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Many high school graduates dream of having that ideal college experience they’ve grown up hearing about. But the reality these days — especially in a COVID-affected world — is that attending school online might be a more viable option.
As traditional college tuition continues to rise, choosing an online school or program can help you save considerably on your education. But how do you pay for online school? The good news is that online college students can get student loans to help pay for their education, just like students who attend school in person.
Can I get student loans for online school?
Simply put — yes, you can get student loans for online school in many cases. Like traditional brick-and-mortar schools, the online school and degree program must be accredited and meet other eligibility requirements. The loan process is the same whether you’re attending school in person or online.
If you’re thinking about attending an online school, you may have options for federal and private student loans depending on the school and program.
Credible lets you compare student loan rates from private lenders in minutes.
Financial benefits of online school
Attending an online school is becoming more common, and a digital education has several benefits.
- You’ll save money. Outside of tuition, think of the typical costs associated with the traditional college model. There’s room and board to consider, as well as meal plans. Don’t forget transportation costs, student activity fees, change for laundry, and outfitting your dorm room with essentials. The cost to live on or off campus often rivals the cost to attend school itself.
- You can attend classes from anywhere. Aside from saving money, attending an online school makes your location irrelevant. You can take classes from nearly anywhere, including your home, a local library or coffee shop, while on vacation, or anywhere with a WiFi connection. The sky’s the limit when it comes to online school.
- You have more degree program options. Attending school online also opens the door to finding the perfect degree program without having to move. If you’ve ever researched colleges but couldn’t find any close to home that offered your desired program, attending online school removes that barrier.
- You can balance work and school. Many people find it easier to balance work with online classes, compared to attending school in person. Online classes often give you more flexibility in your schedule to work or pursue other interests outside of school.
Despite opportunities to save money, attending college online is still expensive. If you’re looking for student loans or other forms of financial aid to finance your education, keep reading to learn how to pay for online school.
How to get student loans for online school
The process to apply for financial aid for online school is similar to what you’d do if attending a traditional college. And like students attending college in person, you should exhaust all your federal student loan options first, before turning to private student loans to cover any financial gaps.
Determine if your school and program are eligible for federal financial aid
It may come as a surprise, but not all colleges or degree programs are accredited and eligible for federal financial aid. The accreditation process ensures that educational institutions meet an acceptable level of quality. Accredited schools provide you with education and training that meets industry standards in your given field of study. Approval for accreditation is determined by an independent agency, not the Department of Education.
To be eligible for federal student loans, the school you’re attending must be accredited. You can search the Department of Education’s Database of Accredited Postsecondary Institutions and Programs to determine whether your desired online school and program are accredited.
Complete the FAFSA
One of the first steps you need to take to get student loans for online school is completing the Free Application for Federal Student Aid. The FAFSA is used to determine a student’s eligibility for federal student aid, including student loans, grants, work-study programs, and more. You’ll need to submit the FAFSA every year you’re enrolled in an online school to receive federal student aid.
After you submit your form, you’ll receive a Student Aid Report, which provides basic information about your eligibility for federal aid. This information is also sent to any schools you included on your FAFSA. They use this information to determine your eligibility for federal student aid. Eventually, if you’re accepted to the colleges that received your information, they’ll send you a financial aid offer with details on any aid that’s available to you.
Some students make the mistake of thinking they won’t qualify for help, so they don’t fill out the FAFSA. But you should submit the FAFSA annually, whether you think you’ll receive aid or not. You may be eligible for federal or state funding that you weren’t aware of. And your situation may change from year to year, possibly opening the door to new streams of financial aid. Pay attention to federal, state, and school FAFSA deadlines to ensure you’re eligible for any available financial aid.
Look for state and institutional loans, grants, and scholarships
Federal student aid isn’t your only option to pay for online school. Many state governments, colleges, and universities also offer student loans you can use toward tuition and fees. Don’t forget about grants and scholarships, often available through schools too. Unlike student loans, you don’t have to pay back grants and scholarships. Contact your school’s financial aid office to see what options are available to you.
You can also look for scholarships and grants through local and regional organizations and associations within your field of study. Check with any groups your parents or other family members are associated with as well. Search online to find other scholarships and grants that might be available to you to cover college costs.
Once you’ve exhausted your federal student loan options, use Credible to compare student loan rates from private lenders.
Take out federal loans first
You should always exhaust your federal student loan options before looking for alternative sources of aid. Federal loans are backed by the federal government and provide access to several helpful protections, like income-based repayment plans, student loan forgiveness programs, and loan deferment and forbearance options. Most federal loans are need-based and don’t require you to meet stringent credit requirements. Private lenders have stricter credit requirements and tend to be less flexible when it comes to loan repayment.
Here’s a look at some of the federal loan options currently available.
Direct Subsidized Loan
Direct Subsidized Loans are available to undergraduate students who display a financial need. Individual schools determine how much you can borrow, although there are limits on how much of your overall loan debt can come from subsidized loans.
What makes Direct Subsidized Loans attractive is that the U.S. Department of Education pays interest on them as long as you’re in school at least half-time, as well as during the grace period and periods of deferment.
- Loan award limits: Up to $5,500 annually (subject to change)
- Interest rate: Typically 3.73%
- When payments start: Six months after you graduate, drop below half-time enrollment, or leave school
Direct Unsubsidized Loan
Direct Unsubsidized Loans are available for both undergraduate and graduate students. Individual schools determine how much you can borrow. Unlike Direct Subsidized Loans, you won’t need to demonstrate financial need to receive a loan. Unfortunately, you’re responsible for paying interest on Direct Unsubsidized Loans, including while you’re in school. If you don’t make at least interest-only payments on your loans, interest will accrue and capitalize, which means it’s added to your loan balance.
- Loan award limits: Up to $20,000 per year, minus any subsidized loans you might receive over the same time period (subject to change)
- Interest rate: Typically 3.73% for undergraduate students and 5.25% for graduate students
- When payments start: Six months after you graduate, drop below half-time enrollment, or leave school
Parent PLUS Loans
Parent PLUS Loans are available for parents who want to take out loans to cover college costs for their children. These loans are specifically for parents of dependent undergraduate students. PLUS Loans are one of the few federal student loans that consider your credit when determining eligibility.
- Loan award limits: Cost of attendance (as determined by the school) minus any other financial aid received
- Interest rate: Typically 6.28%
- When payments start: As soon as the loan is fully disbursed, unless you request deferment (interest will also accrue during this time)
Grad PLUS Loans
Grad PLUS Loans are similar to Parent PLUS Loans, except they’re for graduate or professional students. You must attend at least half-time at an eligible school or program and meet credit requirements to qualify for a Grad PLUS Loan.
- Loan award limits: Cost of attendance (as determined by the school) minus any other financial aid received
- Interest rate: Typically 6.28%
- When payments start: Six months after you graduate, leave school, or fall below half-time attendance
Direct Consolidation Loans
Direct Consolidation Loans allow you to combine multiple federal student loans into one loan with a new term. Consolidating your federal loans simplifies loan repayment because you’ll only have one monthly payment with one loan servicer. Also, it’s one of the rare opportunities to choose your own federal loan servicer. Most federal student loans are eligible for consolidation, except for Parent PLUS Loans.
- Loan award limits: None
- Interest rate: Will be the weighted average of the interest rates on all loans you’re consolidating
- When payments start: Within 60 days after loan disbursement
Comparison shop for private student loans
Private loans are a great way to bridge the gap when federal aid doesn’t cover all the costs of online school. In most cases, you’ll need good to excellent credit to qualify for private student loans. Unfortunately, most college students haven’t had time to build sufficient credit history. The good news is that many private lenders allow you to use a cosigner to qualify for a private student loan. A cosigner is usually someone you have a close relationship with already, like a parent or other relative. Keep in mind that using a cosigner puts them on the hook financially if you can’t make your loan payments.
Because these private student loans aren’t backed by the federal government, they provide much less flexibility than federal loans, especially if you face hardship that prevents you from making your monthly payments.
Your credit also affects the type of interest rate you’ll receive from private student loan lenders. The better your credit, the more likely you can score low interest rates, which can save you considerable money. Most private lenders allow you to check rates ahead of time without negatively affecting your credit score. Take advantage of this to shop around for the best rates before you apply for a private student loan.
With Credible, it’s easy to compare student loan rates from private lenders in one place.
About the author: Kevin Payne is a finance and family tavel expert. He writes about credit cards, travel, student loans, saving money, homeownership, careers, and entrepreneurship. His work has appeared in Forbes Advisor, The Ascent, FinanceBuzz, Slickdeals, Student Loan Planner, and more. He is working toward accreditation as an Accredited Financial Counselor (AFC).
