What federal student aid is available for online courses?

There’s considerable mythology about the status of online learning programs. Most of the misunderstanding stems from early prejudice against distance learning in general. To clear up all the uncertainties, we need to go back to 1992 when Congress had become alarmed at the number of colleges either offering online education or moving some of their learning online. There was a general feeling many of the new colleges were little better than scams, set up to milk the federal budget of financial aid. A bill was therefore signed into law setting the 50% rule. So if a college or university did not offer at least 50% of its teaching in traditional classrooms, it could not qualify as a distributor of financial aid to its students. This law was repealed in 2006 and, since then, federal aid is more routinely made available to everyone who wants to study online. This reflects two recognitions:

  • the accreditation programs established by federal and state legislators, and by the educationalists themselves, were improving the teaching standards and the credibility of qualifications; and
  • a student is a student whether attending a traditional brick-and-mortar campus or learning online.

Federal Student Aid for Online Learning Programs

However, note that although the 50% rule itself has been abolished — it was a mechanical rule that worked unfairly — colleges and universities still have to meet conditions before they can distribute federal grant aid. So before you make any commitments about enrollment, contact all the online colleges and/or universities you are interested in and confirm whether they are able to process federal student loans. If there’s any doubt, first confirm your choice is properly accredited, and then check out the federal financial aid website to confirm whether your choice has a federal school code.

What are the benefits of federal loans?

Although banks are always keen to lend money to you for college and university education, this is self-interested. The banks want to lock you in as a customer while you are young and the loans are always at a higher rate of interest. The most economical way of paying for your continuing education is by a grant or scholarship. This applies whether you are going to study exclusively online or merely take some classes online.

What federal loans are available?

The most common are:

  • Perkins Loans which are awarded to students who have exceptional financial need. Reflecting the degree of difficulty, these loans are also at a very low rate of interest and you do not have to pay while you are enrolled in school, nor for nine months after graduation. The government pays the interest until you are judged able to afford it.
  • Subsidized Stafford Loans, like Perkins Loans, see the federal government paying your interest while you remain enrolled in school and for six months after you graduate.
  • Unsubsidized Stafford Loans also carry low interest rates but you are responsible for paying this interest from the moment you draw down funds. However, you have a six month period of grace before you need begin repayment of the capital and the accumulated interest.
  • PLUS Loans (the Parent Loan for Undergraduate Students) are made to the parents who intend to pay for their children’s education. Payments must begin the moment funds are drawn down and there must usually be a cosigner.
  • PLUS Loans for Graduate and Professional Degree Students help adult students who have exhausted the other federal grant options. If you satisfy the credit check and have a cosigner, you can usually borrow. If your financial situation is difficult, you can ask for repayment to be deferred until after you have completed the course.

General advice

To qualify for a financial grant, you must be a US citizen, proved by producing your social security number. You must also have a reasonable academic track record with a high school diploma and a GED certification, or have passed an alternate examination. Naturally, you must then enroll on a course run by an online college or university able to dispense federal loans.

The amount you receive is fixed by the online school you have selected depending on how far advanced your studies are, the fees, and your financial need. If you depend on your parents for support, the FAFSA form will be used calculate how much they are expected to contribute. Before you apply, it’s a good idea to discuss the options for grants and scholarships with a financial aid counselor. Only then are you likely to get a detailed overview of the available choices.

Exploring Career Options

    Discover which jobs match your skills, interests, and experience.

    Using the latest labor market data explore which careers are growing in popularity.

    Find out what's required to get your dream job.

    Get the most job satisfaction at the best rates of pay.

    Understand what you have to do to be successful in your chosen career.