There are many student loans available for online degree-seeking students, through both the federal government and private organizations.
Student Loans for Online Degrees
Most student loan programs, either federal or private, require students to submit a Free Application for Federal Student Aid (FAFSA) or its equivalent. For a faster submission process, the U.S. Department of Education encourages students to obtain a Federal Student Aid PIN, which can be used to electronically apply for and manage federal loans (www.pin.ed.gov).
Federal Title IV Loans
Title IV student loans offered by the federal government include Stafford, PLUS and Perkins loans, or Federal Work-Study and Leveraging Educational Assistance Partnership (LEAP) programs. Each type of loan or program contains specific eligibility requirements, though all federal student loans require:
- U.S. citizenship or non-citizen eligibility
- Registration in the Selective Service (if applicable)
- A high school diploma or GED
- Enrollment in an accredited degree program
- Maintaining status as at least a half-time student (6 credits)
- No criminal convictions
- A Social Security number or an assigned identification number
- Academic progress reports
- Non-default payment history on all school loans
According to the U.S. Department of Education's Federal Student Aid office, the school a student chooses to attend needs to participate in the federal loan program he or she applies for, and the online degree program must be accredited (studentsaid.ed.gov). Recent legislation reorganized federal student loans, requiring that all financial assistance come from the U.S. Department of Education's Direct Loan Program. Previously, some federal loans allowed private lenders to finance a student's education, guaranteeing the loan with federal funds.
Stafford loans may be subsidized, accruing no interest until six months after graduation; or unsubsidized, accumulating interest for the life of the loan. Students may apply for both subsidized and unsubsidized Stafford loans during the same academic year. Funds are submitted directly to the school, with any additional money forwarded to the student twice a year.
Graduate students or parents of dependent undergraduate students may apply for a federal PLUS loan. Funds will be paid at least twice a year directly to the school. Any money not used for school costs will be released to the borrowers. Parents may begin paying the loan within 60 days of the final loan disbursement or defer payments for a 6-month period after the student graduates.
Graduate or undergraduate students with a proven financial need may qualify to apply for a Perkins loan. Schools receive funds directly from the U.S. Department of Education and make them available to underprivileged students through low-interest loans, which students repay directly to the school. Unlike other government loans, the Perkins loan does not require a minimum number of enrolled hours.
Federal Work-Study Program
Schools may award employment opportunities to students with a financial need, though the severity of the need does not have to be great. If a student receives more than one type of federal loan, the wages from the work-study program combined with other aid cannot be more than the cost of the student's education.
Criteria for this program vary state by state. Funds may be awarded through a centralized state agency or directly through the school. Some states have greater eligibility restrictions than others, including the type of degree being sought and the level of financial need. Students typically submit a FAFSA application, though some schools may require additional information. Student aid through the LEAP program is still subject to the funding limitations of other federal programs and loans.
Sallie Mae Smart Option Student Loan
Sallie Mae offers students pursuing an online degree a private loan option to supplement federal aid. Short-term loans may receive a lower interest rate for students using a cosigner with good credit or automated payment options. Students make interest-only payments while enrolled at least part-time in an undergraduate or graduate program, and the Upromise option offers cash back for loans in good standing (www.salliemae.com).
Determining Federal Student Loan Amounts
The amount of money that a student can borrow from the federal government is based on the student's financial need. That amount is determined by calculating the difference between the cost of attendance for an online program and the student's expected family contribution. The expected family contribution is calculated based on the financial information that the student provides on the FAFSA. The cost of attendance can include many factors for online students, including:
- Loan fees
- Computer hardware
- Computer software
- Dependent care expenses
Private Student Loan Options
If federal student loans do not provide sufficient funds to meet all school costs, students and their parents may take advantage of other private loan options. Many federal and private loan alternatives exist to meet the needs of students seeking online degrees, including:
- Banks, such as Citibank and Wells Fargo, offer loans for school with lower interest rates or accounts designed for school funding that provide a higher yield of interest.
- Credit card companies, like Discover and American Express, include competitive student loans as part of their product offerings.
- The Credit Union Student Choice program offers student loans through many credit unions across the nation with low interest rates and versatile payment options.
There are many federal loan options for online students, which are provided based on the student's financial need. If that does not cover the student's expenses, students may seek loans from other financial institutions.