When you attend an accredited degree program online, you are eligible for the same financial aid as that offered to students at traditional brick-and-mortar schools. To be eligible for most financial aid, recipients must be enrolled in an institution that is accredited by the U.S. Department of Education Office of Postsecondary Education. “If the program is not accredited, students will not be able to get financial aid and should question the value of the program,” said Mark Kantrowitz, financial aid expert and publisher of the well-known financial aid advice sites Fastweb.com and FinAid.org.
Types of Financial Aid
Financial aid options available include need-based and merit-based grants, scholarships, and fellowships and loans. Need-based awards are given to students who fit within the criteria of needing the most financial assistance, whereas merit-based awards are given to students with exceptional scholastic achievements. Scholarships pay for all or part of your tuition without needing to be paid back. Fellowships are similar, but usually involve other requirements such as work study, teaching courses or conducting research. Finally, loans are monetary sums borrowed by students that are meant to be paid back once school has been completed.
Once you have exhausted all scholarship and grant options and still need funding for school, you can apply for student loans. When applying for loans, you should first borrow as many Federal Stafford loans as possible, as they are more affordable in the long run. Kantrowitz mentioned that federal loans are “cheaper, more available and have better repayment terms than private student loans.” In order to apply, you should annually file a Free Application for Federal Student Aid or FAFSA. Also through applying to the FAFSA, you can become eligible for Perkins loans, which are need-based low-interest loans for students, and Pell grants, which are also dependent on financial need, but do not need to be repaid. Although the FAFSA can only be filed once a year, you should be aware of deadlines that can be dependent on your state of residence, your year in college (freshman, sophomore, etc), or your school’s deadline if it has one.
According to Haley Chitty, Director of Communications at the non-profit organization National Association of Student Financial Aid Administrators (NASFAA), an organization that supports the training and development of financial aid administrators, to be eligible for Title IV federal aid – which covers the administration of the United States federal student financial aid programs and includes Pell grants – you must:
- be enrolled in a Title IV-eligible program at an eligible postsecondary institution
- satisfy U.S. citizen or eligible non-citizen requirements
- have earned a high school diploma or its equivalent
- maintain satisfactory academic progress
- not be in default for a loan, or have any outstanding debt issues
- have a valid social security number
- have not have any pending drug convictions
If you have questions about borrowing, consult your online school’s financial aid counselor who can assist you with finding the best payment options for funding your education. “The school is required to provide information to current and prospective students regarding the financial aid programs it participates in,” said Chitty. Many online schools, such as American InterContinental University, can work with you to develop a personalized payment plan catered to meet your individual needs. This will allow students to spread out payments over time, bill to an employer, or any other option that your school’s financial aid department is willing to work with.
Active duty members of the military and veterans have additional financial aid options at most online schools like education benefits such as VEAP and the Yellow Ribbon Program, military scholarships and tuition discounts. Military financial aid benefits are available at online schools such as Strayer University, Ashford University, University of Phoenix, American Intercontinental University, and Liberty University Online.
What Are the Best Options for Financial Aid?
When seeking funding for online education, the best aid options are the ones you will not have to pay back. These options include scholarships, fellowships and grants, which can be offered through a specific degree program, the school itself, or an outside organization. A good place to start searching for scholarships is Fastweb.com and Scholarships.com.
The best ways to increase your scholarship eligibility are scoring well on standardized exams such as the SAT or ACT or professional examinations such as the GRE or GMAT if you are applying for graduate programs. Students with high grade point averages, specific talents, or affiliations with special interest groups have better chances of receiving gift aid. Scholarships can either be need-based, merit-based, demographic specific or career specific.
Kantrowitz recommends making sure their online program’s accreditation is “sufficient for the occupation they intend to pursue.” For instance, if you are looking for MBA programs online, you should seek programs accredited by AACSB – International (Association to Advance Collegiate Schools of Business). This internationally recognized association is considered to be the highest standard of business school accreditation and employers look favorably upon graduates of schools with it. Professional accrediting bodies sometimes offer occupation-specific scholarship options. For example, the American Association of Colleges of Nursing or AACN offers scholarships for nursing students, but also has its own autonomous higher learning accrediting agency, the Commission on Collegiate Nursing Education or CCNE.
Because of higher interest rates and fewer options for loan forgiveness, borrowing private loans or applying for loans through the school should only be a last resort. According to a report by ProjectStudentDebt.org, the average loan debt for graduating seniors in 2009 was $24,000. Due to the economic recession, more graduates are having a harder time finding employment after graduation and many are unable to pay off their loans. Some private loans can be predatory to student borrowers with high interest rates and should be avoided.
Facts about Loan Interest Rates and Repayments
Federal loan interest rates are much lower than private loan interest rates. According to Kantrowitz, the subsidized Stafford loan has a 3.4% fixed interest rate for the 2011-2012 academic school year. The unsubsidized Stafford loan has a 6.8% fixed interest rate, while the Parent PLUS loan has a 7.9% fixed interest rate. Private loan interest rates are more variable and can increase over time due to bad credit and other factors.
For more information, visit FinAid.org for a list of the best student loan comparison sites. For an estimate of what you can expect to pay, there are aid calculators at the Department of Education, Collegeboard.com, and FinAid.org, which also features a glossary of common financial aid terms.
Different repayment options are available for student loans. Usually, loans must start being repaid after a grace period of six months after graduation unless you continues to graduate school. However, some private loans may require that borrowers begin repayment sooner than six months, which is why it is important to read the fine print before signing to borrow any private loan.
Different options for repayment include standard repayment, where loans are paid in a monthly fixed amount until the loan is paid in full, and income-based repayment, where your monthly payments are dependent on your income. With income-based repayment, your monthly payment can be adjusted annually with lower installments, but repayment will usually take longer than with the standard repayment plan. Late payments, hiked interest rates, and other factors may contribute to an increase in monthly payments or extend the length of your loan repayment. Most lenders will help you in determining which repayment method works best for you.
Student loan repayment begins after a six-month grace period, but in instances of unemployment or financial hardship, borrowers can apply for deferment or forbearance. According to the Department of Education, deferment is a postponement of repayment. If the loan is subsidized, interest will not accrue during the deferment period. To be eligible for deferment, the borrower must either be enrolled part-time in a postsecondary institution, enrolled full-time in graduate school, or unemployed. If the borrower does not qualify for deferment, the other option is forbearance, which allows you to stop making payments on your loan, make smaller payments, or extend the time for making payments. Interest will still accrue if you choose forbearance.
If you fall behind on payments or fail to pay them back within the guidelines as indicated in your loan’s promissory note, your loan can go into default. If you default on a loan, you lose eligibility for either deferment or forbearance. A defaulted loan can have severe consequences to your credit and can also prevent you from borrowing federal loans in the future. Unfortunately, student loan debt cannot be dispelled by declaring bankruptcy, but a number of student interest groups are working to have this law changed by Congress.
Remember to always read the fine print before you sign anything and contact your school’s financial aid advisor for assistance in finding the best payment options for you.
