SoFi

Wondering what to do about your undergraduate school loans before starting graduate school? There are several options to consider, including deferment and refinancing college student loans.

Some grad students defer loan repayment while enrolled in school or refinance college student loans before starting a graduate program. As with your undergraduate student loans, the right choice for you will depend on a range of factors, such as whether you have federal or private student loans as well as how you plan to pay for grad school. Here’s an overview of the pros and cons of graduate school loan refinancing.

Grad School Student Loans

Before considering whether you should refinance your college student loans, it may be helpful to consider how you’ll be paying for graduate school. The average cost of public, in-state tuition for graduate school was $12,410 for the academic year 2019-2020, according to the National Center for Education Statistics. For a private institution, that number more than doubles to $26,597. In fact, graduate student loans account for 40 percent of federal student loans, according to The Center for American Progress.

You may be eligible for various types of student financial aid, including federal loans and private student loans. You’ll likely want to start by pursuing options such as grants (federal or private) that don’t need to be repaid, work-study programs, and federal loans.

Federal loans offer some benefits and protections, such as fixed interest rates, income-driven repayment plans, and access to forgiveness programs. As a grad student, you can apply for a Direct Unsubsidized Loan and Direct Grad PLUS Loan. (Direct Subsidized Loans are only an option for undergrads.) If federal options don’t cover what you’ll need to pay for grad school, private loans may be an option. Here are the most common grad school student loans.

Recommended: How Do Student Loans Work?

Direct Unsubsidized Loans

With federal Direct Unsubsidized Loans, students enrolled at least part-time can access financing at a fixed interest rate. Unlike Direct Subsidized Loans, the government doesn’t pay for accrued interest while you’re in school, during the loan’s grace period, or if a loan is in deferment. This means you’re responsible for repaying all interest charges that incur.

Although you can choose not to pay interest while you’re in school and during periods of deferment, the accumulated interest will capitalize. Capitalized interest means the unpaid interest charges are added to your principal balance, so that when you start making student loan payments, you’ll pay interest on a larger balance.

Your school will determine how much in Direct Unsubsidized Loans you can borrow each academic year, up to the maximum of $20,500. (Students enrolled in certain health profession programs may be eligible for additional loan amounts.) Any existing undergraduate federal loans you have will count toward the $138,500 aggregate federal loan limit for grad students and may affect the amount you’re able to borrow.

Direct Grad PLUS Loans

Graduate and professional students enrolled at least half-time can also look into federal fixed-rate Direct Grad PLUS Loans if they need more funding. Direct PLUS Loans are the only federal loan program that require a credit check.

Like Direct Unsubsidized Loans, you’re fully responsible for all interest charges that accrue. You also have the option to let interest charges capitalize on the account if you choose not to make interest payments while you’re in school or during deferment.

The maximum you can borrow through a Direct Grad PLUS Loan is the cost of attendance minus any existing financial aid you’ve received.

Private Student Loans

Private student loans offer non-federal funding from a private institution, like a bank, online lender, college, or credit union.

Private student loans can come with fixed or variable interest rates, and eligibility criteria and terms differ between lenders. Graduate students who’ve built a positive credit history might qualify for more competitive rates. Students with adverse credit — or those applying to grad school who haven’t graduated college yet — might require the help of a cosigner to qualify.

If you’re considering a private student loan, always compare multiple offers from different lenders to find the lowest rate for you.

Do You Have to Pay Undergraduate Loans While in Graduate School?

If you have federal student loans and you’re enrolled at least half-time at an eligible school, you can opt to defer payment on your loans while you’re in graduate school.

In-school deferment for a federal loan is typically automatic after your school reports your enrollment status. Expect to receive a notice from your loan servicer that your loans are in deferment. If your loans aren’t automatically placed on deferment, ask your school to report your enrollment status.

Keep in mind that if you defer federal loan payments while you’re in school, interest on deferred Direct Unsubsidized Loans from your undergrad years will continue to accrue and capitalize. You also won’t make any progress toward loan forgiveness, if you plan on participating in programs like Public Service Loan Forgiveness.

Choosing when to pay back student loans and whether to take advantage of federal loan deferment is a personal decision that depends on your individual financial situation.

If you borrowed private student loans while pursuing your undergraduate degree, you’ll need to contact your lenders about your options. Not all private lenders offer in-school deferment and eligibility may vary.

Recommended: Examining How Student Loan Deferment Works

Should I Refinance Before Grad School?

If you only have federal Direct Subsidized Loans, you don’t need to make payments while in school and, since interest doesn’t accrue, it won’t make sense to refinance. If you have Direct Unsubsidized or private student loans, however, refinancing college student loans might help lower your monthly obligation by extending your loan term or lowering your interest rate.

Keep in mind if you refinance a federal loan with a private lender, you’ll lose access to federal protections and benefits. And extending your term may mean that when you start making payments, you may pay more interest over the life of the loan and will be in debt longer. To find the choice that’s right for you, it’s helpful to look at the pros and cons of graduate school loan refinancing.

Refinancing College Student Loans, Explained

A student loan refinance lets you put one or multiple student loans, federal and/or private, into a new loan — ideally, with a lower interest rate. This loan is provided by a private lender, and it will pay off your original student loans in full. In turn, you’ll repay the lender under the new refinance loan which can be at a fixed or variable rate, as well as a different repayment term. As mentioned earlier, if you refinance a federal loan with a private lender, it will no longer be eligible for federal benefits and protections.

If your goal is to reduce the monthly loan payments for private and/or unsubsidized loans while you’re in grad school, for example, you might consider extending your term to make smaller payments over time.

Pros of Refinancing Before Grad School

Refinancing is a repayment strategy that offers some advantages.

Lets You Change Your Loan Term

When you refinance, you can change the specific repayment terms of your original undergraduate loan — electing, for example, a 10-year term instead of a five-year one (again, this may result in your paying more interest over the life of the loan.)

Allows for a Reallocation of Your Monthly Budget

A longer term reduces your monthly payment amount. As a grad student, freeing up money upfront can help pay for graduate school expenses, like textbooks, lab equipment, and fees.

Simplifies Repayment for Two or More Undergraduate Loans

Student loan refinancing helps simplify your repayment experience. Instead of managing payment amounts and due dates for multiple undergraduate loans, a student loan refinance results in one monthly payment and one due date to remember.

Cons of Refinancing Before Grad School

Although there are advantages to refinancing college student loans, there are downsides, too.

You may pay More Interest Over Time

Again, an extended repayment term may result in paying more interest over time, and paying more toward your education loan overall. It also prolongs the amount of time you’ll be in debt.

You’ll Lose Access to Federal Loan Forgiveness

Refinanced federal student loans won’t be eligible for forgiveness or other current or future federal loan benefits. This applies to all refinanced student loans, regardless of whether they originated as a federal loan.

Recommended: Can Refinanced Student Loans Still Be Forgiven?

Some Refinance Lenders Don’t Offer Academic Deferment

If you originally had federal loans from your undergrad, you’ll no longer receive automatic in-school deferment after refinancing. Although some lenders, like SoFi, offer eligible members in-school deferment, not all lenders do. This means you might be required to continue refinance payments while you’re studying for your grad program.

Refinancing Student Loans With SoFi

If you’ve decided to refinance your student loans, comparing a few different lenders can help you find the right fit for your needs. SoFi’s student loan refinancing offers flexible terms, no fees, no prepayment penalties — and you can view your rate in 2 minutes.

FAQ

Can you refinance student loans before graduation?

Yes, you can technically apply for a student loan refinance at any time. But proceed with caution when refinancing federal loans. Doing so removes you from the federal loan system and you’ll lose access to income-driven repayment plans, loan forgiveness, and other federal loan benefits and protections. Also, for Direct Unsubsidized loans, there is a six-month grace period after graduation, when payments aren’t due yet.

If I go to grad school, can I defer my loans?

Yes, you can defer federal student loans as long as you’re enrolled at least half-time in grad school. However, if your federal student loans aren’t Direct Subsidized, the interest may still accrue.

Do undergraduate loans affect grad school student loans?

Yes, for federal loans, undergraduate loans count toward the $138,500 aggregated loan limit that graduate students are allowed to borrow. Your available federal loan funds toward grad school might be limited, based on how much you borrowed as an undergraduate student.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

Photo credit: iStock/kali9
SOSL0222007

Federal financial aid funds are generally referred to as Title IV under the Higher Education Act of 1965 (HEA) and are administered by the U.S. Department of Education. Title IV funds may come from grants, work-study, or student loans. It’s important that students understand all of their options when it comes to paying for college.

Here are some more details about Title IV financial aid, how it works and how these funds can help pay for school-related expenses.

What Is Title IV?

Under the HEA, Title IV refers to federal financial aid funds. Title IV of the HEA authorizes student financial aid programs of the federal government, which are the primary source of direct federal support to students attending certain institutions of higher education (IHEs). These institutions include public, private nonprofit, and proprietary institutions, which must meet a variety of criteria to participate in Title IV programs.

Federal aid awarded to students can be used to pay for tuition and fees, room and board, books and supplies, and transportation. Federal financial aid is mainly distributed to students through federal student loans, grants, and work-study.

In 2021, Federal Student Aid (FSA) processed more than 17.6 million FAFSA® forms — otherwise known as the Free Application for Federal Student Aid. In 2021, $112 billion was delivered via Title IV financial aid to more than 10.1 million postsecondary students and their families. These students attended 5,600 active institutions of postsecondary education that participate in federal student aid programs.

Different Types of Title IV Funds

Title IV doesn’t include all forms of financial aid that can be used to help pay for college. Here is what Title IV does cover.

•   Direct Subsidized Loans are a type of federal student loan available to undergraduates where a borrower isn’t generally responsible for paying interest while in school. Direct Subsidized Loans are only available to students who demonstrate financial need.

•   Direct Unsubsidized Loans are loans available to undergraduates and graduates where a borrower is fully responsible for paying the interest regardless of the loan status. Interest accrues from the date of disbursement and continues throughout the life of the loan.

•   Direct PLUS Loans are federal loans available to graduates or professional students and parents of dependent undergraduate students to help pay for college or career school.

•   Direct Consolidation Loans are federal loans that allow the borrower to combine multiple federal student loans into a single new loan.

•   Federal Grant Programs offer eligible students financial assistance by the U.S. government out of the general federal revenue. Title IV covers several federal grant programs, including Federal Pell Grants, the Federal Supplemental Educational Opportunity Grant Program, the Teacher Education Assistance for College and Higher Education (TEACH) Grant Program and the Iraq and Afghanistan Service Grant Program.

•   Federal Work-Study Program is a federally-funded program that offers part-time employment to students in financial need, allowing them to earn money to help pay for school-related expenses.

Who Is Eligible for Title IV?

To be eligible for federal student aid, you must meet basic eligibility requirements . Students must:

•   Demonstrate financial need for most programs.

•   Be a U.S. citizen or an eligible non-citizen.

•   Have a valid Social Security number.

•   Be enrolled or accepted for enrollment as a regular student in an eligible degree or certification program.

•   Enrolled at least half-time for Direct Loan Program funds.

•   Maintain satisfactory academic progress.

•   Sign the certification statement on the FAFSA stating that you are not in default on a federal student loan, you do not owe money on a federal student grant, and you will only use federal student aid for educational purposes.

•   Show you’re qualified to obtain a college or career school education by having a high school diploma or its equivalent or enrolling in an eligible career pathway program and meeting one of the “ability-to-benefit” alternatives.

Some Title IV programs have additional eligibility criteria specific to the program. Check with your school’s financial aid office for more information or questions on a particular program.

Recommended: FAFSA Guide

What Can Title IV Loans Be Used For?

Title IV loans can be used for tuition and fees, room and board, books and classroom supplies, transportation and even some eligible living expenses. Tuition is typically the largest expense. According to the College
Board , the average college tuition including fees for a private four-year nonprofit institution in 2021-2022 is $38,070 while the average for a public, out-of-state four-year institution is $27,560 and $10,740 for a public four-year institution with in-state tuition.

Beyond tuition, Title IV loans can also be used to purchase books and school supplies, like a backpack, laptop, and notebooks. To help reduce costs, you can purchase used textbooks or rent them through your school or other services. Title IV loans can also help cover housing expenses and food costs, even if you live off-campus, and pay for the maintenance of your car, fuel, or bus and taxi fares.

If Title IV loans are used inappropriately, the school can report it to the Department of Education via a hotline and you may be held liable for those funds.

Recommended: Using Student Loans for Living Expenses and Housing

Title IV Payments

As mentioned, grants, scholarships, and work-study attained through Title IV generally don’t need to be repaid. However, as mentioned, student loans do need to be repaid.

Once you graduate, drop below half-time enrollment, or leave school, your federal student loan goes into repayment and you must make Title IV payments. However, if you have a Direct Subsidized Loan or a Direct Unsubsidized Loan, there is a six-month grace period before you are required to start making regular payments. Graduate and professional student PLUS borrowers will be placed on an automatic deferment while in school and for six months after graduating, leaving school, or dropping below half-time enrollment.

When your loan enters repayment, your loan servicer will automatically enroll you on the Standard Repayment Plan, which spreads monthly payments over a 10-year period. This can be changed at any time for free. You can also make prepayments on your loan while you are in school or during your grace period.

Your loan servicer will provide you with a repayment schedule with the due date of your first payment, the number and frequency of payments and the amount of each payment. Your monthly payment depends on your chosen repayment plan. Most Title IV loan services will send out an email when your billing statement is ready to be viewed online.

What to Do if Your Title IV Loans Aren’t Enough

If your Title IV loans aren’t enough to cover all costs, there are other options.

You can apply for scholarships or grants, which are a form of gift aid that typically do not need to be repaid. Scholarships are awarded based upon various criteria, such as academic or athletic achievement, community involvement, job experience, field of study, financial need and more. Most grants for college are need-based.

Another option is a part-time job. Your school may have job boards that list on-campus jobs for students or you could check external job sites for part-time opportunities.

Once you’ve exhausted every other option, private student loans are another possibility to consider. Private student loans can be used to cover college costs, but they are issued by banks, credit unions, and online lenders rather than the federal government. Private student loans are also credit-based and the lender will have their own eligibility criteria. The lender will typically review factors including your credit history, income, debt, and whether you’re enrolled in a qualified educational program. If you don’t have enough credit history or enough proof of income, you may choose to apply with a cosigner. Adding a cosigner with an established credit history can help improve your application and potentially allow you to qualify for a more competitive loan.

If you take out student loans, you can refinance them after you graduate to save money when it’s time to repay. Refinancing involves taking out a new loan and using it to repay all your existing loans, which can include federal loans and private loans. Refinancing student loans with a private lender also means forfeiting federal loan benefits like deferment, forbearance or income-driven repayment plans.

Recommended: I Didn’t Get Enough Financial Aid: Now What?

The Takeaway

Title IV financial aid has given millions of students the means to afford and attend college, university and trade school. And if you don’t receive enough Title IV aid, it doesn’t mean you’re out of luck when it comes to funding your college education. By applying for scholarships, taking on part-time jobs, applying for private student loans or refinancing, you can make your dreams a reality.

If refinancing seems like an option for you, consider SoFi. It only takes minutes to apply, even with a cosigner, and there are no fees, period.

FAQ

What is the purpose of Title IV?

Federal Student Aid is responsible for managing the student financial assistance programs under Title IV of the HEA. The FSA’s mission is to ensure that all eligible students benefit from federal financial assistance throughout postsecondary education.

What is included in Title IV?

Title IV provides grant, work-study, and loan funds to students attending college or career school.

Is Title IV a loan?

Title IV does include federal student loans such as Direct Unsubsidized and Subsidized loans. However, Title IV funds are also distributed to students through federal grants and work-study programs.

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 Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

Photo credit: iStock/martin-dm
SOSL0222012

In a competitive market, buyers have been known to waive contingencies, increase earnest money, insert escalation clauses, and pen love letters. Yes, that’s right: personal letters to sellers in an attempt to stand out from the crowd.

The National Association of Realtors® (NAR) isn’t feeling the love for “love letters” because they often contain personal information about the buyer, like their race and culture, that could make sellers and their agents vulnerable to accusations of discrimination.

Oregon was poised to ban homebuyer offer letters until a federal judge permanently blocked the law in March 2022. That month a Rhode Island representative introduced a bill to outlaw the practice in her state, calling it “kind of a very quiet way of redlining, potentially,” before the bill was held for further study.

So the practice goes on, legally, as of now, despite the letters’ tepid sway. A Zillow survey of partner agents showed that love letters were the least successful strategy for winning the deal (all-cash offers made sellers’ hearts beat fastest).

If you’re inclined to write a homebuyer love letter, here are tips.

1. Make a Strong Opening

Remember handwriting? Do your best and write your letter on a nice piece of stationery. You’re trying to humanize yourself in the eyes of the seller, and a handwritten note can go a long way toward doing so.

Address the seller by name if possible, searching for it online, or asking your real estate agent. As you write the letter, convey a friendly tone and a sincere message.

2. Tell the Owner About Yourself

You might choose to tell the sellers something memorable about your family, that you plan to raise kids in the house, or that the yard is perfect for your dogs.

You could also talk about where you’re moving from and why. Maybe you’ve taken a new job, you’re looking for a sense of community, and you fell in love with this neighborhood.

If you mention your family, just realize that familial status is protected against discrimination under federal housing rules. (In this case, sellers or their agents are not to act with bias against, or in favor of, families with children. The point of the Fair Housing Act is to create a level playing field for all people renting or buying a home, getting a mortgage, or seeking housing assistance.)

3. Think Twice About Sending Photos

Photos are part of what makes NAR uneasy, because race, gender, gender identity, sexual orientation, disability, religion, and familial status are protected against housing discrimination under the Fair Housing Act.

Yet many real estate agents allow buyer clients to include photos with their offer letters.

The NAR director of legal affairs advises Realtors to “avoid helping buyer clients to draft or deliver love letters. … Counsel them to focus on the characteristics of the home or other objective information.”

Still, buyer love letters are actually encouraged by some agencies — along with photos and even videos.

4. Share What You Like Best About the Home

Why you want to buy the home is the central theme of your letter. So you may want to tell the sellers somewhere near the top what you like best about their house.

Mention details. For example, maybe you like the large front porch and can picture gathering there with friends and family on summer nights. Or maybe you’ve become enamored of the kitchen, where you’ll perfect your bread-making skills. If, by chance, the property has an ADU, you could describe your plans for it.

You could throw in a bit of flattery, letting the sellers know how much you appreciate how they’ve maintained the home.

5. Find a Connection

One way to develop a relationship with someone is to find common traits or interests. If you notice that you and the sellers share an interest, it can’t hurt to let them know.

Perhaps you’re a gardener, and it’s clear they’ve got the plant bug. Maybe you have a passion for pottery, and the seller has a small ceramics studio. Or maybe you noticed a jersey from your favorite basketball team.

As you hunt for a connection, be careful not to cross any personal boundaries that might make the seller uncomfortable.

6. Explain Your Offer

Once you’ve given a sense of yourself and why you want to live in this house, you can get down to explaining your offer. Be honest and respectful as you give context.

If you’re living in a time of bidding wars and your offer isn’t the highest, there’s no need to dance around it. You could explain that the house is your dream home, but it’s at the top of your price range and that you respectfully ask the seller to consider your offer.

If the sellers are selling and buying at the same time, you could mention your willingness to do a rent-back agreement that would allow them to lease their former house from you for a set period of time.

7. Let Them Know You Are Serious

Selling a home is a lot of work. The last thing sellers want on their hands is a buyer who slows down the process and might not even make it through closing.

Make sure your letter reiterates that you are pre-approved for a mortgage and are flexible about closing dates.

8. Mind the Length

If there’s a lot of interest in a property, sellers might receive many love letters. They may not have the time, or interest, to read long-winded missives, so keep yours short and sweet, perhaps one page.

9. Thank the Owners

The close of your letter should be as strong as the opening. This is your last chance to make an impression, weave in some personal notes, and make any final flattering remarks.

Thank the sellers for considering your offer, and let them know you are looking forward to hearing from them soon.

10. Avoid Negativity

Some things are better left unsaid, like changes you’d like to make. The sellers may have spent a long while making their home perfect in their eyes. So even if you want to open up the floor plan and pull up the carpet, it’s a good idea to keep those thoughts to yourself for now.

You don’t want to make market prices, or this particular one, sound unfair. And it’s smart to avoid pressuring the sellers in any way, as with talk about time constraints.

Finally, don’t contradict anything that might go into a purchase agreement.

The Takeaway

In a seller’s market, a so-called love letter gives buyers a chance to distinguish themselves. Though not all real estate agents are keen on clients sending personal letters, the practice continues.

Home shoppers in an active market will want to get pre-qualified and then pre-approved. Learn the SoFi Mortgage advantages: loans with competitive fixed rates and low down payment options.

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

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.

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.

SOHL20063