Student Loans for Online Degrees: How to Find

As online education increases in popularity, and traditional schools offer more degree through distance learning programs, student loan lenders are taking a contemporary stance on school funding. The Department of Education released its restrictions on Title IV student loans, and private lenders recognize online degree programs as a valid alternative to a conventional classroom education.

How Do You Find a Student Loan for an Online Degree?

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 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 for Online Degree Programs

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 you choose to attend needs to participate in the federal loan program you apply for, and the online degree program must be accredited (studentsaid.ed.gov). Recent legislation reorganized federal student loans, requiring that all financial assistance to 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. Students with this type of loan must reapply for federal funding under the new law.

Stafford Loans

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 for the same academic year. Funds are submitted directly to the school, with any additional money forwarded to the student twice a year.

PLUS Loans

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.

Perkins Loans

Graduate or undergraduate students with a proven financial need may qualify to apply for a Perkins loan. Schools receive funds directly from the 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.

LEAP Program

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 degree program, and the Upromise option offers cash back for loans in good standing (www.salliemae.com).

Other 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.

• Banks, such as Citibank and Wachovia, 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.

Many federal and private loan alternatives exist to meet the needs of students seeking online degrees. Whether you are a parent in the planning stage for your child's future education or a professional adult working toward a first or second degree, lending institutions make finding a student loan for an online degree simple.