What Is a Direct PLUS Loan? A Complete Guide for Parents and Grad Students

The US government offers various federal student loans for undergraduate students, graduate students, and parents. 

The Federal Direct PLUS Loan is an unsubsidized federal education loan for graduate students and parents of dependent undergraduate students. Students and parents can access this loan after a student exhausts eligibility for Federal Stafford Loans. Note that as of July 1, 2026, the PLUS loan is no longer available to new graduate student borrowers.

If you or your child need additional financial aid beyond Stafford Loans, the Federal Direct PLUS Loan could be an option. But is it the best choice? In this guide, we’ll cover everything you need to know—costs, eligibility, and whether a PLUS Loan is right for you.

Federal Direct PLUS Loan Quick Facts

Types of Federal PLUS Loans

There are two versions of the Federal PLUS Loan: the Federal Parent PLUS Loan and the Federal Graduate PLUS Loan, although the Graduate PLUS Loan is no longer available to new borrowers as of July 1, 2026. The Parent PLUS and Graduate PLUS loans are nearly identical, apart from borrower eligibility and certain provisions.

The Federal Graduate PLUS Loan first became available on July 1, 2006, through an amendment to the Federal Parent PLUS Loan. It was eliminated for new borrowers on July 1, 2026 by the One Big Beautiful Bill Act. Graduate students who had an active Grad PLUS or graduate unsubsidized loan in the 2025-2026 award year, and who stay continuously enrolled in the same program at the same school, may qualify for an interim exception that lets them keep borrowing Grad PLUS for the lesser of three academic years or the remaining length of the program — through the 2028-2029 award year at the latest.

Both loans require the college student and the borrower to be a U.S. citizen, U.S. national, or eligible noncitizen, with no adverse credit history. As long as those two criteria are met, PLUS loan borrowers are not required to have good credit, such as a high credit score, minimum income threshold, or low debt-to-income ratio.

However, PLUS loan eligibility is slightly different for Parent vs. Grad PLUS Loans. 

Who Qualifies for a Direct PLUS Loan?

The Federal Direct PLUS Loan is available to graduate students and parents of dependent undergraduate students who meet these requirements:

For Parent PLUS Loans:

• The borrower must be a biological, adoptive, or step-parent of a dependent undergraduate student.
• The student must be enrolled at least half-time in an eligible degree or certificate program.
• Both the borrower and the student must be U.S. citizens or eligible non-citizens.
• The borrower must not have an adverse credit history, though income and credit scores are not considered.
• The student and parent must complete the FAFSA.

For Grad PLUS Loans:

Grad PLUS Loans are no longer available to new borrowers as of July 1, 2026. Graduate students who were already borrowing in 2025-2026 may qualify for a limited interim exception that runs through the 2028-2029 award year. Borrowers who are eligible must also meet the following requirements.

• The borrower must be a graduate or professional student enrolled at least half-time.
• The borrower must be a U.S. citizen or eligible non-citizen.
• Must not have an adverse credit history (no minimum credit score required).
• Must complete the FAFSA.

Even if borrowers have an adverse credit history, they may still qualify by adding an endorser (co-signer) or documenting extenuating circumstances.

Interest Rates on Federal PLUS Loans

The interest rates on Federal PLUS Loans are fixed and change only for new loans each July 1. The new interest rate is based on the last 10-year Treasury Note Auction. Interest rates are the same for both Federal Parent PLUS Loans and Federal Graduate PLUS Loans.

The interest rates are set according to this formula:

The most recent interest rates are:

Borrowers who sign up for auto-debit, where the monthly loan payments are automatically transferred from the borrower‘s bank account to the loan servicer, may receive an interest rate reduction. The standard reduction is 0.25%, but the Department of Education temporarily increased it to a total of 1.00% from July 1, 2026 through June 30, 2028 for Direct Loans first disbursed on or after July 1, 2012, including parent borrowers. Borrowers not already enrolled in auto-debit must sign up by September 30, 2026 to receive the larger reduction.

Is the Federal Direct PLUS Loan Subsidized or Unsubsidized?

The Federal PLUS Loan is unsubsidized. Interest begins accruing immediately after disbursement.

The federal government does not pay the interest on the Federal PLUS Loan.

If the borrower does not pay the interest as it accrues, it will be added to the loan balance (capitalized) when the loan enters repayment, which increases the debt. After interest is capitalized, more interest will be charged on the interest, causing the loan to grow faster.

Loan Fees on Federal PLUS Loans

Federal Direct loan borrowers pay an origination fee of 4.228%, which is four times the fee on Federal Stafford loans.

Loan fees are based on the rate effective on the loan’s disbursement date. A loan fee is typically deducted proportionately from each disbursement, and borrowers can also choose to have the fee added to their loan balance.

Loan fees change each October 1, based on the federal budget, but have remained the same since 2020.

Student loan limits on Federal PLUS Loans

Federal Parent PLUS Loans first disbursed on or after July 1, 2026 are capped at $20,000 per academic year and $65,000 in total per dependent student. The college’s cost of attendance minus other aid received still applies, but only as a ceiling within those caps. Parents who were already borrowing for the same student at the same school in 2025-2026 may qualify for an interim exception that preserves the old cost-of-attendance limit for up to three more academic years, through 2028-2029. Colleges may also set program-level loan limits below the federal maximums, so your school’s limit may be lower.

Suppose the parent of a dependent undergraduate student is denied a Federal PLUS Loan. In that case, the student becomes eligible for higher unsubsidized Federal Stafford Loan limits,the same limits available to independent undergraduate students. This applies to a credit-based denial. Simply running out of room under the new $65,000 aggregate Parent PLUS limit is not treated as a denial and does not make the student eligible for the higher unsubsidized limits.

Even with the new caps, the Federal Parent PLUS Loan lets parents borrow $20,000 a year per child — and up to the full cost of attendance if they qualify for the interim exception — so they must take care to avoid over-borrowing. Parents should borrow no more for all their children than their annual income. If the total Federal Parent PLUS Loan debt is less than the parent’s annual income, the parents should be able to repay the loans in 10 years or less. If retirement is less than 10 years away, they should borrow proportionately less money. For example, if retirement is in just 5 years, the parents should borrow half as much.

Graduate and professional students who qualify for Grad PLUS Loans under the limited exception can borrow up to the program’s cost of attendance minus financial aid. New graduate or professional borrowers first taking out loans as of July 1, 2026 are no longer eligible for PLUS loans. They may be eligible to borrow federal loans but face new aggregate caps of $100,000 and $200,000 respectively, within an overall $257,500 lifetime federal borrowing limit that excludes Parent PLUS.

See also: Complete Guide to Parent Loans

How to Apply for Federal PLUS Loans

The Federal PLUS Loan is disbursed through the college financial aid office, so they administer the application process and determine the maximum amount you can borrow. They will ask you to complete a PLUS loan application at the Studentaid.gov website. You may be required to complete entrance counseling.

For Grad PLUS Loans, borrowers can apply online at the Studentaid.gov website, however some schools may have a different application process. If unsure, you can check with your school’s financial aid office to learn how to request a Grad PLUS Loan.

PLUS Loan borrowers will also have to sign a Master Promissory Note (MPN) at Studentaid.gov. The MPN can cover multiple loans for up to 10 years from the date it is signed, if the college participates in the multi-year MPN process. PLUS borrowers must actively confirm each year’s loan, and an MPN signed with an endorser is good for only one loan.

Loan Disbursement

The federal government sends Federal PLUS Loan funds directly to the college. The college financial aid office then applies the loan funds to tuition and fees (plus room and board if the student lives on campus).

Any remaining credit balance usually is “refunded” to the student or parent within 14 days. (Parents can authorize the college to refund any leftover Federal Parent PLUS loan proceeds to the student.)

Loan Repayment

Repayment begins within 60 days of full disbursement. However, parents may request a deferment to delay repayment until the end of the six-month grace period after the student graduates or drops below half-time enrollment. Parents can also defer repayment if the student is enrolled at least half-time in college. Interest will accrue and be added to the loan balance if it isn’t paid.

Repayment Options for Federal Direct PLUS Loans

• Tiered Standard Plan (10 to 25-year repayment; for loans issued on or after July 1, 2026)
• Standard 10-year repayment (loans first disbursed before July 1, 2026)
• Extended Repayment (loans first disbursed before July 1, 2026; requires more than $30,000 in Direct Loans, up to 25 years)
• Graduated Repayment (loans first disbursed before July 1, 2026). Parent PLUS loans first disbursed on or after July 1, 2026 have only one repayment option: the tiered standard plan, with a fixed term of 10 to 25 years based on the balance. They are not eligible for the new Repayment Assistance Plan (RAP), for any income-driven repayment plan, or, in practice, for Public Service Loan Forgiveness.
• For loans first disbursed before July 1, 2026: Income-Contingent Repayment (ICR), but only if the parent obtained a Federal Direct Consolidation Loan disbursed on or before June 30, 2026 and enrolls in ICR and makes at least one payment before July 1, 2028. Taking out any new federal loan or new consolidation loan on or after July 1, 2026 ends this eligibility.
• Public Service Loan Forgiveness, on that same pre-July 2026 consolidation path.

For Grad PLUS loans first disbursed before July 1, 2026: most repayment plans, including income-driven plans — but ICR, PAYE and SAVE terminate on July 1, 2028, and borrowers still on them are moved to the Repayment Assistance Plan (RAP). IBR has no sunset. Grad PLUS loans first disbursed on or after July 1, 2026 under the interim exception may use only the tiered standard plan or RAP.

Transferring Direct PLUS Loans

Parents cannot transfer a Federal Parent PLUS loan to the student unless they refinance with a private lender, giving up federal loan protections.

Loan Cancellation

Federal Direct PLUS loans are eligible for discharge upon the death or total and permanent disability of the borrower. In addition, Federal Parent PLUS loans may be discharged upon the death (but not disability) of the student beneficiary.

Federal PLUS loans are also eligible for other loan cancellation provisions, such as the closed school discharge, identity theft discharge, bankruptcy discharge, unpaid refund discharge, and false certificate discharge. They may be eligible for loan forgiveness, such as public service loan forgiveness, which requires working in a specific occupation for a specified period while repaying the loans.

Alternatives to the Federal PLUS Loan

If the student has exhausted eligibility for the Federal Stafford Loan, alternatives to the Federal Direct PLUS Loan include private student loans and private parent loans. Generally, private loans require a creditworthy cosigner, usually the parent, but they may come with a lower interest rate and no origination fees.

Pros and Cons of Federal Direct PLUS Loans

When considering the Federal Direct PLUS Loan compared to other borrowing options, consider the pros and cons. 

Pros of Borrowing Direct PLUS Loans

• Parent PLUS limits are still far higher than the annual limits on Direct Subsidized and Unsubsidized loans — $20,000 per year per dependent student for loans first disbursed on or after July 1, 2026, or up to cost of attendance minus other aid if you qualify for the interim exception.
• Your interest rate remains fixed for the lifetime of the PLUS loan. This helps you plan your repayment and not worry about unexpected surprises regarding your debt.
• Parents can request a PLUS loan deferment while the student is in school, offering more loan repayment options.
• Parent PLUS loans first disbursed before July 1, 2026 are eligible for the standard repayment plan or other flexible options, such as graduated or extended repayment plans.

Cons of Borrowing Parent Direct PLUS Loans

• Direct PLUS loans have higher interest rates than other federal student loans.
• Direct PLUS loan borrowers also pay an origination fee, which could make the loan more expensive than a private loan.
• Borrowers must undergo a credit check, and adverse credit history might limit eligibility. 
• Direct PLUS Loans allow borrowing well beyond the annual Stafford limits — $20,000 a year per child for new Parent PLUS borrowers, and up to the full cost of attendance for those covered by the interim exception — making it easy to over-borrow. Parents and students should carefully assess how much they need to avoid excessive debt.
• You must start paying parent loans back right away unless you request a deferment.
• Parent PLUS loans first disbursed on or after July 1, 2026 are not eligible for any income-driven repayment plan, including the new Repayment Assistance Plan — the tiered standard plan is the only option.

Conclusion

A PLUS Loan may be a good choice if you need a federal loan with flexible repayment options. However, a private loan could offer lower rates and no fees if you have strong credit. Be sure to compare all options before choosing.

Interested in exploring other student loan options? Check out our list of the best private student loans for 2026.