Distance learners who plan to apply for federal student loans must follow a series of steps. Outside of federal loans, there are a few other loan options to consider.
Applying for Distance Learning Undergraduate Loans
When it comes to financial aid, those seeking their degrees online are generally treated the same as those doing so on campus. Therefore, many of the same educational funds are available, regardless of the means by which students pursue their degrees. While college loans can be obtained from private lenders and state governments, most students are encouraged to apply for federal financial aid. In fact, when students apply for federal financial aid, they may also subsequently receive state aid.
A student's eligibility for financial aid depends on many factors and is ultimately determined by the college's or university's financial aid administrator. Here are the steps that distance learning students can follow to apply for federal undergraduate student loans.
Step 1: Make Sure Eligibility Requirements Have Been Met
To receive federal student aid, students must meet several key requirements, including the following:
- Have a high school diploma or GED
- Be a U.S. citizen or eligible non-citizen
- Have registered with the Selective Service (for males aged 18 and older)
- Possess a valid social security number
- Demonstrate financial need (for some types of loans)
- Be enrolled in a certificate or degree program with accreditation from an accrediting body recognized by the U.S. Department of Education
Additionally, students applying for federal aid must not be in default on any federal student loan and must not owe an over-payment on a federal grant. They must also certify that they will use the funds awarded to them specifically for educational purposes.
Step 2: Fill Out the FAFSA
The FAFSA, or Free Application for Federal Student Aid, is a form used by 2- and 4-year institutions to award federal, state and college aid (www.fafsa.ed.gov). The FAFSA can be filed on paper or online. The online version allows students to easily access financial documents like their income tax statements and send all materials online using a student identification PIN (www.pin.ed.gov).
When filling out the FAFSA, students must provide personal information, such as the following:
- Personal income
- Parent or guardian income (for dependent students)
- The type of school they plan on attending
- Expected enrollment status
The deadline for filing the FAFSA is typically around the end of June; however, students are encouraged to apply as early as the first of the year to assure that both federal and state funds will be available for use during the following school year.
Step 3: Determine Which Loans to Accept
Students have the right to refuse any loans they don't want. This means that students will need to learn more about the different types of undergraduate loans available through the federal government and compare those loans to their individual needs. The three main types of loans available through the federal government include:
- Direct Stafford Loans
- Direct PLUS Loans
- Perkins Loans
Direct Stafford Loans
The Direct Stafford Loan program includes subsidized and unsubsidized loans. Subsidized loans are awarded based on financial need. Students aren't charged interest while in school at least half-time, during deferment and during grace periods. The school will determine the amount that a student can borrow. Unsubsidized loans do not require students to show financial need. Like with subsidized loans, the school will determine the amount of money a student can borrow for an unsubsidized loan. However, interest will accrue on this type of loan as soon as the funds are provided. Students can pay this interest while in school and during deferment and grace periods. They can also choose to let the interest capitalize and be added to the principal loan amount.
Direct PLUS Loans
Direct PLUS loans are for parents of dependent children who are participants in the Direct Loan program. The student must be enrolled at least half time. Parents can use the PLUS loan to fund their child's education. Parents will need to undergo a credit check at the time of application.
Federal Perkins Loans
The Federal Perkins loan is a federal loan administered by a college or university's financial aid office. Instead of repaying the federal government, the student will repay the school. As of 2017, students can borrow up to $27,500 for the entire span of their undergraduate studies through this loan.
Step 4: Complete a Master Promissory Note (MPN)
The Master Promissory Note is a legal document outlining the terms and conditions of the loan. By signing the MPN, students promise to repay their loans and any fees and interest to the U.S. Department of Education or to the third-party lender. One MPN can often be used for multiple loans. Students can sign a copy of the MPN given to them by the school, or they can complete the MPN online.
Step 5: Reapply for Loans
Students must reapply each year for federal financial aid. An easy way to do this is to reapply online. The online option lets students save information from the previous award year, so portions of the application will be pre-filled. As mentioned earlier, students can also apply via paper or PDF.
Other Student Loan Options
In addition to federal loans, students may find loans offered through the college at which they are enrolled. There are also many private financial institutions that offer student loans, but it is important for students to make sure that they fully understand the loan commitment before taking out a loan with one of these companies. Issues to consider include:
- Interest rate (fixed vs. variable)
- Loan fees
- Loan forgiveness options
- Deferment options
- Penalties for early repayment
- Requirement for cosigner
- Requirement for credit check
- Grace period
Distance learners need to makes sure they are eligible and fill out the FAFSA before applying for Direct Stafford, Direct Plus and Federal Perkins Loans. Non-federal loan opportunities may be offered by particular schools or through private organizations.