How it works
Grad PLUS loans are federal loans for graduate and professional students, priced above undergraduate federal rates and carrying an origination fee deducted from every disbursement — so borrowing $42,000 of usable money requires taking a larger gross amount, which then accrues and repays too. Private graduate loans skip the upfront fee and often quote lower headline rates to strong credit profiles, making the comparison genuinely close: the fee pushes the effective cost of PLUS well above its sticker rate, while the private route trades that premium away along with the federal safety net. The calculator prices both routes on identical terms: it grosses up the PLUS borrowing to deliver your needed net amount after the fee, amortizes each side over the same term, and reports all-in repayment, monthly payments, and the fee in dollars. On the illustrative defaults — an 8.94% rate with a 4.23% deduction against a 7.49% private quote — the federal premium lands in the thousands over a decade. What the spreadsheet cannot price is protection: income-driven repayment, discharge provisions, and public-service forgiveness exist on the federal side only, and their value depends entirely on your career risk. Rate tables reset annually and program rules change — verify current figures at StudentAid.gov before deciding.
Formula
Gross PLUS = needed ÷ (1 − fee%) | All-in cost = level payment × months for each route at its own rate
Tips
- Exhaust lower-cost federal unsubsidized limits before touching either option.
- Compare the effective rate: PLUS fee spread over a short stay raises its true cost sharply.
- Private quotes hinge on credit — pull real offers before trusting any comparison.
- If grad employment might involve income-driven options, price that insurance into the decision.
- Recheck annually: PLUS rates reset each academic year, changing last year's answer.
Frequently asked questions
- Is Grad PLUS cheaper than a private loan?
- Rarely on raw price for strong-credit borrowers: the combination of a higher rate and a multi-percent origination deduction typically costs thousands more over a decade, as the defaults here illustrate. The federal route earns its premium through repayment flexibility and forgiveness programs that private lenders do not offer.
- How does the Grad PLUS origination fee work?
- A percentage of each disbursement is withheld before the money reaches the school, so you borrow gross to receive net. To land a full $42,000 at an illustrative 4.23%, the loan must total about $43,855 — and interest accrues on the larger figure from day one.
- Can I refinance Grad PLUS loans later?
- Yes, into a private loan once your income and credit support a better rate — but refinancing converts the loan to private status permanently, surrendering income-driven options, federal deferment paths, and forgiveness eligibility attached to the federal loan. Recheck the math after graduation when salaries are stronger.
- Do private grad loans offer income-driven repayment?
- Generally no — private lenders offer hardship programs of varying generosity, but nothing structurally equivalent to federal income-driven plans that scale payments to income and potentially forgive balances. Career uncertainty is the main reason borrowers willingly pay the federal premium.
- Should I take Grad PLUS for living expenses too?
- Borrowing refunds for rent compounds fast: every disbursed dollar carries the rate and fee for the full term. Price the total package here before deciding — on these terms, $10,000 of extra borrowing costs roughly $16,000 repaid — and exhaust assistantships, employer benefits, and direct savings first.