When planning for grad school, the type of loan you pick can make a big difference in interest costs and repayment options. If you’re not sure which loan is right for you, comparing Grad PLUS loans vs. unsubsidized loans will help you determine the best option.
Both loans come from the federal government, but they behave differently and serve different needs. This article explains how each option works, their pros and cons, and how to decide which makes the most sense for your unique needs.
What Is a Grad PLUS Loan?
A Grad PLUS loan is a federal student loan for graduate and professional students who need extra funding. It can cover tuition, housing, books, and other things that other loans or financial aid don’t fully cover.
Unlike some federal loans, Grad PLUS loans require a basic credit check. A high score may not be needed, but a serious negative credit history can affect eligibility. You can borrow the cost of attendance at your school, minus any other aid you receive. That makes it a flexible option for unexpected bills and expenses.
Once approved, the money goes directly to your school for tuition and fees first, with any leftover sent to you. Repayment usually starts after the loan is fully disbursed, though you can request a deferment while in school. Interest starts accruing immediately, and unpaid interest is added to your balance, so it’s important to understand how it grows and plan accordingly.
For many students, it’s not the first choice, but it can help when other options aren’t enough.
What Is an Unsubsidized Loan?
A federal direct unsubsidized loan is another type of federal student loan for graduate and professional students. Unlike Grad PLUS loans, they don’t require a credit check, making them accessible to many students who qualify for federal aid.
With an unsubsidized loan, you can borrow up to an annual limit, which may not always cover all tuition or living costs. That’s why some students supplement with a Grad PLUS loan if expenses are higher than expected.
Just like with Grad PLUS loans, interest starts accruing as soon as the loan is disbursed, even while you’re in school. And even though you can defer interest payments until after school, any unpaid interest is added to your balance when repayment begins.
Unsubsidized loans are often a first step because they’re simple, predictable, and don’t require a credit review. For students who only need a smaller loan to cover tuition or fees, this can be a lower-cost, lower-risk option compared with Grad PLUS loans.
Grad PLUS Loans vs. Unsubsidized Loans: Pros and Cons
Both Grad PLUS loans and unsubsidized loans can help fund grad school, but they work differently and fit different situations. Let’s break down the benefits and drawbacks of each so you can see which makes more sense for you.
Grad PLUS Loan Pros
- Higher borrowing limits: Grad PLUS loans let you borrow up to the full cost of attendance, minus any other aid. This is especially helpful if your expenses exceed what an unsubsidized loan can cover.
- Flexible use: You can use the funds for tuition, books, housing and other school-related costs, making it easier to manage unexpected expenses.
- Fixed interest rates: Like most federal loans, Grad PLUS loans have predictable, fixed interest rates, so you know what your payments will be each month.
- Eligibility for repayment plans: These loans are eligible for federal repayment options, including income-driven plans, which can help if your post-grad income is modest.
Grad PLUS Loan Cons
- Credit check required: Approval depends on your credit history, so students with adverse credit may face challenges.
- Higher interest and fees: Grad PLUS loans usually carry a slightly higher interest rate and origination fee than unsubsidized loans.
- Interest accrues while in school: Even if you defer payments, interest accumulates and is added to your balance, which can increase the total cost over time.
Unsubsidized Loan Pros
- No credit check required: These loans are easier to qualify for since eligibility is based on enrollment and financial need, not credit history.
- Predictable, fixed payments: Like Grad PLUS loans, interest rates are fixed, so monthly payments are predictable.
- Lower overall cost for smaller amounts: If you only need a limited amount to cover tuition or fees, unsubsidized loans are typically cheaper than Grad PLUS loans.
- Federal protections: You’re eligible for standard repayment plans, deferment, and forbearance options, just like with Grad PLUS loans.
Unsubsidized Loan Cons
- Lower borrowing limits: You may not be able to cover all your expenses, which can force you to find other loans or funding.
- Interest accrues immediately: Interest starts building as soon as the loan is disbursed, even while you’re in school, adding to your overall balance if unpaid.
- May not cover living expenses: Unlike Grad PLUS loans, unsubsidized loans might not stretch far enough for housing, books, or other costs, which could require additional loans.
How to Decide Which Is Right for You Between Unsubsidized Loans and Grad PLUS
1. Pay Attention to Upcoming Program Changes
Under current federal policy, Grad PLUS loans are scheduled to end for new borrowers after July 1, 2026, according to the U.S. Department of Education. If you already have one, you can continue borrowing under the current rules for up to three more years.
After that, new grad students will generally have to rely on Direct Unsubsidized Loans, which have annual and total limits ($20,500 and $100,000 for most programs; $50,000 and $200,000 for professional programs).
2. Compare Your Costs
Unsubsidized loans may cover tuition and fees, but not all education and living expenses. Grad PLUS loans can help fill gaps if you need extra money for housing, books, or other costs.
3. Check Your Borrowing History
If you borrowed federal loans for undergrad, your remaining lifetime loan limit may affect how much you can take in either type of loan.
4. Think About Your Future Income
Graduate students in high-earning fields may be able to handle the higher borrowing limits of Grad PLUS loans. However, you should do your best to borrow only what you need, especially if your intended field has a lower average income.
5. Consider Repayment Flexibility
Both are federal loans, so they offer options like income-driven repayment, deferment, or forgiveness. Grad PLUS loans may carry slightly higher interest rates, but they still provide protections that private loans don’t.
Final Thoughts
When deciding between Grad PLUS loans vs. unsubsidized loans, consider your budget, how much you truly need, and what you can handle after graduation. Neither loan is better for everyone. The right choice depends on your budget, borrowing needs, and comfort level with interest and repayment obligations.
For some students, unsubsidized loans provide enough support with lower costs. Others may need the flexibility of Grad PLUS loans when expenses go beyond standard limits. Both come with responsibilities, but also with protections private loans don’t offer.
Focus on borrowing what you need, understanding the terms, and planning ahead. That way, whichever loan you choose, you can manage your education debt confidently and avoid surprises down the line.
