Everything You Need to Know about Federal PLUS Loans

on June 13, 2017

The Federal PLUS loan is an unsubsidized federal education loan that is borrowed by graduate students to pay for their own graduate school education and by parents of dependent undergraduate students to pay for the student’s college education. These loans are known as the Federal Grad PLUS and Federal Parent PLUS, respectively, and are identical in most aspects.


Interest Rates and Fees


Federal PLUS Loans have fixed interest rates that do not change over the life of the loan. However, each academic year’s new loans are at a new fixed interest rate that is based on the last 10-year Treasury Note auction in May, plus a margin. The new interest rates take effect for new loans on or after July 1. The interest rates on existing Federal PLUS loans do not change.


The interest rates are the same for Federal Grad PLUS and Federal Parent PLUS loans.


Loan Program

Interest Rate

Interest Rate

Interest Rate Formula

Rate Cap

Parent PLUS



10-year Treasury + 4.60%





10-year Treasury + 4.60%



The loan fees on the Federal PLUS Loan are 4.276 percent of the amount borrowed. The fees are deducted from the disbursement and are not paid in advance of receiving the loan. The fee normally changes on October 1 of each year, reflecting changes in sequestration.


Federal PLUS Loan Limits


The annual limit on the Federal PLUS loan is up to the full cost of attendance minus other aid received. There is no cumulative loan limit.


The cost of attendance is defined as including tuition, fees, room, board, books, supplies, equipment, transportation to/from the college and miscellaneous/personal expenses.


If a dependent student’s parent is denied a Federal Parent PLUS loan, the student becomes eligible for the higher unsubsidized Federal Stafford loan limits available to independent students. Graduate students who are denied a Federal Grad PLUS loan are not eligible for higher Federal Stafford loan limits.


Although graduate students and parents can borrow up to the full cost-of-attendance, that doesn’t mean they should. Needing to borrow a Federal PLUS loan or a private student loan might be a sign of over-borrowing.

  • Graduate students should not borrow more for their entire education (including any outstanding undergraduate loans) than their expected annual starting salary after graduation. If total student loan debt is less than the student’s annual income, they can afford to repay the student loans in ten years or less.
  • Parents should not borrow more for all their children than their annual income. If total parent loan debt is less than the parents’ annual income, they can afford to repay the parent loans in ten years or less. However, if retirement is only 5 years away, the parents should borrow half as much, since they will have half the time to repay the debt before they retire.

Eligibility for Federal PLUS Loans


To be eligible for a Federal PLUS loan, the student (including the student on whose behalf the parent is borrowing a Federal Parent PLUS loan) must satisfy the requirements for students to borrow from the federal student loan programs. These requirements include:

  • The student must be a US citizen, permanent resident or eligible non-citizen
  • The student must be enrolled as a regular student in a program that is eligible for Title IV federal student aid
  • If the student is male, the student must register or have registered with Selective Service
  • The student must be enrolled on at least a half-time basis
  • The student must not be in default on any federal education loans

There are additional requirements for the borrower of the Federal PLUS loan:

  • The borrower must not have an adverse credit history
  • A parent borrower must be the biological or adoptive parent of the student, or a stepparent who is currently married to a biological or adoptive parent of the student. Grandparents and other relatives are not eligible unless they have legally adopted the student. Likewise, legal guardians and foster parents are not eligible to borrow a Federal Parent PLUS loan.
  • A parent borrower must satisfy the same citizenship requirements as the student, except for the Selective Service requirement
  • Eligibility for the Federal PLUS loan does not depend on financial need

To apply for a Federal PLUS loan, the student should file the Free Application for Federal Student Aid (FAFSA) at fafsa.ed.gov. The FAFSA is required before the student can receive a Federal PLUS loan. After the FAFSA is filed, the borrower will need to sign a Master Promissory Note (MPN) at StudentLoans.gov.


Repayment of Federal PLUS Loans


Since July 1, 2008, repayment of a Federal PLUS loan begins 6 months after the student graduates or drops below half-time enrollment. Borrowers can choose to start repayment 60 days after full disbursement of the loan.

Federal Grad PLUS loans are eligible for standard repayment, graduated repayment, extended repayment and income-driven repayment.

Federal Parent PLUS loans are not directly eligible for income-driven repayment. However, if the Federal Parent PLUS loans enter repayment on or after July 1, 2006 and are consolidated into a Federal Direct Consolidation Loan, the consolidation loan is eligible for income-contingent repayment (ICR) but not the other income-driven repayment plans.

Parent borrowers cannot consolidate their Federal Parent PLUS loans with the student’s federal student loans. But, a parent can consolidate their Federal Parent PLUS loans with their own federal student loans. Graduate students can consolidate Federal Grad PLUS loans with Federal Stafford loans.

Federal Parent PLUS loans are not only eligible for discharge upon the death or total and permanent disability of the parent borrower, but also for discharge upon the death of the student on whose behalf the loan was borrowed. The discharge of the debt can be treated as taxable income to the borrower or the borrower’s estate, resulting in a tax liability.


When financial aid and federal student loans aren't enough to cover all college costs, consider financing the gap with private student loans. Shop around to find the loans that best fit your needs.

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