Federal Loans and Online Degrees
When online education came into being, the government did not make student loans available for that purpose, because of the unregulated nature of what was offered. Now federal student loans are given to students in some online degree programs, but a school’s eligibility is determined on a case-by-case basis. You must check with your school’s financial aid office before each year’s enrollment to make sure you remain eligible for federal loans.
Note: The ability to receive a federal loan for tuition at any given institution, whether or not it is online only, should not be construed as an endorsement of the quality of the education provided. You should always check institutions through the Better Business Bureau, your state’s higher education authority and that of the state in which the business is registered, and the attorneys general for both states to make sure your choice is honest.
When Your Online Degree Is Eligible For The Federal Loan Program
You can apply for federal loans to fund your distance education in exactly the same manner as you ordinarily would, by filling out the Free Application for Federal Student Aid (FAFSA), which is also required for most private loans. Complete the form online, print and mail a paper form, or request a paper copy by mail.
Federal Direct Loans
You should seek advice from your school’s financial aid office about which type of federal loan best suits your circumstances, but most students enter the Direct Loan program, choosing among four different types of loan:
Direct Subsidized, to undergraduates with some financial need
Direct Unsubsidized, to graduate and professional students as well as undergraduates, no demonstration of financial need required
Direct Plus, to parents of undergraduates as well as graduate and professional students, intended to cover educational expenses not paid by other forms of aid
Direct Consolidation, in which you roll all your existing federal loans into one large loan, with a single monthly payment to one loan servicer.
Federal Perkins Loan Program
If you can demonstrate exceptional financial need, you may receive a Perkins Loan with an especially low interest rate (5% in 2012). Not every school makes these loans, because the school serves as the lender and there is administrative overhead involved in that task. But if you are eligible, the Perkins Loan is an excellent borrowing opportunity.
Repaying Your Federal Student Loans For Distance Education
Most federal student loans need not be repaid as long as you continue to attend school at least half-time. The exception is the PLUS loan, repayment of which begins when the proceeds have been fully disbursed. Some loans do have a short grace period after the time for repayment to begin, and in that period you may elect to withhold payment, but usually interest does continue to accrue.
Again, the PLUS loan has no grace period, but other loans give you six months. You can read more about loan repayment here.