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Subsidized loans, a type of loan offered by the federal government, used to be available to graduate students. Unfortunately, that is no longer the case. The program that allowed graduate students to receive subsidized loans was ended in 2011 by the Budget Control Act. For now, these loans are only available for undergraduate students. However, there are other loans available to help pay for grad school. Continue reading for more information on subsidized loans and the other options available to graduate students.

What Are Subsidized Loans?

Federal student loans are offered through the U.S. Department of Education to help students cover the cost of higher education. The government helps students pay for degrees or certificates from colleges and universities, community colleges, and trade, career, or technical schools.

Direct Subsidized Loans are available to undergraduate students able to demonstrate financial need. The amount of the loan is determined by the school you are applying to.

The Department of Education pays all interest on the loans while you are in school at least half-time, during the six-month grace period after you leave school, and during periods of deferment. Outside of these periods, the borrower is responsible for making all principal and interest payments.

Subsidized vs Unsubsidized Loans

Federal Direct Unsubsidized Loans, on the other hand, are one of the student loans available to undergrads and graduate students. Students do not have to demonstrate financial need to qualify for these loans.

The loan amount is still determined by your school, and you are entirely responsible for making interest payments during all periods.

When considering subsidized vs. unsubsidized loans, it’s important to understand both are subject to loan limits. In aggregate, dependent students, except those whose parents are unable to take out PLUS loans, may borrow no more than $31,000, at a given time, of which only $23,000 may be in subsidized loans.

For undergraduates whose parents are unable to access PLUS loans, the loans limit is $57,500, with no more than $23,000 in subsidized loans.

And for graduate students, the loan limit is $138,500, of which no more than $65,500 may be in subsidized loans. What’s more, the aggregate limit also includes whatever student loans you may have from your time as an undergraduate.

When you reach the aggregate loan limit, you will not be allowed to borrow any more money in federal student loans. However, if you are able to pay off some of your loans you may be able to borrow again up to the aggregate loan limit.

Interest rates for both types of loans are set by the federal government each year. For the 2023-2024 academic year, the interest rate for undergraduate borrowers is 5.50% for Direct Subsidized Loans and Direct Unsubsidized Loans. The interest rate for graduate borrowers for Direct Unsubsidized loans is 7.05%. The interest rate is fixed over the life of the loan.

Alternatives to Subsidized Loans

In addition to unsubsidized loans, there are other loans available from the government and private sources that can help you pay for grad school.

Grad PLUS Student Loans

Grad PLUS Student loans are another federal loan available through the Department of Education. They are also known as Direct PLUS loans. Grad PLUS Loan requirements include that you must be a graduate student enrolled at least half-time at an eligible school. Your program must lead to a graduate degree, a professional degree, or a certificate. You meet the basic eligibility requirements for federal student aid and must not have an adverse credit history.

Under the Grad PLUS program you are allowed to borrow the cost of attendance less any other financial aid. And you don’t have to repay the loan until six months after you leave school or drop below half-time enrollment.

Interest rates on the loan are fixed. Any loans disbursed after July 1, 2023, carry an interest rate of 8.05%.

To apply for federal student loans, you’ll need to fill out the Free Application for Federal Student
Aid (FAFSA®) . Your school will use the information on this form to determine how much aid you are eligible to receive and present it to you in an offer letter. The offer letter will also give you information about grants and work-study programs you may be eligible for.

Recommended: Grad PLUS Loans, Explained

Private Loans

Private student loans are available through banks and credit unions and other private institutions. The individual lender will determine the amount you can borrow, terms of the loan, and interest rate based in large part on financial factors such as your income and your credit score. Many undergraduates will need a cosigner to qualify for a private student loan. Cosigners are responsible for making loan payments if you fail to do so.

Private loans may allow you to borrow beyond the federal limits imposed on federal loans, or help you pick up the slack if you didn’t qualify for enough federal funding. Though they may lack protections afforded to federal student loans, and as a result, are generally thought of as a last-resort option when paying for grad school.

Personal Loans

Personal loans are also available through private lenders. Borrowed funds can be used for practically any purpose, which means they could potentially be used to cover expenses beyond tuition, fees, room and board, such as transportation. As with private loans, the amount you can borrow will depend on your financial history or that of a cosigner.

How Much Can You Borrow for Graduate School?

The amount you can borrow for graduate school will depend on the types of loans that you use.

Grad PLUS student loans potentially allow you to borrow up to the full cost of attending your program less any other financial aid.

However, unsubsidized loans limit your aggregate borrowing to $138,500, and that’s including any federal loans that you took out as an undergraduate.

Borrowers who are enrolled in certain health profession programs may be subject to a higher aggregate limit for Direct Subsidized Loans, and should talk to their school’s financial aid office.

Private student loans may limit borrowers to the cost of attendance. Policies will likely vary by lender.

Personal loans may allow you to borrow as much as $100,000 with no limitations on how the money must be spent. Again, specific policies may vary by lender.

Recommended: What is the Maximum Amount of Student Loans for Graduate School?

The Takeaway

Federal subsidized loans are no longer available to graduate students. Though organizations like the National Association of Student Financial Aid Administrators are pushing for legislation that would reintroduce the loans. In the meantime, graduate students have other options, and may rely on federal unsubsidized loans, Grad PLUS Loans, loans from private lenders, or a combination of the above to help pay for school.

FAQ

Does the US Department of Education offer subsidized loans for graduate students as part of financial aid packages?

Federal Direct Subsidized Loans are no longer available to graduate students.

Are Grad PLUS Loans subsidized loans?

Grad PLUS Loans are not subsidized, which means that interest accrues while the student is in school.

Can you pay off subsidized loans before graduating?

You can pay off federal subsidized loans before you graduate without paying any penalty. Note that federal subsidized loans do not accrue interest while you are in school.

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Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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SOPS0222006

A Direct PLUS Loan is a type of unsubsidized federal student loan that can be made to graduate students or parents of a dependent undergraduate student.

Direct PLUS Loans can help pay for education costs that aren’t covered by other types of financial aid. As they have higher interest rates than other types of federal loans, it’s generally recommended that a student exhaust all of their Direct Loan options before considering a Direct PLUS Loan.

As you plan how to pay for your education, here’s what to know about Direct PLUS Loans to decide if this option is right for you.

What Is a Federal Direct PLUS Loan?

After pursuing financial aid options that don’t need to be paid back (such as grants, scholarships, or work-study programs), many students take out federal student loans to help pay for the cost of school.

There are several types of federal student loans from the William D. Ford Federal Direct Loan Program. Direct Loans (also known as Stafford Loans) can be subsidized for undergraduate students with financial need — meaning that the federal government will pay the loan interest while a student is in school at least half-time and during a grace period after graduating or during a period of deferment.

Direct Loans can also be unsubsidized for both undergraduate or graduate students. With a Direct Unsubsidized Loan, the borrower is responsible for all of the interest that accumulates on the loan. These loans are not dependent on financial need, but there is a cap on the amount a student can borrow.

So what is a Direct PLUS Loan? Direct PLUS Loans can be made to graduate students or parents of dependent undergraduate students to help meet the remaining costs of school.

Types of Federal PLUS Loans

As mentioned, Direct PLUS Loans are unsubsidized federal student loans that two groups of people can apply for to help pay for higher education that isn’t covered by other types of financial aid: graduate and professional students or parents of a dependent undergraduate student.

When a Direct PLUS Loan is made to parents of an undergraduate student, it’s often referred to as a parent PLUS loan. When made to a graduate or professional student, it’s called a grad PLUS loan.

Keep in mind that PLUS loans are some of the highest interest loans offered by the government — significantly higher than federal loans offered directly to undergrads — so it’s worth it to pursue other federal options first.

Eligibility for Federal Parent PLUS Loans

Parents can qualify for a parent PLUS loan as the biological, adoptive, and in some cases, stepparent of a qualifying undergraduate student enrolled at least half-time. It’s important to note that a federal Direct PLUS Loan made to a parent borrower cannot be transferred to the child.

Both parent and child must be U.S. citizens or eligible noncitizens and meet the eligibility requirements for federal student aid.

Unlike other types of federal loans, Direct PLUS Loans consider your credit history, and the requirements state that the borrower must “not have an adverse credit history.”

Some borrowers with credit issues may still be able to qualify if they meet certain additional eligibility requirements, such as having an endorser on the loan. Another option is to document if there are extenuating circumstances related to the adverse credit history.

Eligibility for Federal Grad PLUS Loans

When a Direct PLUS Loan is made to a graduate or professional student, it’s commonly called a grad PLUS loan. To qualify as an individual student borrower, you must be enrolled at least half-time in an eligible program leading to a graduate or professional degree.

As with parent PLUS loans, the borrower must meet the eligibility requirements for federal financial aid and can’t have an adverse credit history.

Interest Rates on Federal PLUS Loans

Direct PLUS Loans have some of the highest interest rates of all federal student loans. Interest rates on federal student loans are fixed for the life of the loan and the rate is set by Congress each year.

For the 2024-2025 school year, the federal student loan interest rate is 6.53% for undergraduates, 8.08% for graduate and professional students, and 9.08% for parents. The interest rates, which are fixed for the life of the loan, are set annually by Congress.

Is the Federal Direct PLUS Loan Subsidized or Unsubsidized?

Direct PLUS Loans are unsubsidized federal loans, meaning that the interest accumulates on the loan at all times.

If you are a graduate or professional student, you do not have to make any grad PLUS loan payments if you are enrolled at least half-time in school, and there is also a six-month grace period after you graduate or leave.

If you don’t pay the interest on a federal unsubsidized loan during these periods, the interest on the loan is capitalized and added to the total principal amount of the loan. This amount will also accrue interest and increase the overall amount you owe.

Parent borrowers are expected to start making payments on a Direct PLUS Loan once it’s been fully paid out. But in certain circumstances parents may request a deferment while their child is enrolled in school or six months after.

Loan Fees on Federal PLUS Loans

There is a loan fee for Direct PLUS Loans. A percentage of the loan amount (currently 4.228%) is deducted from each loan disbursement. This percentage is higher than that for Direct Loans (currently 1.057%). Loan fees vary by the date they are disbursed.

Loan Limits on Federal PLUS Loans

Direct PLUS loans allow graduate students or parents to borrow enough money to fund the costs of school that aren’t covered by other aid.

Unlike other federal loans, you can borrow up to the total cost of attendance with a Direct PLUS Loan, minus financial aid already received. The student’s school sets the amount that a graduate student or parent can borrow through a Direct PLUS Loan.

How to Apply for Federal PLUS Loans

Before applying for a Direct PLUS loan, a student must fill out the FAFSA® — the Free Application for Federal Student Aid. The borrower will undergo a credit check and may need to participate in credit counseling if this is the first PLUS loan.

Once completed, schools at which students applied and were accepted will send award letters to students that include financial aid options for the upcoming school year, including Direct PLUS loans if the student and/or parent qualifies.

If a school doesn’t accept applications for Direct PLUS Loans via the federal Student Aid website , contact the school’s financial aid office to find out how to apply.

Recommended: FAFSA Guide

What to Do When Federal PLUS Loans Aren’t Enough

The amount that can be borrowed through Direct PLUS Loans is set by the student’s school and can’t exceed the total cost of attendance minus financial aid received. If you still need additional funds to cover other education-related costs, you may want to explore private loans.

Private loans can bridge the gap between what a student is able to borrow in federal loans and their remaining needs after accounting for aid such as scholarships or grants.

Your eligibility and the interest rate that you can get through a private loan will depend on factors like your credit score and income. Having a cosigner on your loan may help you secure more favorable terms.

Parents with strong credit and income may find lower interest rates on no-fee private parent student loans than on federal parent PLUS loans which, as a reminder, also come with an origination fee.

Recommended: The Differences Between Grants, Scholarships, and Loans

What to Do About Undergraduate School Loans

Direct PLUS loans are not eligible for most income-driven repayment plans. However, if you consolidate your PLUS loan (or loans) into a federal Direct Consolidation Loan, that new loan can be eligible for an income-contingent plan.

If you’re a graduate student and you have a high-interest rate on existing undergraduate loans or need to lower your monthly payment before grad school, it could be worth considering student loan refinancing. Refinancing student loans through a private lender offers the opportunity to consolidate multiple student loans, federal and/or private, into a single loan with a single payment and (ideally) a lower interest rate. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

Refinancing may be a better long-term solution for some PLUS loan borrowers, especially if they do not qualify for income-driven repayment and are not planning to use other federal benefits. Keep in mind if you refinance federal loans, you lose access to federal benefits and protections, such as forgiveness, income-driven repayment plans, and forbearance.

The Takeaway

Direct PLUS Loans are unsubsidized federal loans that can be made to graduate students or parents of a dependent undergraduate student. Known as grad PLUS loans or parent PLUS loans, these federal loans take your credit history into account. If you have an adverse credit history, there are certain eligibility requirements you’ll need to meet to qualify.

Direct PLUS Loans allow you to borrow up to the full cost of attendance for graduate school minus the amount of financial aid you receive from other sources. Since they have higher interest rates and a higher origination fee than other types of federal loans, you’ll likely want to pursue a federal Direct Unsubsidized Loan first.

Private student loans can bridge the gap between what a student is able to borrow in federal loans and their remaining needs after aid such as scholarships or grants is considered.

Parents or graduate students with strong credit and income may find lower interest rates on no-fee private student loans than on federal Direct PLUS Loans.

SoFi private student loans offer competitive interest rates for qualifying borrowers, flexible repayment plans, and no fees.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

Weighing your child’s college education against keeping your own debt manageable is a tough balancing act. Parent student loans could help you fill gaps when other student aid falls short.

There are a variety of student loans available to parents who are interested in helping their child pay for college. Parents can consider either federal or private student loans. Parent PLUS Loans are federal student loans available to parents. Private lenders will likely have their own loans and terms available for parent borrowers.

It’s important to note here that figuring out how to fund your child or children’s education is a personal and individualized decision. Continue reading for an overview of the different loan types available to parents and some important considerations to make before borrowing money to pay for your child’s education.

Types of Parent Student Loans

Parent borrowers can consider borrowing a federal student loan or private student loan. Here are a few of the different types of loans to consider.

Parent PLUS Loans

Parent PLUS Loans are federal student loans that are available to parents of dependent undergraduate students through the Department of Education. They offer fixed interest rates — 8.05% for the 2023-2024 academic year. On the plus side, eligible parents can borrow up to the attendance costs of their child’s school of choice, less other financial aid.

The amount eligible parents can borrow is not limited otherwise, so this can be a useful loan to fill in whatever tuition gaps aren’t covered by other sources of funding. These loans also provide flexible repayment options, such as graduated and extended repayment plans, as well as deferment and forbearance options.

As far as federal loans go, interest rates on Parent PLUS Loans are relatively high. So, it may be worth considering having your child take out other federal loans that carry lower interest rates. Parent PLUS Loans may also come with a relatively high origination fee of 4.228% for the 2023-2024 academic year.

Applying for Parent PLUS Loans

To apply for a Parent PLUS Loan, parents will have to fill out the Free Application for Federal Student Aid, or FAFSA®. In addition to the FAFSA, there is a separate application form for Parent PLUS Loans . Most schools accept an online application. For any questions, contact the school’s financial aid office.

Unlike other federal student loans, there is a credit check during the application process for Parent PLUS loans. One of the eligibility requirements is that borrowers not have an adverse credit history. Though, parents who do not qualify for a Parent PLUS Loan due to their credit history, may be able to add an endorser in order to qualify. An endorser is someone who signs onto the loan with the borrower and agrees to make payments on the loan if the borrower is unable to do so.

Repaying a Parent PLUS Loan

​​PLUS Loan terms are limited to 10 to 25 years, depending on the chosen repayment plan , and do not offer income-driven repayment plans like other federal loans do (although they may be eligible for the Income-Contingent Repayment Plan if they are consolidated through a Direct Consolidation Loan).

Parents have the option of requesting a deferment if they do not want to make payments on their PLUS loan while their child is actively enrolled in school. If a parent does not request deferment, payments will begin as soon as the loan is disbursed.

Keep in mind that interest will continue to accrue during periods of deferment, so deferring payments while your child is in school may increase the overall cost of borrowing the loan.

Private Parent Student Loans

In some cases, it might make sense to turn to private lenders for student loans. If you have a solid credit history (among other factors), you may be able to secure a reasonable interest rate.

Recommended: Private vs. Federal Student Loans

Before taking on a private student loan, here are some things to be aware of:

•   Always read the fine print.

•   Origination fees will vary from lender to lender.

•   There may not be flexible repayment options, and private loans typically don’t offer deferment or forbearance options the way federal loans do.

•   Also, the amount you may qualify to borrow will likely vary.

The application process for private parent student loans will likely vary based on the individual lenders. Repayment terms and options will also generally vary by lender.

Keep in mind that private student loans don’t offer the same borrower protections, like deferment options, as federal student loans. For this reason, they are typically borrowed after other options, like using savings, federal student loans, and scholarships, have been exhausted.