If you are borrowing for graduate or professional school, you have likely run into two federal loan names that sound similar but work differently: Direct Unsubsidized Loans and Grad PLUS Loans. Choosing between them — and knowing what is changing in 2026 — can save you money and stress. This guide compares Grad PLUS and Direct Unsubsidized loans for graduate students.
The Two Federal Graduate Loans
Both loans come from the federal government, but they have different rates, limits, and rules.
- Direct Unsubsidized Loans are the first federal loans graduate students turn to. For loans first disbursed in 2026-27, the rate is 8.07%. They have an annual borrowing limit (commonly $20,500 per year for most graduate students) and do not require a credit check. Interest accrues while you are in school.
- Grad PLUS Loans let graduate students borrow up to the full cost of attendance, minus other aid, after a basic credit check. For 2026-27, the rate is 9.07% — higher than unsubsidized loans — and they carry an origination fee. Interest also accrues while you are in school.
The Big 2026 Change: Grad PLUS Is Ending
This is the most important update. Under the 2025 law, the Grad PLUS loan program is eliminated for new borrowers starting July 1, 2026. Graduate students who do not already have Grad PLUS loans will no longer be able to take them out. Instead, federal graduate borrowing will be capped at annual and lifetime limits on Direct Unsubsidized Loans, and students who need more may have to turn to private loans.
If you are continuing a program and already have Grad PLUS loans, check whether any grandfathering applies to you, and confirm your remaining federal options with your school's financial aid office.
Which to Use First (While Both Exist)
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College Ave's student loan products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or BTG Pactual Bank, N.A., member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2) As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (APR): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/15/2026. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
When both loans are available to you, the order is simple: borrow Direct Unsubsidized first, because it has the lower rate and no origination fee, then use Grad PLUS only for what you still need after that. Never borrow more than you actually require, since interest on either loan compounds over time.
Why Keeping It Federal Matters
Both Direct Unsubsidized and Grad PLUS loans are federal, which means they qualify for federal protections that private loans do not: income-driven repayment, Public Service Loan Forgiveness, and generous deferment and forbearance options. With Grad PLUS ending, more students may be tempted by private loans — but private loans give up all of those protections. Borrow federal to the extent you can before considering private debt.
A Graduate Borrowing Checklist
- File your FAFSA to unlock federal graduate loans.
- Borrow Direct Unsubsidized loans first, up to your annual limit.
- If you still have a gap and Grad PLUS is available to you, use it before private loans.
- Keep your total borrowing tied to actual costs, not the maximum offered.
- Confirm your federal options early, since the 2026 changes may limit what you can borrow.
The Bottom Line
Direct Unsubsidized and Grad PLUS loans are both federal, but unsubsidized loans carry a lower rate and should be used first. The defining change for 2026 is that Grad PLUS is ending for new borrowers on July 1, which makes careful planning and keeping your borrowing federal more important than ever. Borrow only what you need, and protect your access to income-driven repayment and forgiveness by avoiding private loans where you can.
Comparing graduate programs by real cost? Create your free CollegeLens plan to map your costs and borrowing, and file your FAFSA to access federal loans.
— Sravani at CollegeLens
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