Typically, when you apply for a loan, the lender wants proof of income to show that you can repay the loan. 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 cosigner on the private graduate student loan.
But some graduate students, perhaps MBA, law school, or computer science students about to start their final years, 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?
Keep reading to learn how and when you can use an offer letter as income verification can give you an edge in the application process.
Key Points
• Graduate students can sometimes use signed job offer letters as proof of income when applying for private student loans, potentially eliminating the need for a cosigner.
• Submitting a job offer letter can strengthen a loan application by demonstrating future earning potential, which may increase the likelihood of loan approval.
• Providing an offer letter as income verification may help applicants qualify for more favorable interest rates, leading to potential savings over the life of the loan.
• To be accepted, the offer letter must typically include a start date within 90 days for graduate students.
• By leveraging a job offer letter, graduate students may access private student loans with greater ease and potentially more favorable terms.
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 not standard. Luckily, for graduate private student loans, many lenders now accept an offer letter as a form of income for eligible borrowers.
Offer letters can help recent graduates or students entering the workforce qualify for better loan terms, such as lower interest rates or the ability to apply without a cosigner. 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, 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.
Qualifying Without a Cosigner
A student loan cosigner is 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 repay. In the case of student loans, cosigners are often parents or guardians, though other relatives and even friends can be cosigners, as well.
In many cases, it can be hard for graduate students to qualify for additional student loans without a cosigner, particularly if they’re young and newly graduated from college — which probably means their credit histories are short and their income is limited.
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 cosigner (if the loan company doesn’t expressly require one).
Increasing Approval Chances
Even if a graduate school student loan applicant does still elect to have a cosigner, 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 cosigner, 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 what rate you qualify for.
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.
The Takeaway
Graduate, law, and MBA students may be able to use a job offer letter as proof of income in addition to, or instead of, adding a cosigner 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 or professional graduate programs.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
FAQ
How does submitting a job offer letter affect my chances of loan approval?
Providing a job offer letter can strengthen your loan application by demonstrating future earning potential, which may increase the likelihood of approval and potentially qualify you for more favorable interest rates.
What information should be included in the job offer letter?
The offer letter should include the employer’s name, your job title, the start date, and the annual salary or compensation details.
What are the eligibility requirements for using an offer letter as income proof?
To be eligible through SoFi, the offer letter must be signed and include a start date within 90 days of the application date for graduate students, or within 12 months for MBA and law students. SoFi also requires verification of the offer through written or verbal confirmation from the employer.
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