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When a student fills out the Free Application for Federal Student Aid (FAFSA®) form, it’s important that they understand their dependency status. A student’s dependency status will affect the information they need to report on their FAFSA.

Dependent students have to report both their own and their parent’s information during this process. Independent students will only have to report their own information, the exception being if they are married. In which case, they will provide their spouse’s information as well.

Here’s how it works for independent vs. dependent students.

The Difference Between Independent and Dependent Students

There are a few key differences between independent and dependent students.

What Is an Independent Student?

An independent student meets one or more of the following criteria. They are:

•   24 years old or older
•   Married
•   A graduate or professional student
•   A veteran
•   A member of the armed forces
•   An orphan
•   A ward of the court
•   Someone with legal dependents other than a spouse
•   An emancipated minor
•   Someone who is homeless or at risk of becoming homeless

What Is a Dependent Student?

Basically, a dependent student is any student who doesn’t meet the criteria to be considered an independent student. The U.S. government bases their federal student aid programs on the belief that it is primarily the student and their family’s responsibility to pay for the student’s higher education pursuits.

Even though it may not be the case in reality, dependent students are assumed to have the support of their parents which is why the parents’ information must be included in the student’s FAFSA form. Providing this information gives FAFSA a more complete picture of the family’s financial strength.

Just because someone is considered a dependent student does not mean that their parents have to contribute financially to their higher education costs, but the government assumes that parents will contribute in some way if financially possible.

Determining Dependent or Independent Student Status

While that brief overview begins to paint a picture of what it looks like to be a dependent or independent student, the Federal Student Aid office, which is an office of the U.S. Department of Education, asks key questions that help students determine their official status.

Their answers to the questions on the FAFSA form will help determine whether they are considered a dependent or independent student. The questions do change slightly each year, but are published by the Federal Student Aid office.

These questions include things like:

•   As of today, are you married?
•   Are you a veteran of the US armed forces?
•   At any time since you turned age 13, were both your parents deceased, were you in foster care, or were you a dependent or ward of the court?

These questions can help guide students to determine whether or not they qualify as an independent or dependent student. Essentially, if a student answers “yes” to any of the questions in the FAFSA, they are considered an independent student.

Dependent Students

Students that answered “no” to all of the questions above are considered to be dependent students and while applying for federal student aid must provide information about their parents on the FAFSA form.

Students who are considered a dependent student by the FAFSA but are not in contact with their parents and don’t know where they live, can discuss their situation with the financial aid office at the college or career school they are planning on attending.

Their school’s financial aid administrator will usually be able to help them determine next steps. The same process applies if a student has left home due to an abusive situation. They will fill out the FAFSA form and contact their school’s financial aid office for assistance.

Even if a dependent student doesn’t live with their parents, they still need to provide accurate information about their parents. If their parents won’t provide the information they need, the student risks having their application rejected which may make them ineligible to receive any federal student aid.

Students in these circumstances may be able to qualify for an unsubsidized loan at most, but this option depends on what the financial aid office at their specific college decides.

Even if a student’s parents won’t help pay for college, if they answered “no” to all of those questions, they are still considered dependent.

Independent Students

Students that answered “yes” to any of the above questions are considered to be independent students during the federal student aid process. Independent students do not have to provide information about their parents on the FAFSA form.

When Federal Student Aid Falls Short

Colleges use the FAFSA to determine a student’s federal aid eligibility. While the FAFSA is a great place to start, sometimes federal aid can’t fully cover the cost of a college education. This is where private student loans can step in and cover the expenses that gift aid and Federal loans could not.

Related: A Guide to Private Student Loans

SoFi strongly believes students should exhaust all of their Federal grant and loan options before they look at private loans. Once a student has exhausted their options, they can look at SoFi private student loans which are easy to apply for, allow students to add a cosigner to their application in minutes, and never have fees.

No origination fees, no late fees, and no insufficient fund fees. Ever. With flexible repayment plans and exclusive rate discounts, SoFi Private Student Loans can provide a good option for covering the costs of attending college.

The Takeaway

In order to fill out the FAFSA, students will need to determine if they are an independent or dependent student. For example, students aged 24 and older, those attending graduate school, students who are married, or who have dependents are all generally considered independent students.

For a full list of questions to help you determine whether or not you are a dependent student, check out this resource from the Federal Student Aid website.

The distinction between independent and dependent students is important because they are required to submit different information to the FAFSA. Dependent students are required to submit their parent’s information in order to be considered for federal aid opportunities. This is the case even if a dependent student’s parents are not contributing financially to tuition costs. Independent students are not required to submit any of their parent’s financial information.

In situations where federal aid may not cover the cost of college, private student loans could be an alternative option to look into.

Learn more about SoFi’s competitive student loan rates.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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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.

Visit SoFi, to learn more about options for private student loans.

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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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Photo credit: iStock/Kseniia Ivanova
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Parents and grad students have options when it comes to paying for college. Federal aid, institutional scholarships and grants…prepaid tuition plans. But sometimes there’s a leftover cost.

Federal PLUS Loans are an accessible option for graduate students and parents of college students.

Parent PLUS Loans are federal loans for parents of full time students. They offer flexible repayment options, fixed interest rates, and higher borrowing limits.

Direct PLUS Loans are available to graduate or professional degree students. They are also known as “grad PLUS Loans.” Both Parent and Grad loans fall under the Direct Loan Program operated by the federal government.

What Is a Parent PLUS Loan?

As mentioned, Parent PLUS Loans can be borrowed by parents of undergraduate students, in order to help their child pay for college. These loans are funded by the U.S. Department of Education and are part of the Direct Loan Program.

Unlike other types of federal student loans, Parent PLUS Loans do require a credit check. If an applicant has an adverse credit history, they may not be approved to borrow a Parent PLUS Loan.

Recommended: What Is a Parent PLUS Loan?

How Do Parent PLUS Loans Work?

As noted previously, Parent PLUS loans are available to all qualifying parents of undergraduate students. Borrowers with poor credit history can ask an “endorser” to cosign the loan or borrowers can send a report clarifying their credit history to be considered.

The loan amount is limited to your child’s Cost of Attendance (COA), less any other aid awarded to the student. The interest rate is fixed for both loan types and interest accrues the moment it’s released, even during deferment. Also, PLUS loans have an origination fee of 4.228% for the 2023-2024 academic year.

Like other loans in the Direct Loan program, a third party company called a “loan servicer” manages customer service around general billing requests such as repayment and deferment.

Parent PLUS Loan Application Process

The first step in borrowing a Parent PLUS Loan is to have your child fill out the FAFSA® or Free Application for Federal Student Aid. This is required before a parent can request a PLUS Loan. After the FAFSA is taken care of, parents can submit an online application for a PLUS Loan.

Note that while most schools offer an online application, some schools may have a different process. If you have any questions, check in with the financial aid office at the school your child attends.

Before applying, remove any security freezes on your credit bureau files. Any active credit freezes will prevent an application from being processed.

It may take upwards of 20 minutes to complete the application. And you’ll generally need the following information:

•   Verified FSA ID

•   School Name

•   Student Information

•   Personal Information

•   Employer’s Information (such as the employer’s name, address, and phone)

A verified FSA ID is a unique ID that acts as a legal electronic signature. It should only be used by that applicant.

After being approved for the PLUS Loan, borrowers will be required to fill out the Master Promissory Note (MPN). This indicates that you agree to the terms of the loan.

Recommended: Do You Have to Apply for a Parent Plus Loan Every Year?

Filling Out the FAFSA

The FAFSA is required for all forms of federal student aid, including grants, work-studies, and federal loans. Some state and school-specific aid may also be awarded based on information included on a student’s FAFSA form.

Applicants who submit a FAFSA get a Student Aid Report (SAR) that summarizes the form’s information. It will include your Student Aid Index number (SAI) and your eligibility for federal grants and loans among other details. Schools listed on your FAFSA get a copy of this report to determine aid.

Recommended: FAFSA Guide

Determining Your Eligibility

Borrowers must fulfill the following basic requirements:

•   Be the legal guardian of an undergraduate enrolled in a higher ed program part-time or full-time

•   Fulfill general Federal Student Aid requirements, such as citizenship

•   Not have an adverse credit history

How Much Can You Borrow?

Parent PLUS Loan borrowers can take out the total cost of attendance of the program their child is enrolled in, less the amount of scholarships or other forms of aid.

How Much Do You Want to Borrow?

It can be tempting to borrow to make paying for college easier, but be cautious of overborrowing. Parent PLUS loans have costlier fees and rates, with the latest interest rate at 8.05% combined with a 4.228% origination fee.

For income-earning parents, it may be easier to measure the amount of student debt you should take on. As a general rule of thumb, all debt, including student loans, should not exceed more than 20% of your annual or projected annual take home pay.

Filling Out Your Parent PLUS Loan Application

Prospective students and parents of prospective undergraduates fill out a parent plus loan application online. Grad PLUS loan applications are separate online forms.

Enrollees will have the option to sign up for deferment and get a credit check on the spot — so be prepared to know which decision works best for you to apply for student loan. Finally, borrowers can view a demo to tailor the prep-work.

Recommended: Grad PLUS Loans, Explained

Signing a Promissory Note

Once you complete the plus loan application, you’ll be directed to complete a Master Promissory Note (MPN). An MPN spells out a borrower’s rights and responsibilities in the loan agreement.

Loans will not be awarded until an MPN is completed.

You’ll be asked to fill out personal information and provide two references as future contacts in case you’re unreachable.

What to Expect After Applying

Approved loans will be disbursed to the school you’re enrolled in and they’ll apply the loan to outstanding fees, tuition, and/or room and board. If there are funds leftover, you can cancel the remainder or choose to keep it for discretionary expenses related to higher ed day-to-day living.

What If You Are Denied?

If you are denied a loan, you may be able to add an endorser to your application. An endorser is someone who agrees to pay your loan if you are unable. If you were denied for having an adverse credit history, you will likely need to complete an online PLUS Credit Counseling course.

How Long Until the Loan Is Disbursed?

Each school pays out loans on a different schedule. Once the federal government has processed your paperwork and released funds, schools handle the process afterwards. If you have questions about when your loan will be disbursed, contact the financial aid office at your child’s school.

When Do You Need to Begin Repayment?

Repayment for Parent PLUS Loans may begin immediately upon disbursement or after deferment, depending on the repayment plan you select.

If you request a deferment, you are able to pause payments until six-months after your child graduates from college. If you are interested in this option, you can make this selection on the PLUS Loan application or request it directly with the loan servicer. Interest will accrue even while the loan is in deferment.

Applicants who do not choose deferment must begin repayment as soon as the loan is disbursed.

Income-Driven Repayment Options for Parent PLUS Loans

Parent PLUS Loan borrowers are able to enroll in an income-driven repayment plan if they first consolidate the loan through the Direct Consolidation Loan Program. Income-driven repayment plans tie the monthly payments to your income and repayment takes place over a period of 20 to 25 years.

On these plans, your loan payment may fluctuate each year, depending on your income and family size. At the end of your repayment period, any outstanding balance is forgiven, but under certain circumstances, this forgiven amount may be considered taxable income by the IRS.

The Takeaway

Parent PLUS loans are federally funded loans available to parents of undergraduate students. PLUS loans and private student loans meet different needs. Parents might like the idea of their children learning independence, and getting a loan in their name — even as a cosigner — might be a more attractive option.

Also, a key difference between PLUS loans and private student loans is credit score impact on borrowing limit and interest rates. Parents who have lower, but not adverse credit scores, might get higher interest rates and lower borrowing limits for a private loan versus a PLUS loan.

SoFi offers the same benefits as most federal parent loans, including deferment and flexible repayment plans. Our interest rates for private student loans are competitively low — and we have a no-fee policy.

Check out our private loans for undergrads today and find out your rate in minutes.

FAQ

How long does it take for approval for a parent PLUS loan for college?

Loan applications are approved or denied on submission and schools are notified within 24 hours. Applicants must pass eligibility requirements after completing the application. An MPN and FAFSA also must be completed prior to loan awards. Disbursement processing times differ with each school.

Can you be denied a parent PLUS student loan?

Yes, if you have an adverse credit history. You can get a PLUS loan with an endorser or documentation proving extenuating circumstances around your history. Examples include foreclosure or bankruptcy.

What is the maximum borrowable amount for a parent PLUS loan?

The maximum amount allowed is your child or your Cost of Attendance (COA). COAs are determined by schools.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If you need financial aid to help pay for college, you’ll fill out the Free Application for Federal Student Aid (FAFSA®), which allows you to apply for federal unsubsidized student loans, subsidized student loans, work-study, and grants.

When your FAFSA has been processed, you’ll receive an aid offer that explains the types and amount of aid that a college is offering to you. If you’ve applied to multiple schools, you’ll receive an aid offer from each. You’ll be asked to tell them which forms of financial aid you would like to accept before they apply it to the amount you owe your school.

But you don’t have to accept all the aid on offer, including student loans, so consider your options carefully.

What Are Subsidized and Unsubsidized Loans?

There are two basic types of federal student loans: Direct Subsidized Loans and Direct Unsubsidized Loans. They help eligible students cover the cost of four-years colleges, community colleges, and trade, career, and technical schooling. Here are the major differences between unsubsidized versus subsidized student loans.

Direct Subsidized Loans are student loans for undergraduates with financial need. Your school will determine how much you can borrow, and that amount cannot be more than your financial need.

The government pays all interest on Direct Subsidized loans while you’re in school at least half-time, during the six month grace period after you leave school, and during periods of deferment.

Direct Unsubsidized Loans are available to undergraduates and graduate students. They are not awarded based on financial need.

Again, your school will determine how much you are able to borrow, and you are responsible for paying all interest on the loan amount at all times. If you choose not to pay interest while you’re in school, during the grace period, or if your loan is in deferment or forbearance, the interest will still accrue. At the end of the deferment period, the interest will be added to the principal of the loan.

Interest rates for each type of loan are fixed. For example, for the 2023-2024 academic year, the interest rate for Direct Subsidized Loans and Direct Unsubsidized Loans is 5.50% for undergraduate borrowers. The interest rate for Direct Unsubsidized Loans is 7.05% for graduate or professional borrowers.

There are also limits to the amount of money that you can borrow, and the loan amount that you receive may be less than this limit. For dependent students, except those whose parents can’t receive PLUS loans, the aggregate loan limit is $31,000, of which no more than $23,000 can be in subsidized loans.

For dependent undergraduates whose parents can’t obtain PLUS loans, the limit is $57,500, of which no more than $23,000 can be in subsidized loans. For independent graduate students or professionals, the limit is $138,500, of which no more than $65,500 can be in subsidized loans.

When Might You Be Offered More Loans Than You Need?

You don’t have to accept all of the federal loans that are offered to you. To figure out if you’ve been offered more loans than you actually need, you’ll need to do a bit of budgeting.

Federal loans can only be applied to tuition, fees, housing and meal plans. These won’t be the only expenses you’ll need to cover, however. Consider other costs like transportation, travel, eating outside the dining hall, etc. Add up the costs to which your federal loan would apply and any extra expenses to get a sense of the total cost of going to school.

Now figure out your total funding sources, excluding the sources in your offer letter. This might include money from your parents, scholarships, grants, and any money you may have saved on your own. If your total expenses exceed your sources of funding, you may need to accept the federal loans on offer. However, if they don’t, you might not need to accept all the funding.

Which Loans Should You Accept?

If you don’t anticipate needing the amount of money offered to you through loans, you do not need to accept them. Schools will allow you to decline a loan, accept it, or even accept a portion of it.

That said, if you do decide to take on federal loans, it’s generally wise to accept subsidized loans first because they offer more benefits in the form of government interest payments.

Unsubsidized loans, on the other hand, put you on the hook for all of the interest that accrues on the loan. These loans however are still eligible for other federal benefits and borrower protections.

Can Your Return Unused Student Loans?

If you accept a loan and realize that you don’t need it, the good news is you can cancel the loan, or a portion of it, within 120 days of disbursement. By canceling the loan, you’ll return the money you received, and you won’t owe any interest or be charged any fees.

Alternatives to Federal Student Loans

Federal student loans aren’t the only way to help pay for schooling. Here’s a look at three alternatives:

Private Loans

Students can apply for private student loans which are offered by private institutions, such as banks and credit unions. These lenders will determine the amount you can borrow, interest rates, and terms largely based on financial factors such as your income and your credit score, or that of a cosigner if you need to have one.

Private student loans are not subject to the same loan limits imposed on federal loans, so students can potentially borrow more to cover costs. Though, this also means that private loans aren’t afforded the same borrower protections (like income-driven repayment plans) as federal student loans. For this reason, they are generally considered only after a student has thoroughly reviewed all of their other options.

Personal Loans

Personal loans are also provided by private lenders who, again, set the loan amount, interest rates and terms, based on a person’s financial history. The terms of the loan do not dictate how the money must be used, so they may be a way to cover expenses outside of tuition, fees, room, and board.

Financial Aid

There are a variety of types of financial aid available from public and private sources that can help you pay for school.

Grants and scholarships are money given to you that you don’t need to repay. Scholarships are often given based on academic merit or talent, or they’re given to students wishing to pursue a particular area of study.

The Federal Work-Study Program allows students to work part-time to earn money to pay for schooling.

The Takeaway

When you’re offered a student aid package by the federal government, it may include federal subsidized and unsubsidized student loans. You can accept or decline these loans, or even accept a small portion of them. Consider declining if your sources of funding exceed your expenses. Doing so may be cheaper in the long run, as it allows you to avoid making interest payments.

Private student loans are another potential source of funds to help you pay for school. To learn more about the options available to you to meet your student loan needs, visit SoFi.

FAQ

Is it better to accept subsidized or unsubsidized loans?

When choosing between subsidized and unsubsidized loans, consider accepting subsidized loans first, since the federal government will pay your interest while you are in school at least half-time, during the six month grace period after you leave school, and during periods of loan deferment.

Can you accept student loans and not use them?

You can accept student loans and not use them, but you’ll still be responsible for paying them back with interest. If you find you don’t need the loans, you can cancel them within 120 days of loan disbursement.

How are subsidized and unsubsidized loans different?

Subsidized and unsubsidized loans differ mainly in who they are available to and who must make interest payments. Subsidized loans are available to undergraduate students, and the government makes interest payments while you are in school at least half-time, during the six month grace period after you leave school, and during periods of loan deferment. Unsubsidized loans are available to undergraduate, graduate, and professional students, who are responsible for all loan payments.

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SoFi Private Student Loans
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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 2023-2024 school year, the interest rate on Direct Subsidized or Unsubsidized loans for undergraduates is 5.50%, the rate on Direct Unsubsidized loans for graduate and professional students is 7.05%, and the rate on Direct PLUS loans for graduate students, professional students, and parents is 8.05%. The interest rates on federal student loans are fixed and 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.

Make a plan for repayment and consider refinancing your student loans.

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SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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