Can Grad PLUS Loans Be Used for Living Expenses?

Federal Direct Graduate PLUS Loans, or Grad PLUS loans, help graduate and professional students finance their education. These loans are a significant resource for covering various educational expenses, including living costs. Grad PLUS loans are intended to cover the total Cost of Attendance (COA) at an eligible institution, which includes both direct academic costs and indirect living expenses.

Understanding Eligible Expenses and Borrowing Limits

Grad PLUS loans cover the full Cost of Attendance (COA) at a student’s educational institution, minus any other financial aid received. The COA is an estimate determined by the school for one academic year and encompasses both direct and indirect educational costs. Direct costs typically include tuition and fees, along with room and board if billed by the school.

Indirect costs are estimated expenses for living and educational necessities not directly billed by the institution. These can include housing (rent, utilities), food, transportation, books, supplies, and other personal expenses like toiletries and laundry. Schools determine reasonable amounts for each category of indirect costs, and these amounts can vary based on the institution and its location.

The maximum amount a student can borrow through a Grad PLUS loan is limited by their institution’s COA, reduced by any other financial assistance already received, such as scholarships or other federal loans. There is no specific dollar limit on Grad PLUS loans, only the constraint of the COA minus other aid. Students are encouraged to borrow only what is necessary to avoid excessive debt.

Receiving and Managing Loan Disbursements

Once a Grad PLUS loan is approved, the funds are typically sent directly to the student’s school. The institution first applies these funds to direct educational costs charged to the student’s account, such as tuition, fees, and any on-campus room and board.

Any remaining balance, known as a credit balance, is then disbursed directly to the student. This credit balance helps cover indirect educational expenses, including living costs. Common methods for disbursing these remaining funds include direct deposit to a bank account or a physical check.

Disbursements typically occur at the beginning of each academic term, often after the add/drop period, with the total loan amount usually split evenly across semesters or trimesters. For example, for an academic year loan, half of the funds might be disbursed at the start of the fall term and the other half at the start of the spring term. Students should confirm specific disbursement schedules and methods with their financial aid office.

Applying for a Grad PLUS Loan

The process for applying for a Grad PLUS loan begins with completing the Free Application for Federal Student Aid (FAFSA). The FAFSA is a required initial step for federal student aid programs. Graduate students are generally considered independent for FAFSA purposes, meaning parental financial information is typically not required.

After completing the FAFSA, students must apply for the Grad PLUS loan directly through the Federal Student Aid website or their school’s financial aid office. A credit check is a mandatory part of the application process for Grad PLUS loans. If an applicant has an adverse credit history, they may still be able to receive the loan by obtaining an endorser (a co-signer) or by appealing the decision and documenting extenuating circumstances.

New borrowers are required to complete a Master Promissory Note (MPN) and participate in entrance counseling. The MPN is a legal document outlining the terms and conditions of the loan and is an agreement to repay the borrowed funds. Entrance counseling provides information about the loan, including repayment obligations and options. Students should also be aware of their school’s specific deadlines for submitting all required application materials, as these can impact timely fund availability.