Typically, when you apply for a loan, the lender wants proof of income, aka proof that you can pay them back. For graduate students, this can pose a catch-22, since they are going to school in order to become gainfully employed. The customary workaround: having a co-signer on the private student loan.
But some graduate students, perhaps MBA, law school or computer science students about to start their final year, may have offer letters of employment for when they graduate. Wouldn’t it be great if they could submit those offer letters as proof of income—a practice used in mortgage lending?
How Common Is the Practice of Using an Offer Letter as Proof of Income?
Certainly, accepting offer letters as part of graduate students’ applications is a break with custom. The only company currently doing so is actually SoFi. For graduate private student loans, SoFi now accepts an offer letter as a form of income for eligible borrowers.
When a loan applicant can submit an offer letter as proof of income, a co-signer may no longer be needed. Read on for more ways an offer letter may strengthen the loan application and empower the funding process for the student.
Using an Offer Letter as Proof of Income
Given how much a student likely already has on their plate—especially if they are a soon-to-be (or current) graduate student—chances are they want the student loan application process to be as straightforward as possible. Needing to supply an additional document might sound like an extra hassle.
But there can be plenty of benefits to using a job offer letter as proof of income on a student loan application—and doing so may even help save money in interest over the long run if the student qualifies for a lower rate. Here are a few other things to consider.
Qualifying Without a Co-Signer
A student loan co-signer is, as the name implies, a second person who signs a loan along with the borrower—and who is therefore also responsible for the debt should the borrower fail to pay. In the case of student loans, co-signers are often parents or guardians, though other relatives and even friends can be co-signers, depending on a lender’s criteria.
In many cases, it can be hard for graduate students to qualify for additional student loans without a co-signer, particularly if they’re young and newly graduated from college—which probably means their credit histories are short and their income is limited.
Some private loan companies even require a co-signer in order to apply, which can be a major pain if mom or dad have decided to cut off the gravy train once and for all.
Because a job offer letter demonstrates the applicant’s individual earning potential, using one in a student loan application may empower students to be able to qualify without a co-signer (if the loan company doesn’t expressly require one).
Even if the applicant does have a willing co-signer, it can be empowering to seek out educational funding completely on their own terms.
Increasing Approval Chances
Even if a graduate school student loan applicant does still elect to have a co-signer, using an offer letter as proof of income may help increase the chances of approval. When it comes to borrowing large amounts of educational funding, every little bit of qualification can help.
Potentially Qualifying for a More Favorable Rate
With or without a co-signer, additional income validation in the form of a job offer letter may be able to qualify you for a more favorable interest rate—which may potentially mean savings over time. It is important to remember that this is just one of the many factors that lenders take into account when determining which rate you qualify for.
This can be particularly valuable when graduate students are adding to an existing student debt total, and in the case of private student loans, which typically carry higher interest rates than their federal counterparts.
What’s the Process of Using a Job Offer Letter?
To use a job offer letter as part of your student loan application package, the applicant will need to include the letter in their application materials.
Depending on the loan company’s process, the letter may be uploaded directly online or a copy included in a mailed-in application. Offer letters typically include a start date and pre-tax pay rate so the lender can accurately assess how the offer augments the application.
Funding a Graduate Education with SoFi? Your Offer Letter Could Help
Students may already know that SoFi offers a range of private student loans—for undergraduates, graduates, and parents. The loans carry competitive interest rates and are free of origination, late, or insufficient funds fees, and they’re getting even better.
SoFi now allows graduate, law, and MBA students to use a job offer letter as proof of income in addition to, or instead of, adding a co-signer to their application.
While students should exhaust all their federal student aid options before considering a private student loan, sometimes additional assistance is necessary to handle the expense of graduate studies or professional graduate programs.
Getting a rate quote for a SoFi private student loan takes three minutes and won’t affect your credit score¹.
SoFi members can also qualify for perks like rate discounts on additional loans, career services, and more. With competitive rates and multiple repayment options, SoFi Private Student Loans might be just the thing for you and your budget.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.¹
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