Student Loans for Online Degree Programs

Francine L. Huff
LoanBiz Columnist

Article Rating , 4 out of 5 based on 1 votes

Enrollment in online degree programs is booming. In fact, nearly 3.5 million students were enrolled in at least one online course in the fall of 2006, a 10% increase from the previous year, according to the Sloan Consortium. And more student loans and other financial aid are available to online students than ever.

Changes in the Law

More colleges and universities have begun offering online courses since the repeal of the 50/50 Rule by the Higher Education Reconciliation Act of 2005. Previously, schools could not receive federal student aid if more than half their students were enrolled online or more than half their courses were distance learning programs. The law change means students enrolled in accredited online degree programs can qualify for federal student loans and other aid such as grants and scholarships.

Federal Student Loans

By filling out the Free Application for Federal Student Aid (FAFSA) online students can determine their eligibility for a variety of federal student loans. The Perkins is a need-based student loan that is subsidized, which means the federal government will pay all interest while a student is in school and for the first nine months after leaving school. The financial aid office at a student's school will determine how much aid will be received.

Stafford Loans can be unsubsidized or subsidized for students who demonstrate financial need. Students who receive unsubsidized loans can defer interest payments until they finish school. According to FinAid, about 2/3 of subsidized Staffords go to students with a household income under $50,000.

Private Student Loans

If federal student aid isn't enough, students can always apply for a private student loan. They'll have to undergo a credit check and will pay a higher interest rate than with federal student loans. However, many people are turning to private student loans to pay for online education costs because federal aid isn't enough. MSN Encarta took a sampling of online-degree schools and found that earning an MBA or master's degree in education could cost students anywhere from $15,000 to approximately $30,000. With tuition costs continuing to rise each year, more people are likely to turn to private student loans to pay for a college degree.

Online degree students can also apply for a variety of grants and scholarships. As with campus-based degree programs students should apply for as many sources of aid as early as possible to get the funds they need.

Sloan Consortium
MSN Encarta

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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