SoFi

For sellers, the idea of multiple offers on the home they’ve put on the market is a dream. But for buyers, it can be a big source of stress: How can you get your bid to stand out and be the one selected? This is especially challenging in today’s seller’s market, when bidding wars and stiff competition has become more common.

So do you want to know how to compete against multiple offers on your dream house? You’re in the right place.
Here, you’ll learn some strategies and secrets that can help give you a competitive edge, from boosting your earnest money to waiving contingencies.

Read on to find out:

•   How to compete against multiple offers in a buyer’s and a seller’s market

•   How to collaborate most effectively with a buyer’s agent

•   How to increase your chances of competing against multiple offers on a house.

Multiple Offers in a Seller’s Market

A seller’s market means the demand for houses is greater than the supply for sale, causing home prices to increase and often giving sellers a serious advantage.

It can get pretty competitive for those who need to buy a house, and multiple offers on a house become the new norm.

Seller’s markets and the frequency of multiple offers can happen for a few reasons:

•   More houses typically go up for sale during peak homebuying season in the summer, so seller’s markets are more common in the winter when inventory is low.

•   Cities that see steady population growth and increased job opportunities often experience a higher demand for housing, leading to multiple interested buyers making offers on limited inventory.

•   A decrease in interest rates could mean more people are able to qualify for mortgages, causing an uptick in homebuyers that might work to the seller’s advantage. More interested parties can mean more negotiation power.

As of the end of 2022, despite rising interest rates and waning home construction, there has nevertheless been a hot market, with demand outstripping supply. According to NAR (the National Association of Realtors®), one in four houses on the market receives enough bids to sell above asking price – a significant amount of competition.

Multiple Offers in a Buyer’s Market

In a buyer’s market, there’s a greater number of houses than buyers demanding them. In this case, homebuyers can be more selective about their terms, and sellers might have to compete with one another to be the most sought-after house on the block.

In a buyer’s market, house hunters typically have more negotiating power. The number of offers on the table is usually lower than in a seller’s market, and the winning bid is often lower than the listing price.

In other words, you are likely to be better positioned to get a good deal.

Are Buyers’ Agents Aware of Other Offers?

Unless house hunters are buying a house without an agent, there are certain cases where the buyer’s agent could be tipped off to other offers on the house. This insight could help you hone your offer to be the winning bid.

A lot of it depends on the strategy of the sellers’ agent and whether it’s designed to stir up a bidding war with obscurity or transparency. Either way, the sellers and their agent could choose to:

•   Not disclose whether or not other buyers have made offers on the property.

•   Disclose the fact that there are other offers, but give no further transparency about how many or how much they’re offering.

•   Disclose the number of competing offers and their exact terms and/or amounts.

It’s up to the sellers and their agent to decide which strategy works best for their situation and, according to the National Association of Realtors® 2020 Code of Ethics & Standards of Practice, only with seller approval can an agent disclose the existence of other offers to potential buyers.

However, as you might guess, it can stir up more heated bidding if it is revealed that there are multiple offers. A prospective buyer might learn that intel and hike up their bid or offer other concessions, such as foregoing an inspection.

How Do Multiple Offers Affect a Home Appraisal?

What happens in the event of an all-out bidding war? Say a house comes on the market where few other properties are available, and it has all kinds of dream amenities: an outdoor pizza oven and slate patio, the perfect family room with a wall begging for a ginormous flat screen, a spa-style bathroom with soaking tub, and all kinds of energy-efficient bells and whistles.

Some buyers may be tempted to keep increasing their offer to one-up the competition. Unfortunately, this could lead to drastically overpaying for the house. And when it comes time for the mortgage lender to approve the loan, they may think the home isn’t worth all that money.

In these cases, buyers can add an appraisal contingency to their offer, asserting that the appraised value of the property must meet or exceed the price they agreed to pay for it or they can walk away from the deal without losing their deposit.

But what about in competitive seller’s markets when making mortgage contingencies could mean losing the deal? In those cases, buyers might have to put down extra money to bridge the gap between what their lender is willing to give and what they offered.

Think carefully in this situation about what you would do if the only way to nab your dream home would be to come up with more cash. For some people, it might be possible (perhaps by borrowing from family); for others, it would mean walking away or risk overextending oneself and blowing one’s budget.

Recommended: Home Affordability Calculator

How Can Buyers Beat Other Offers on a House?

Are you wondering, “But how can I compete against multiple offers on a house?” There are a few things homebuyers can do to improve their odds of winning when there are multiple offers on a house. Consider the following options:

A Sizable Earnest Money Deposit

Earnest money is a deposit made to the sellers that serves as the buyers’ good faith gesture to purchase the house, typically while they work on getting their full financing in order.

The amount of the earnest money deposit generally ranges between 1% and 3% of the purchase price, but in hot housing markets, it could go up to 5% to 10% of the home’s sale price.

By offering on the higher end of the spectrum, homebuyers can beat out contenders who offer less attractive earnest money deposits.

Best and Final Offer

Going into a multiple-offer situation and expecting negotiation can be tricky. It’s typically suggested that buyers go in right away with their strongest offer; one they can still live with if they lose to a contender — aka, they know they gave it their all.

In some cases, sellers deliberately list the home for less than comparable sales in the area in an attempt to stir up a bidding war. By going in with their highest offers, buyers could end up paying what the house is actually worth while still winning the deal.

Recommended: 7 Steps to Buying a Home

All-Cash Offer

By offering to pay cash upfront for the property, homebuyers effectively eliminate the need for third party (lender) involvement in the transaction. This can be appealing to sellers who are looking to streamline the sale and close ASAP.

However, this is obviously not possible for all homebuyers. It requires having quite a chunk of change on reserve to make this kind of offer. For some though (including those who just sold another property), it could be an option.

Waived Contingencies

Whether it’s offering the sellers extra time to move out or waiving the home inspection, potential homebuyers can gain wiggle room when they start to waive contingencies.

Contingencies are conditions that must be met in order to close on a house. If they’re not met, the buyers can back out of the deal without losing their earnest money deposit.

By waiving certain contingencies, buyers show that they’re willing to take on a level of risk to close the deal.
This can be appealing to some sellers. Of course, if you are the prospective buyer in a multiple-bidding situation, it means you are taking on risk.

What if, say, after you purchase the home, you discover that there’s $10,000 worth of HVAC work that needs to be done? An inspection would likely have revealed this, and you would have been able to negotiate with the sellers about this. But when you waive the inspection, you will be on the hook for this kind of upgrade.

Recommended: 6 First-time Home-Buying Mistakes to Avoid

Signs of Sincerity and Respect

Because many sellers have pride in and a deep affection for their home, buyers who show sincerity, respect, and sentiment may score extra points.

In some cases, it may be helpful for bidders to write a letter that details what they love about the home, which adds to the positive interactions with the sellers and their agent. It can make the sellers feel as if their home will be in good hands, with people who appreciate it rather than want to do a gut reno and strip away all the features they treasure.

This could lead to winning in a multiple-offer situation, but seek your real estate agent’s advice before penning such a letter. It could be a turn-off to some sellers.

An Offer of Extra Time to Move Out

In some cases, sellers might appreciate (or even require) a bit of a buffer between the closing date and when they formally move out of the house.

By offering them a few extra days post-closing without asking for compensation, flexible buyers can get ahead of contenders who might have stricter buyer possession policies.

Or you might offer to lease back the property for a month or more, if that would help the sellers get settled in their next residence. This kind of flexibility could tip the balance in your favor.

A Mortgage Pre-Approval Letter

Most offers are submitted with a lender-drafted letter that indicates the purchasers are pre-qualified for a loan.

But did you know there’s a difference between getting pre-qualified vs. pre-approved? A pre-approval letter can take it a step further by showing that the buyers are able to procure borrowed funds after deep financial, background, and credit history screening.

Pre-approval signifies to some sellers that the buyers can put their money where their mouth is, lessening the possibility of future financing falling through.

Recommended: Guide to Buying, Selling, and Updating Your Home

Kick-Starting the Homebuying Process

If you’re shopping for a home or plan to do so in the near future, it’s a wise move to get a jump on the process by exploring your mortgage options. For instance, how much of a loan do you qualify for and at what interest rate? How much would you have to put down?

As you move through this process, see what SoFi Mortgage Loans can offer. Our loans are convenient loans and have competitive rates. Plus, they can be available to qualifying first-time homebuyers with as little as 3% down. By knowing what your home loan funding looks like, you may be able to bid with greater confidence.

Get a leg up on buying a home, and find your rate in minutes with SoFi Mortgage Loans.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOHL20045

The average cost of college tuition varies widely based on location and whether the school is public or private. The average cost of college for in-state students at a four-year institution in 2022-23 was almost $11K. Students at private nonprofit four-year institutions paid over $39K on average.

Read on for more information about average tuition costs and other expenses facing college students.

The Average Cost of College

According to the College Board’s annual “Trends in College Pricing” report, the average cost of attending a four-year college as an in-state student at a public university during the 2022-23 school year was $10,950. For an out-of-state student attending a public four-year college, the average rose to $28,240.

The average cost of attending a private four-year institution was $39,400. These averages are based on the published price at a college or university. This includes tuition, fees, and room and board.

Cost is a major factor for students deciding which school to attend. According to the annual Sallie Mae survey “How America Pays for College 2022,” 60% of parents and students eliminated a college based on cost after receiving their financial aid package.

Historical Average Cost of Tuition

The cost of tuition has increased dramatically over time. For the 2002-03 school year, the average cost of college tuition at a public four-year institution was $4,202 for a student receiving in-state tuition. In 20 years, tuition rose to $11,541 for the 2022-23 school year.

U.S. News reviewed tuition costs at 440 ranked National Universities, those universities included as part of the annual college rankings. According to their data, the average tuition and fees at private National Universities increased by 134% in 20 years from 2003 to 2023. During the same period, at four-year public National Universities, tuition for out-of-state students increased by 141%, and for in-state students it rose by 175%.

Average Total Cost of College

A traditional undergraduate college degree takes four years to complete, which means four years of tuition costs. According to EducationData.org, the cost of college has risen, on average, about 7.1% annually since 2000.

Year-over-year changes can fluctuate greatly, however, so it can be challenging to predict exactly how much a student will pay in tuition costs over the course of their degree. For example, the “Trends in College Pricing” report found that in-state tuition costs at public four-year institutions increased just 1.8% from the 2021-22 to the 2022-2023 school year. For that same time period, tuition increased 3.5% at private nonprofit four-year institutions.

To get a rough estimate of how much college will cost in its entirety, you can take the current tuition rate and multiply it by four. Keep in mind this won’t account for any increase in the cost of tuition.

Average Additional College Expenses

Tuition generally makes up the majority of a student’s college expenses. But there are other fees and costs to factor in, including room and board, books, and other supplies. As you plan how to pay your tuition, students might also consider general living expenses.

What Is the Cost of Room and Board?

Some colleges charge “comprehensive fees,” which reflect the total for tuition, fees, and room and board. Other schools charge room and board separately from tuition and fees. The cost of room and board typically accounts for the cost of housing (i.e., a dorm room or on-campus apartment) and the meal plan.

The average cost of on-campus room and board for the 2022-23 school year was $11,557 for four-year public institutions for both in-state and out-of-state students, and $12,857 for four-year private nonprofit institutions.

The actual cost will vary depending on the type of housing you live in and the meal plan you choose. Housing can be another determining factor for students. According to the same 2021 Sallie Mae survey, 85% of college students selected a college in their home state and 39% live at home or with relatives to save on housing costs.

The Cost of Extra Classes

Tuition at some schools covers the cost of a certain number of credit hours. Your credit hours can vary each term depending on the classes you enroll in. If you exceed the number of credit hours covered by tuition, you may pay an additional fee.

Books and Supplies

On top of those expenses, don’t forget to budget for books and supplies. The average college student attending a four-year college spends $1,226 on textbooks per year.

Transportation

Transportation is another major category of expenses for college students. Will you have a car on campus? If so, plan to pay for gas, insurance, and a parking permit. How often do you plan to go home? Will a trip to visit your family require airfare?

Other Living Expenses

Then there are additional personal expenses like eating out, laundry, and your monthly cell phone bill. To get an idea of how much you’ll actually spend every month, it helps to review your current spending.

College may be the first time you’ve had to learn how to budget. Consider sitting down with your parents, an older sibling, or a trusted friend who has already navigated their first year of college to get an idea of the expenses you may encounter.

Paying for College

There are, of course, options available to help you finance your education. Whether you’re going to college for the first time or returning for further education, consider looking into the following options:

First Thing’s First: The FAFSA

A common first step for students interested in securing federal financial aid is to fill out the Free Application for Federal Student Aid (FAFSA®). As you get ready to apply, pay attention to deadlines, as they vary by school and state. After you fill out the FAFSA, you’ll receive an offer letter detailing the type of aid you qualify for. This may include scholarships and grants, work-study, and federal student loans.

Planning ahead is one way to set yourself up to successfully pay for college. If you’re not quite ready to fill out the FAFSA yet, you can use the Federal Student Aid Estimator at StudentAid.gov/Aid-Estimator/ to get an idea of how much aid you might qualify for.

Recommended: Jobs for MBA Graduates

Scholarships and Grants

Scholarships and grants can be immensely helpful when it comes to paying for college, since that money doesn’t need to be repaid. In addition to filing the FAFSA, you can check to see if there are any other scholarship opportunities for which you may qualify. There are also online resources and databases that compile different scholarship opportunities.

The federal work-study program is another form of aid that can help students pay for college. If you are eligible for work-study and receive it in your financial aid award, you may still have to find your own employment at your university. Check with your school’s financial aid office to find out if your school participates and whether they will place you or if they have a work-study job board.

Of course, other jobs for college students are available, but students will have to pursue those on their own.

Recommended: Grad School Scholarships

Student Loans

Student loans offer another avenue for students to finance their college education. Unlike scholarships and grants, however, student loans must be repaid. There are two kinds of student loans — federal and private.

Federal Student Loans

Applying for student loans requires filling out the FAFSA. Federal loans for undergraduates can be either subsidized or unsubsidized. With a subsidized loan, borrowers won’t be responsible for paying the interest that accrues on the loan while they are actively enrolled in school at least half-time. With an unsubsidized loan, borrowers are responsible for paying the accrued interest during all periods.

Whether subsidized or unsubsidized, loan repayment generally doesn’t begin until after graduation (or a student drops below half-time) and a grace period.

Most grace periods for federal loans are six months. Interest rates on federal student loans are set by the government and are fixed for the life of the loan.

Federal loans aren’t guaranteed to cover your undergraduate or graduate school tuition costs. There are borrowing limits that restrict the amount of federal loans a student can take out each year. For example, a first year undergrad, dependent student is currently allowed to borrow $5,500 in federal loans. In some cases, private student loans may be used to fill in the gaps.

Private Student Loans

Private student loans are offered by banks, credit unions, or other lenders. Terms and conditions of a private student loan are set by the individual lender.

Private lenders will likely review a borrower’s credit history and other financial factors in order to determine what type of loan they may qualify for. If an applicant is applying with a cosigner, private student loan lenders will look at their financial background as well, which might include things like their credit score and current income.

While federal student loans come with fixed interest rates, private student loans can have fixed or variable interest rates. Variable interest rates may start lower than fixed rates, but they rise and fall in accordance to current market rates.

Private student loans don’t carry the same benefits and protections offered by federal student loans — such as income-driven repayment and loan deferment options. Some lenders may offer their own benefits.

The Takeaway

The average cost of college tuition for the 2022-23 school year was about $11K for students paying in-state tuition at a four-year public institution. For out-of-state students, the average was $28K. At a private four year institution it was $39K. Paying for college usually requires a combination of financing options, including savings, scholarships, grants, work-study, federal student loans, and even private student loans.

Private student loans aren’t going to be the right choice for every student. If they seem right for you, SoFi’s private student loans are worth considering. SoFi private student loans have no fees — that means no late fees or origination fees — and the application process is entirely online, even if you need to add a cosigner.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIS1122002

If you’ve applied for federal student loans in the past, chances are you’re familiar with the Expected Family Contribution, or EFC—a number used by colleges to figure out how much financial aid students are eligible for.

Starting for the 2024-2025 school year the EFC will be replaced by the Student Aid Index or SAI. It fulfills the same basic purpose but works a little differently, which we’ll discuss in-depth below.

This change was part of the larger FAFSA® Simplification Act, which itself was part of the larger Consolidated Appropriations Act passed in December 2020. The idea is to simplify the federal aid application process by making it more straightforward for students and their families, particularly for lower-income earners. But all changes come with a bit of a learning curve, even if simplicity is the goal. Here’s some helpful information about the Student Aid Index.

Student Aid Index vs the Expected Family Contribution (EFC)

While both of these calculations perform a similar function, there are important differences in how they work—and important ramifications on how students receive financial aid.

How the EFC Currently Works

Despite its name, the Expected Family Contribution is not actually the amount of money a student’s family is expected to contribute—a point of confusion Student Aid Index is meant to clarify. (Most families end up paying significantly more than the calculated EFC when funding a college education, especially when you factor in loan interest.)

Rather, the EFC assesses the student’s family’s available financial assets, including income, savings, investments, benefits, and more, in order to determine the student’s financial need, which in turn is used to help qualify students for certain forms of student aid, including Pell Grants, Direct Subsidized Loans, and Federal Work-Study.

A very simplified version of the calculation looks like this:

Cost of college attendance – EFC = financial need

However, a college is not obligated to meet your full financial need, and they may include interest-bearing loans, which require repayment, as part of a student’s financial aid package.

Still, the EFC plays an important role in determining how much financial aid you’re eligible for and which types.

How Will the Student Aid Index Work?

The Student Aid Index will work in much the same way: the figure will be subtracted from the cost of attendance to determine how much need-based financial aid a student is eligible for. However, there are some important updates that come along the rebranding:

Pell Grant Eligibility

Pell Grant eligibility will now be determined before the FAFSA is submitted if their adjusted gross income (AGI) is less than a certain threshold determined by the poverty line. Pell Grants may still be offered to students after an application is submitted, using the SAI, if they don’t immediately qualify based on income alone.

A Wider Range of Financial Need

The SAI offers a greater range of financial need than the EFC, whose lowest amount is $0 (meaning a student demonstrably needs the full cost of college covered by aid). The lowest possible SAI, on the other hand, is -$1,500, which creates a cushion to help the lowest-income students cover adjacent college expenses that aren’t bundled into the school’s calculated cost of attendance figure.

New Rules

The SAI comes along with new rules that allow financial aid administrators to make case-by-case adjustments to students’ financial aid calculations under special circumstances, such as a major recent change in income. The bill also reduces the number of questions on the FAFSA down to a maximum of 36 (formerly 108), removes questions about drug-related convictions (which can now disqualify applicants from receiving federal aid), and more.

Recommended: FAFSA Guide

How Will the Student Aid Index Be Calculated?

The Student Aid Index will be calculated much the same as the Expected Family Contribution is calculated today, though the bill does include some updates to make the process easier.

For one thing, the bill works together with the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act to import income directly into a student’s FAFSA, simplifying the application process.

The new FAFSA will also automatically calculate whether or not a student’s assets need to be factored into the eligibility calculation, shortening the overall application and offering more students the opportunity to apply without having their assets considered.

The bill also removes the requirement that students register for the Selective Service in order to be eligible to receive need-based federal student aid.

Recommended: Getting Financial Aid When Your Parents Make Too Much

What Is a Good Student Aid Index Score?

The Student Aid Index isn’t like a test or a report card—there aren’t really “good” or “bad” scores, or “scores” at all. It just depends on your personal financial landscape.

But just like the EFC, the lower the SAI, the more need-based aid a student may be qualified for. Since need-based aid includes grants, which don’t need to be repaid, and subsidized loans, whose interest is covered by Uncle Sam while you’re attending school, a lower SAI may translate into a lower overall college price tag.

How Will the Student Aid Index Be Used?

Like the EFC before it, the SAI will be used to help colleges determine a student’s financial need based on their financial demographics. Although the school itself may have its own grant programs and other types of aid, certain forms of federal student aid such as Pell Grants and Direct Subsidized Loans are offered based on demonstrable financial need, and the SAI is a key part of the calculation used to determine that need.

In short: the SAI will be used to determine how much financial aid a student is eligible to receive.

When Will the SAI Go Into Effect?

The SAI will be implemented in the 2024-2025 academic year. In the meantime, students will still use the same, extended FAFSA to apply for federal financial aid, and will still receive an EFC.

The Takeaway

The Student Aid Index is essentially the same number as the Expected Family Contribution, but it’s been renamed as part of the FAFSA Simplification Act in order to clarify to families what exactly the number means. This act also bundles in some other important changes that will hopefully simplify the overall student loan application process and increase access to education for the lowest-income students and their families.

Submitting the FAFSA and exhausting need-based federal student loan options, which tend to be the most generous to borrowers or grantees, is an important first step when it comes to funding a college education. But there are other tools in a student’s college-funding toolbox, as well.

Students can also apply for Direct Unsubsidized Loans from the government, which often have competitive interest rates and may offer more flexibility to postpone, lower, or forgive the repayment. Additionally, federal loans for undergraduate students don’t require a credit check to qualify, while private student loans usually do.

For those pursuing private student loan funding, SoFi offers no-fee student loan options for undergraduates, graduate students, and parents with competitive interest rates—not to mention the 0.25% discount for borrowers who set up autopay.

Photo credit: iStock/SDI Productions

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPS0721026

Graduate school can be expensive and students who graduate with a master’s degree carry an average debt of $71,287, according to the Education Data Initiative. There are numerous ways to finance your advanced degree (even ways without taking out loans), and investing in graduate education is frequently worth it; the right degree has the potential for a massive return on investment.

The complicated part is determining what options are available to you and figuring out how to hack your way through grad school with the smallest bill. If you’re considering going to grad school, we’ve laid out some key financing options. Read on to learn how to formulate a plan to pay for your graduate education.

Ways to Pay for Grad School Without Taking on Debt

Things like filling out the FAFSA, applying for scholarships and grants, or working for an employer who offers tuition reimbursement while you are going to school can all help you lower your tuition bill during grad school. Continue reading for even more strategies to pay for grad school without taking on debt.

Fill Out The FAFSA

If you received financial aid or federal student loans during undergrad, you’re probably familiar with the Free Application for Federal Student Aid, usually called by its friendlier name: the FAFSA®. The FAFSA is an application to determine what types of federal financial assistance you might qualify for.

Many students who are applying for grad school are considered “independent,” for FAFSA purposes. This means that even if your mom is supplementing your monthly groceries with weekly homemade lasagnas and you’re still using your parents’ password to binge watch Netflix, you may not need to include their financial information on your FAFSA application.

Your FAFSA will determine your eligibility for federal student loans, federal work-study, and federal grants. In addition, your college may use your FAFSA to determine your eligibility for aid from the school itself. Here’s a closer look at the federal options, excluding federal student loans which will be discussed in detail in a later section.

Federal Grants

Unlike student loans, federal grants do not need to be repaid. It may be possible to receive some grant funding to help you pay for graduate school. Filling out the FAFSA is the first step to determine whether you’re eligible. Federal grant programs include the Pell Grant, which is generally only available to undergraduate students who demonstrate exceptional financial need.

Recommended: What Are Pell Grants?

Another federal grant that may be available to graduate students is the TEACH grant, or Teacher Education Assistance for College and Higher Education grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduating.

Federal Work-Study Program

Just like undergrad, you might be eligible for work-study jobs during grad school. Eligibility for work-study jobs is also based on your FAFSA. These jobs often pay you to work at your university for a set number of hours.
They can oftentimes be doubly beneficial because in addition to earning money, you can sometimes secure a work-study position that is relevant to your field of study. You usually have to go through an application process in order to secure a work-study job.

Work-study is a type of financial aid available to students who qualify based on their financial need. You can apply for the program when you fill out your FAFSA. If you qualify for work-study it will be part of your federal financial aid award.

Even if you receive your work-study award you may still have to find a job that qualifies. Many schools have online databases where you can look for and apply to jobs.

Typically, financial aid is awarded on a first-come, first served basis, so the earlier you file your FAFSA the better chance you’ll likely have of securing work-study as a part of your financial aid award.

Figuring out What Your University Can Offer You

After narrowing down your federal options, make sure to consider what university-specific funding might be available. Many schools offer their own grants, scholarships, and fellowships. Your school’s financial aid office likely has a specific program or contact person for graduate students who are applying for institutional assistance.

Many schools will use the FAFSA to determine what, if anything, the school can offer you, but some schools use their own applications.

Although another deadline is the last thing you need, seeking out and applying for school-specific aid can be one of the most successful ways to pay for grad school: Awards can range from a small grant to full tuition remission.

Employer Tuition Reimbursement

It might sound too good to be true, but some employers are happy to reimburse employees for a portion of their grad school costs. Employers that have tuition reimbursement plans set their own requirements and application process.

Make sure to consider any constraints your employer puts on their tuition reimbursement program, including things like staying at the company for a certain number of years after graduation or only funding certain types of degree programs.

If your employer doesn’t already have a program in place, don’t despair. It is almost always worth asking your company if they offer any benefits to employees pursuing a higher degree.

Some employers might offer professional development funding that can be used to help you pay for school or let you keep a more flexible work schedule to accommodate your classes.

Becoming an In-State Resident

If you’re applying for graduate school after taking a few years off to work, you might be surprised to find how costs have changed since your undergraduate days. Graduate students interested in a public university can save tens of thousands of dollars by considering a university in the state they already live in.

Each state has different requirements for determining residency, so if you are planning on relocating to attend grad school be sure to look into the requirements for the state the school you are planning to attend.

Certain states require only one year of full-time residency before you can qualify for in-state tuition, while others require three years. During that time, you could work as much as possible to save money for graduate school. More savings could mean fewer loans.

Becoming an Resident Advisor (RA)

You probably remember your undergrad Resident Advisor (RA). They were the ones who helped you get settled into your dorm room, showed you how to get to the nearest dining hall and yelled at you for breaking quiet hours.

RAs may be under-appreciated, but they’re often compensated handsomely for their duties. Students are typically compensated for a portion or all of their room and board. Some schools even include a meal plan and sometimes even reduced tuition or a stipend. The compensation you receive will depend on the school you are attending, so check with your residential life office to see what the current RA salary is at your school.

While there are plenty of perks to being an RA, don’t underestimate the responsibility that comes with the position. It can be a time-intensive position, requiring round-the-clock supervision.

Still, the perks of being an RA may be measured in saving money each year. By having a free place to live and a free meal plan, you could save more and eat a diet that doesn’t just consist of ramen and stale pizza. RAs rarely have to share a room, so you’ll also have more privacy than you would in an apartment with roommates.

Because RAs receive so many benefits, competition for the job can be fierce and selective. Polish your resume and hone your interview skills before applying. The difference between working as an RA and having to take out loans for rent could affect your life for years to come.

Finding a Teaching Assistant Position

If you’re a graduate student, you can often find a position as a Teaching Assistant (TA) or Research Assistant (RA) for a professor. The position will be related to your undergrad or graduate studies and often requires grading papers, conducting research, organizing labs, or prepping for class. You probably had several TAs during your undergraduate classes and didn’t even realize they were students too.

TAs can be paid with a stipend or through reduced tuition depending on which school you attend. Not only can the job help you to potentially avoid student loans, but it also gives you networking experience with people in your field.

The professor you work with can recommend you for a job, bring you to conferences, and serve as a reference.
Being a TA may help boost your resume, especially if you apply for a Ph.D. program or want to be a professor someday. According to PayScale.com, the average TA earns around $13 an hour, as of September 2022.

Similarly to a job as an RA, securing a TA position can be competitive. Apply early and get to know the professors who will make the decisions.

Applying for Grants and Scholarships

Do you remember all those random essay contests and company scholarship applications your classmates fired off senior year of high school? Well, grad school is no different. There are private scholarships out there, you just need to find them.

Scholarship for the unusually tall? Check. Essay contest on automatic sprinkler systems? You betcha. In addition to the weird and wonderful one-off scholarships, there are industry-specific scholarships that are intended to help graduate students pursuing your specific field of study.

An easy way to search for scholarships is through one of the many websites that gather and tag scholarships by criteria. Keeping all your grad school and FAFSA materials handy means that you’ll have easy access to the information you’ll need for scholarship applications.

Recommended: Guide to Unclaimed Scholarships

As we mentioned at the top of this post, grad students have to submit the Free Application for Federal Student Aid (FAFSA®) in order to potentially qualify for federal grants — just as undergrads do. Grants and scholarships are a great source of financing for graduate school because they don’t need to be repaid.

Grants are available from both the federal and state governments, as well as from the university itself (again, many universities use the FAFSA to determine their own institutional aid, so filling it out is essential). Some companies provide their own grants or scholarships, and many private organizations sponsor grants.

It never hurts to apply for a grant or scholarship, no matter how small it might seem. Think of it this way — every dollar received is one less dollar you need to borrow or earn.

Recommended: Scholarship Search Tool

How to Pay for Grad School With Student Loans

Grad students may rely on a combination of financing to pay for their education. Student loans are often a part of this plan. Like undergraduate loans, graduate students have both federal and private student loan options available to them.

Federal Loans for Graduate School

Depending on the loan type, payments on these student loans can be deferred until after graduation and sometimes qualify you for certain tax deductions (like taking a tax deduction for interest paid on your student loans).
There are different types of federal student loans, and each type has varying eligibility requirements and maximum borrowing amounts. Graduate students may be eligible for the following types of federal student loans:

•   Direct Unsubsidized Loans. Eligibility for this loan type is not based on financial need.

•   Direct PLUS Loans. Eligibility for this loan type is not based on financial need. A credit check is required to qualify for this type of loan.

•   Direct Consolidation Loans. This is a type of loan that allows you to combine your existing federal loans into a single federal loan.

Federal Student Loan Forgiveness Programs

Federal student loan forgiveness programs either assist with monthly loan payments or can discharge a remaining federal student loan balance after a certain number of qualifying payments.

One such program is the Public Service Loan Forgiveness (or PSLF) program. The PSLF program allows qualifying federal student loan borrowers who work in certain public interest fields to discharge their loans after 120 monthly, on-time, qualifying payments.

Additionally, some employers offer loan repayment assistance to help with high monthly payments. While loan forgiveness programs don’t help you with the upfront cost of paying for grad school, they may offer a meaningful solution for federal student loan repayment. (Unfortunately, private student loans don’t qualify for these federal programs.)

Private Loans for Graduate School

If you’re not eligible for scholarships or grants, or you’ve maxed out how much you can borrow using federal student loans, you can apply for a private student loan to help cover the cost of grad school.

Private graduate school loan rates and terms will vary by lender, and some private loans have variable interest rates, which means they can fluctuate over time. Doing your research with any private lender you’re considering is worth it to ensure you know exactly what a loan with them would look like.

Make sure to consider several different types of private student loan lenders before you make your decision. Private student loans are one area where it pays to be a savvy shopper. You’ll want to consider origination fees, payment schedules, and interest rates.

Steps to Take Before Applying to Graduate School

Before applying to graduate school it’s important to consider things like the earning potential offered by the degree in comparison to the cost. At the end of the day, only you can decide if pursuing a specific graduate degree is worth it. Here are a few steps to take before applying to grad school.

1. Research Potential Earnings by Degree

Perhaps you are already committed to one degree path, like getting your JD to become a lawyer. In that case you should have a good idea of what the earning potential could be post-graduation.

If you’re considering a few different graduate degrees, weigh the cost of the degree in contrast to the earning potential for that career path. This could help you weigh which program offers the best return.

2. Complete the FAFSA

Regardless of the educational path you choose, filling out the FAFSA is a smart move. It’s completely free to fill out and you may qualify for aid including grants, work-study, or federal student loans. Federal loans have benefits and protections not offered to private loans, so they are generally prioritized over private loans.

3. Explore Financing Options

As mentioned, you may need to rely on a combination of financing options. When scholarships, grants, and federal student loans aren’t enough — private loans can help you fill in the gaps.

When comparing private lenders be sure to review the loan terms closely — including factors like the interest rate, whether the loan is fixed or variable, and any other fees. Review a lender’s customer service reputation and any other benefits they may offer too.

The Takeaway

Grad school is a big investment in your education, but the good news is there are grants and scholarships that you won’t have to pay back. Some employers may also offer tuition reimbursement benefits, or you could find work as a resident advisor or teaching assistant to supplement your tuition costs. If you need more funding to cover the cost, there are federal and private student loans.

Taking the time to find the best combination of loans and funding is crucial. Taking it one step at a time can help you to assess all the options available and make the best financial decision for you. If you’re interested in private student loans, consider SoFi. Interested applicants can easily apply online and SoFi private student loans have zero fees.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPS0722002

If you’re looking to reduce the amount of income tax you’ll need to pay, there are numerous strategies to consider. Familiar moves include contributing to tax-deferred retirement and health-spending accounts, deducting certain taxes and interest, and making charitable donations. More complex maneuvers include timing investments to offset gains with losses.

Because each person’s situation is unique, be sure to check with your tax accountant to find out how a potential strategy might work for you. Note that some of the strategies included in this guide have income limits.

Keep reading to see how many of these 25 tactics you can implement.

25 Ways to Lower Your Taxable Income

As you look through this list of 25 ideas on how to pay less in taxes, you’ll note that some are broad, advising how to reduce either W-2 taxable income or self-employment income. Meanwhile, others are more targeted — for instance, applying only to the self-employed. Keep track of ideas that pertain to your situation, so you can explore them further.

1. Contribute to a Retirement Account

Many IRA contributions are tax deductible. If you’re covered by a plan at work, you can contribute up to $23,000 to a 401(k) plan in 2024, and an additional $7,500 if you’re over 50. You can also contribute $7,000 to an IRA ($8,000 if you’re over 50), though your deduction may be limited depending on income and other factors.

Self-employed individuals can contribute between 25% and 100% of net earnings from self-employment, up to $69,000 for 2024. Plans available to the self-employed include the Simplified Employee Pension (SEP) plan, solo-401(k), and Savings Incentive Match Plan for Employees (SIMPLE IRA).

2. Open a Health Savings Account

A health savings account (HSA) allows you to deposit money on a pre-tax basis. Contribution limits depend on your health plan, age, and other factors, but most individuals can contribute $4,150 for 2024.

Funds can be used to pay for qualified medical expenses or rolled over year to year. You must have a high deductible health plan (HDHP) to contribute to an HSA.

3. Check for Flexible Spending Accounts at Work

In lieu of an HSA, you can contribute up to $3,200 in pre-tax dollars to a flexible spending account (FSA). FSAs allow people with a health plan at work to deposit money and then use it to pay for qualifying health care costs. Unlike HSAs, FSAs don’t require an HDHP to qualify. The downside: Only a small portion of funds may be rolled over to the following year.

4. Business Tax Deductions

The IRS guidelines around business deductions change frequently, so it’s wise to watch out for their announcements throughout the year. Some business expenses apply only to self-employed people.

5. Home Office Deduction

When a self-employed person regularly uses a specific area of their home for business purposes, they may qualify to deduct costs associated with that part of the house. The home office deduction can be calculated in two ways (regular or simplified) up to the current gross income limitation. For more information, search for “IRS publication 587.”


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

6. Rent Out Your Home for Business Meetings

If you’re self-employed, you can also rent out your home for business events and meetings, collect the income — and not have to pay income taxes on that rental income. To learn specifics, visit https://www.irs.gov/pub/irs-drop/rp-13-13.pdf.

7. Write Off Business Travel Expenses

Travel expenses, as defined by the IRS, are the “ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can’t deduct expenses that are lavish or extravagant, or that are for personal purposes.” For IRS guidance for both W-2 employees and the self-employed, go to https://www.irs.gov/taxtopics/tc511.

8. Deduct Half of Your Self-Employment Taxes

When calculating your adjusted gross income (AGI) as a self-employed person, using Form 1040 or Form 1040-SR, you can deduct half the amount of your self-employment tax. The 2024 self-employment tax rate is 12.4% for Social Security and 2.9% for Medicare, based on your net earnings.

9. Get a Credit for Higher Education

This tax credit can go up to $2,500 based on tuition costs along with what you paid in certain fees and for course materials. As a first step, income tax owed is reduced dollar for dollar up to your limit. Then, if your tax credit is more than what you owe, you may be able to get up to $1,000 in a refund.

10. Itemize State Sales Tax

Currently, you can deduct a total of $10,000 for itemized state and local income taxes, sales taxes, and property taxes when you use Form 1040 or 1040-SR. If married but filing separately, the total is $5,000 per person. The IRS provides a calculator that you can use to figure out your deduction at https://apps.irs.gov/app/stdc/.

11. Make Charitable Donations

A taxpayer can typically deduct up to 60% of their AGI to qualified charities. But starting with contributions made in 2020, the IRS implemented a temporary suspension on limits. This means that a person can make qualified charitable contributions up to 100% of their AGI.

12. Adjust Your Basis for Capital Gains Tax

If you sell an asset, including but not limited to investments, a capital gains tax is levied on the difference between the purchase price and what it sells for. The adjusted basis also takes into account the costs of capital improvements made, minus decreases such as casualty losses. For more on the topic when selling a home, search for “IRS publication 523.”

Recommended: Should I Sell My House Now or Wait?

13. Avoid Capital Gains Tax by Donating Stock

You may be able to avoid paying capital gains tax if you transfer the ownership of your appreciated stock (held for more than one year). This is something that needs to be handled in exactly the right way; your tax accountant can help.

14. Invest in Qualified Opportunity Funds

If you invest in property through a Qualified Opportunity Fund, the IRS states that you can temporarily defer paying taxes on the gains. Taxes can be deferred (not reduced or canceled) up until December 31, 2026, or until an inclusion event occurs earlier than that date. This is a complex strategy and, again, you may want to get professional advice.

15. Claim Deductions for Military Members

You may be able to deduct moving expenses if you’re a member of the military on active duty who relocated because of a military order and permanent change of location. In this case, you can potentially deduct your unreimbursed moving expenses as well as those for your spouse and dependents. You can calculate relevant expenses on “IRS form 3903, Moving Expenses.”

16. Enroll in an Employee Stock Purchasing Program

In an employee stock purchase plan (ESPP), an employee who works at a company that offers this program can buy company stock at a discount. The company takes out money through payroll deductions and, on the designated purchase date, buys stock for participating employees. Note that only qualified plans have potential tax benefits.

17. Deduct the Student Loan Interest You’ve Paid

You may qualify to deduct student loan interest. Annual deduction amounts are the lesser between the amount of interest paid and $2,500. This deduction is lowered and eliminated when your modified adjusted gross income (MAGI) reaches a certain limit based on your filing status.

18. Sell Your Losing Stocks to Claim Capital Loss Carryover

If you sell stock at less than the purchase price, you’ve experienced a capital loss. You can use that loss to offset any capital gains that year. If you’ve lost more than you’ve gained, this can reduce your taxable income, which could reduce what you owe up to $3,000 for individuals and married couples, and $1,500 for someone married who filed separately.

Recommended: Tax Loss Carryforward

19. Deduct Mortgage Interest

You can deduct the money you paid on mortgage interest on the first $750,000 (or $375,000 if married, filing separately) of mortgage debt you owe. Higher limits exist ($1,000,000/$500,000) if the debt was taken on before December 16, 2017.

20. Deduct Medical Expenses

Under certain circumstances, you can deduct medical and dental expenses for yourself, your spouse, and dependents. You’ll need to itemize on your tax return and can only deduct qualifying expenses that exceed 7.5% of your AGI.

21. Delay IRA Withdrawal Upon Retirement

You can delay IRA withdrawals so that you don’t have more taxable income when you’re a high earner. For example, if you reach the age of 70 ½ in 2022 or later, you can wait until April 1 after you reach the age of 72.

22. Ask Your Employer to Defer Income

You pay income tax in the year the income is received. Although there are reasons why employers typically can’t postpone providing paychecks, they may be able to delay a bonus to the following year as long as this is standard practice for them. If self-employed, you can delay sending your end-of-year invoices to bump December payments to the following calendar year.

23. Open a 529 Plan for Education

A 529 plan allows you to save for future educational expenses. Although the contributions themselves aren’t deductible, interest that accrues in the account is tax-free, federally, as well as being tax-free in many states. In other words, when the money is withdrawn to pay college expenses, it is not taxed.

24. Buy Tax-Exempt Bonds

Interest you receive on muni bonds, for example, is not federally taxed (although there may be state and/or local taxes). These are typically very safe investments, although the interest rates may not be what you want.

25. Time Your Investment Gains or Losses

Known as tax loss harvesting, this strategy takes planning because you’ll want to ensure that any investment gains can be offset, as much as possible, by tax losses. So you may decide, as just one example, to hold on to a stock that’s lost significant value — selling it at a time when it can offset a stock sale with a sizable gain.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

High earners looking to reduce taxable income have many avenues to explore — some you’ve likely heard of, with others perhaps new to you. For instance, investors may be able to take advantage of tax loss harvesting, tax loss carryover, or tax efficient investing. Consult your tax accountant about your specific situation. And to take advantage of tax reduction opportunities, it’s important to keep careful track of your financial transactions.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How can I lower my taxable income?

If you’re wondering how to reduce your taxable income, there are numerous strategies that might work for your situation. A good place to start: Contribute to a retirement account, open a health savings account, and learn which taxes and interest you can deduct. Talk to your tax accountant about specific questions you may have.

What are the tax loopholes for the rich?

If you’re looking to reduce your taxable income, consider making charitable donations and investigating investment strategies that offset gains with losses.

Do 401(k) contributions reduce taxable income?

Said another way, are IRA contributions tax deductible? Retirements typically offer some tax benefits with specifics varying based on the type of retirement account. Traditional IRAs have different rules, for example, than Roth IRAs.

Photo credit: iStock/Petar Chernaev

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

SoFi Invest®