Can You Get Student Loans for Online College?

If you need the benefits of a flexible schedule and the potentially lower costs of an online education, you may be excited to know that you can use federal student aid, federal student loans, and private loans to cover the cost of attending many online schools and colleges. To be eligible for federal student aid, your school needs to be participating in the federal student aid programs. And to be eligible to borrow private student loans, the lender you want to work with has to work with your school. Read on to understand your potential loan options as an online college student. 

School Accreditation Status

For an online college or online program to be eligible for federal student loans, it must be accredited by an U.S. Department of Education approved accreditor and approved to participate in the federal student loan programs. . Accreditation is a type of certification where an independent organization will verify that your school or academic program meets acceptable and specific academic standards. This ensures the work you complete is substantial and will be recognized by employers and other post-secondary institutions. 

The U.S. Department of Education recognizes several accrediting agencies which either offer the institution an institutional accreditation or programmatic accreditation. These agencies use school-submitted documentation to ensure schools are maintaining certain minimum academic quality standards. On top of having a recognized accreditor, these schools also need to be licensed or recognized in their state. Only schools and programs that are  accredited by a U.S. Department of Education accreditor can qualify for federal money. This protects students making sure their degree is more than just a piece of paper

As you are working on applying to schools, check the Database of Accredited Postsecondary Institutions and Programs to see if your school or program is accredited. Also, you can check the federal school code list, which is maintained by the U.S. Department of Education to determine which schools are participating in federal student aid. And remember, you have to double check your prospective program at your school, even if the school is accredited, to ensure the program approved for federal student aid. 

Complete the Free Application for Federal Student Aid (FAFSA)

While loans may seem like an obvious first choice in finding funding for your online degree or program, you may be surprised to know that grants and scholarships may be an option to you before you need to apply for federal or private loans. By filling out the FAFSA, you may be able to access federal financial gift-aid or even state- or school-funded gift-aid to help pay your school tuition, fees, and other school-related costs. 

Each year, the FAFSA opens on Oct. 1 and closes June 30. Check out this helpful FAFSA Guide to assist you as you work to file your FAFSA. You should apply for aid as soon as possible so you can receive the most possible federal student aid (some gift-aid can be first come first serve and will run out). By applying early you may also qualify for state-based or school-based aid as well. Check your specific state deadlines to ensure you meet the necessary application qualifications and due dates. 

After you complete your FAFSA or Renewal FAFSA (if you are a returning student) at StudentAid.gov, you will receive a financial aid award letter from your institution’s financial aid office. This letter will summarize what financial aid is available for you, including whatever grants and loans you are eligible for. At this point you need to contact your school’s financial aid office to accept or reject the financial aid and loans. Finally, you will need to sign any associated paperwork, such as the Master Promissory Note. 

Types of Federal Financial Aid

Grants and Scholarships

Both grants and scholarships are forms of gift-aid to help you pay for college, meaning you usually do not have to pay this money back paid back. Scholarships are typically awarded based on merit, and grants are often awarded based on your financial need. Federal will require you to complete the FAFSA while state, or school-based grants may require you file the FAFSA in order to determine your eligibility. There may be additional applications or forms to complete, so check with your state or the financial aid office at your school for more information. 

More >>> Do I have to Pay Back Grants?

Federal Loans

Student loans shouldn’t be first on your list when it comes to financial aid, but they may be necessary. If grants, scholarships, and savings are not enough, you may want to consider federal student loans. It is important to do your research prior to accepting any kind of loan, as not all loans are the same. Some of the valuable benefits of federal student loans are deferment and forbearance periods, a variety of repayment plans, and possible public service loan forgiveness for those who qualify. 

Direct Subsidized Loans

If you are an undergraduate student with demonstrated financial need, a Direct Subsidized Loan offers a fixed interest rate and several different repayment terms. Federal Direct Subsidized Loans do charge interest, but the federal government pays the interest on your Direct Subsidized Loan while you are enrolled in school at least half-time, during the 6-month grace period after you leave school, and during periods of authorized deferment. (The federal government does not pay the interest during periods of forbearance.)

Direct Unsubsidized Loans

The Direct Loans program also offers federal student loans to undergraduate, graduate and professional students and do not require financial need in order to qualify. These Direct Unsubsidized Loans have fixed interest rates and many options for repayment plans. For unsubsidized loans interest begins to accrue from the date your loan is first disbursed. If the interest is not paid as it accrues (while you are attending school), it will be capitalized when you enter repayment and increases the beginning balance (and cost) of your loan. 

Learn more about Direct Unsubsidized Loans

Direct PLUS Loans

Direct PLUS Loans are available to eligible parents (a Parent PLUS Loan) and professional or graduate students (a Grad PLUS Loan) through schools that participate in the Direct Loan Program. When it comes to PLUS Loans, your lender is the U.S. Department of Education and you must not have an adverse credit history. A credit check will be conducted, but you still may receive a PLUS loan if you have adverse credit history and meet additional requirements. These loan funds are unsubsidized, meaning, the borrower (either the parent borrower or graduate student) is responsible to repay all the interest which begins to accrue form the date the loan is first disbursed. 

Learn more about Parent PLUS Loans

Private Loans

Once you’ve exhausted all your scholarship, grant and federal loan options, you may need to look into applying for a private student loan to fill any other financial gaps you may have when it comes to your educational expenses. You can find private student loans through banks, credit unions, and other independent lending institutions. It is possible for some borrowers to qualify for more competitive student loan interest rates and fees with private student loans.<

If you are an undergraduate student, you may need a credit-worthy cosigner to help you qualify for a student loan if you yourself do not have the credit lenders are looking for. Each lender sets their own requirements as to what credit score they will accept, but many private lenders require a credit score of 660 or better (on a scale of 300 to 850). Whatever your loan terms may be, you should fully understand your responsibility and monthly payment upon graduation.