expensive than undergraduate federal loans.
- Credit check required: Applicants must not have a good credit history.
- Limited repayment flexibility for parents: Parent PLUS Loans are not eligible for most income-driven plans unless consolidated.
- Responsibility for repayment: Parents are permanently responsible for Parent PLUS Loans; they cannot be transferred to the student unless refinanced privately, which forfeits federal protections.
How to Apply for a PLUS Loan
- Complete the FAFSA: Both student and parent (if applicable) must submit the Free Application for Federal Student Aid.
- Apply for the PLUS Loan: Visit the Federal Student Aid website (studentaid.gov) and complete the PLUS Loan application.
- Credit check: The Department of Education will conduct a credit check as part of the application process.
- Sign the Master Promissory Note (MPN): This is a legal agreement to repay the loan6.
- Loan disbursement: Funds are sent to the school, which applies them to the student’s account.
Is a PLUS Loan Right for You?
PLUS Loans can be a helpful solution for families and graduate students who have exhausted other forms of financial aid. However, the higher interest rates and fees, as well as the repayment responsibility, mean that borrowers should carefully consider how much they borrow and whether they can afford the payments after graduation. It’s generally advised that parents borrow no more than their annual income and that they plan to repay the loan within 10 years, especially if retirement is approaching.
Conclusion
Federal PLUS Loans cover costs students will encounter while pursuing their degree that are not typically covered by other forms of aid. These programs should be approached conservatively as they offer ample borrowing power and flexible uses but normally come with higher costs and very stringent repayment obligations. Be sure to fully understand the ramifications before engaging this resource. However, if used properly, it can be a part of a sound college financial plan.