What Credit Score Do I Need for a Grad PLUS Loan?

If you’re seeking a Grad PLUS Loan to help make college or career school more affordable as a graduate or professional student, you’re in the right place.

Grad PLUS Loans are a subset of Direct PLUS Loans, which include Parent PLUS Loans for parents of undergraduate students.

For these loans, the lender is the U.S. Department of Education; these are not privately held loans.

You might have heard that a credit check will be performed when you apply for a Grad PLUS Loan. While that’s certainly true, there isn’t a specific credit score that applicants need to have. The credit check happens so the government can find out if you have an adverse credit history.

Adverse Credit History

Simply put, adverse credit history means that you have a negative mark on your credit report, such as:

• Having a debt that was placed in collections in the last two years
• Having a debt that was charged off in the last two years
• Having a write-off of a federal student loan in the last five years
• Having debt(s) totaling more than $2,085 that are 90 days or more behind
• Having a default in the last five years
• Having a foreclosure in the last five years
• Having a bankruptcy discharge in the last five years
• Having a repossession in the last five years
• Having wage garnishment in the last five years
• Having a tax lien in the last five years

Even if you have experienced any of the above, you still have options. You can apply for a Grad PLUS Loan with an endorser who promises to pay off the loan if you don’t or can’t, and you can appeal to the U.S. Department of Education, explaining why your credit report has a negative mark and that it was an extenuating circumstance. You’ll also have to take a 20- to 30-minute PLUS Credit Counseling course to help you understand the implications and obligations of taking on student debt.

Grad PLUS Loan Specifics

Grad PLUS Loans do not have a need-based requirement, but you must be enrolled at least half-time at an eligible school in an eligible program. The loan has a fixed interest rate, and for loans disbursed between July 1, 2020, and July 1, 2021, the interest rate is 4.30%.

In addition to interest on the loan, there is also a loan fee that is proportionately deducted from each disbursement (usually twice a school year). For loans disbursed between Oct. 1, 2018, and Oct. 1, 2019, the fee is 4.248%. For loans disbursed between Oct. 1, 2019, and Oct. 1, 2020, the fee is 4.236%. 

The amount you can borrow with the Grad PLUS Loan varies by person and school. Your school will calculate its cost of attendance. The amount you can borrow is determined by subtracting any other financial assistance you have from the cost of attending your chosen school. If you discover that the loan is actually too much, you can always adjust the amount that you borrow.

First-time PLUS Loan recipients have to complete entrance counseling and sign a Master Promissory Note (MPN). 

Before applying for a Grad PLUS Loan, however, you will need to fill out the FAFSA.

Pre-Loan Paperwork

The FAFSA is the Free Application for Federal Student Aid. It determines what financial aid you’re eligible for at the federal level and for some state- and school-based programs. If you are considered dependent, you will need your parents’ information on top of your own. If you are considered independent, you will only need your own information. The FAFSA helps explain your status with a few questions.

• Driver’s license number
• Social Security number
• Your Alien Registration number (if you’re not a U.S. citizen)
• Tax returns
• Records of untaxed income
• Information on bank account balances, any investments, and assets

Repaying Your Grad PLUS Loan

You do not have to begin making payments until six months:

• After graduation
• After you leave school
• After you are no longer enrolled at least half-time

Interest will accrue on your loan once it is disbursed; you have the option to pay the accrued interest or add to your principal balance when you begin making payments.

Your loan servicer will let you know when payments are due and provide status updates for your loan.

Loan Payments

When it comes time to repay your Grad PLUS Loan, there are several repayment plans available. Your monthly payment varies and can be as low as $0 if your repayment plan is income-based. Not all plans are based on income, though, and you can switch your plan at any time with a call to your loan servicer. 

Plans That Are Not Income-Based

• Standard Repayment Plan: Monthly payments are fixed; all borrowers are eligible; and loans are paid off within 10 years or 10 to 30 years with Direct Consolidation Loans.
• Graduated Repayment Plan: Payments start lower and gradually increase; all borrowers are eligible; and loans are paid off within 10 years or 10 to 30 years for Direct Consolidation Loans.
• Extended Repayment Plan: Payments are fixed or graduated, and loans are paid off within 25 years.

Plans That Are Income-Based

• Revised Pay As You Earn Repayment Plan (REPAYE): Monthly payments are 10% of your discretionary income.
• Pay As You Earn Repayment Plan (PAYE): Monthly payments are 10% of your discretionary income but not more than what you would pay under the 10-year Standard Repayment Plan.
• Income-Based Repayment Plan (IBR): Monthly payments are either 10% or 15% of your discretionary income but not more than you would pay under the 10-year Standard Repayment Plan.
• Income-Contingent Repayment Plan (ICR): Monthly payments are either 20% of your discretionary income or the amount you would pay on a fixed payment plan for 12 years.

Income-based payments are especially helpful if you are having difficulties making your loan payments. Because payments can be extremely low, they are a good alternative to deferment or forbearance if you need temporary relief. Your loan servicer will be able to discuss your options with you.

Loan Forgiveness, Cancellation, or Discharge

As you pursue your graduate studies, you likely have a career in mind. Depending on your career, you might be eligible for loan forgiveness. You may also qualify for loan cancellation or discharge.

• Public Service Loan Forgiveness (PSLF) is available to those who work for an eligible government or nonprofit organization, make 120 qualifying payments, and work full time.

• Closed school discharge is available to students whose school closes while they are enrolled or soon after they withdraw. 
• Total and permanent disability discharge is available for students who can prove they are permanently disabled.
• If a loan was taken out on behalf of someone who died or by someone who died, the loan might be eligible for discharge due to death.
• While rare, you may be eligible for discharge in bankruptcy after declaring bankruptcy.
• If the school did not use the loan as paid for, you might be eligible for borrower defense to repayment.
• If your school falsely certified your eligibility, you may be eligible for false certification discharge.
• If you withdrew, and the school didn’t return the funding to your loan servicer, you may be eligible for unpaid refund discharge.

Although a specific credit score is not needed for a Grad PLUS Loan, working to increase your credit score or keeping a good credit score is important, as is making your student loan payments. For advice on all things college finance-related, CollegeFinance.com can help, whether you’re in the planning, borrowing, or repayment stage. Our experts are here to guide you with the most up-to-date and relevant information so you can make the most of your college investment.