Online college can seem like a totally different beast than traditional college, especially when it comes to tuition. Do the regular rules apply in terms of financial aid and funding? Sometimes yes, sometimes no.
One big question you may have is if you can get student loans for online college. The answer to that is yes. But just where you get those loans—through the government or through a private lender, depends on the school. Let's look at how to get federal and private student loans for online college.
Federal student loans
Many accredited online colleges and universities accept the same federal financial aid as brick-and-mortar schools. That means that students at many online schools will generally be eligible for aid from FAFSA, the Free Application for Federal Student Aid. FAFSA is how you apply for federal student loans.
However, some online schools, such as Penn Foster, have a different type of accreditation and do not accept federal financial aid.
See also: Online Colleges That Accept FAFSA
If your school accepts FAFSA, it's important to know that there are no income requirements or caps in order to qualify for federal financial aid.
Rather, the number that matters is the expected family contribution or EFC. This is the minimum amount you're expected to pay toward the cost of college. The EFC calculation is primarily based on the income and assets of parents and students, or just students if you're no longer a dependent of your parents.
To determine need-based aid, your EFC is subtracted from the college’s total cost of attendance. However, even If you don't qualify for need-based aid, you can still qualify for other aid, such as scholarships and federal loans.
That's why it's important to fill out the FAFSA no matter what your income. In fact, college financial aid staffers tell us that the biggest mistake people make when paying for college is failing to apply for aid through FAFSA. Don't let this happen to you!
Be aware of deadlines—there are more than one
Even though the FAFSA is something you fill out once every school year, know that there are federal and state deadlines, and that your college may also have its own deadline. If all three (federal, state, and school) have different deadlines, make sure to file your FAFSA by the first deadline posted. Check the FAFSA website for more information.
If you’re looking at the 2018-2019 FAFSA (which corresponds to the 2018-2019 school year), the application window opened on October 1, 2017, and runs until June 30, 2019.
Once you submit the FAFSA, the college you plan on attending will send you a financial aid offer, which may include federal student loans. You can choose to accept all, some, or none of the aid you are eligible for.
After determining how much money you need to cover college costs, you will send back the signed award letter indicating the amount you are accepting.
Before you receive your funds, you will be required to complete entrance counseling and sign a Mastery Promissory Note, agreeing to the terms of the loan.
You should accept federal student loan dollars only after you've exhausted all your sources of "free money" from grants and scholarships. Federal student loans are generally offered at a lower interest rate than private loans. They also come with helpful benefits, such as income-driven repayment plans.
When considering federal loans, accept all subsidized loans first, followed by unsubsidized loans.
Loan limits for grad and undergrad
There are yearly and aggregate (total) caps on the amount of subsidized and unsubsidized student loans you can get.
The total limit for dependent undergraduates is $31,000. For independent undergraduates, the maximum amount of is $57,500. For both independent and dependent undergrads, no more than $23,000 of the total amount can be in subsidized loans.
The maximum increases to $138,500 for graduate school. No more than $65,500 of this amount can be in subsidized loans.
The Perkins Loan, which is a school-based loan program for students with financial need, also has maximum borrowing limits. The aggregate cap for undergraduate students is $27,500, and the cap for graduate students is $60,000.
First-year dependent college students can borrow $5,500, and independent students can borrow $9,500. For both, no more than $3,500 of the total yearly amount may be in subsidized loans.
Yearly amounts increase as your progress in school. See loan limits here.
Private student loans
If you’ve exhausted all of the federal student loan, grant, and scholarship options, it may be time to look into applying for a private student loan. If you qualify, the money you receive from a private student loan can help fill any financial gaps you have.
Again, keep in mind that some online colleges may not accept financial aid. Schools like Ashworth College do not accept FAFSA or any kind of financial aid. That includes federal and private student loans. However, Ashworth and similar schools may offer payment plans that allow students to break up payments over time.
Private student loans are offered by banks and independent lending institutions. Many banks and private lenders offer an online application that can render a decision about a conditional loan approval within minutes.
If you're an undergraduate student, you'll likely need a cosigner to qualify for a private student loan. Private student loans are not hard to get if you can prove your creditworthiness or apply with a cosigner. Lenders will use the financial information you provide to determine your interest rate.
More than likely, unless you're already employed full-time, you will need to find a credit-worthy cosigner to apply with you. That’s because most college students can’t prove they have sufficient income, employment, and credit history to qualify on their own.
Additionally, the lender may require proof of citizenship, proof of enrollment in an eligible school, information about tuition and fees, and an estimate of the aid you are already approved to receive.
Loan limits for private loans
Many lenders will limit the yearly amount you can borrow based on your total cost of attendance minus financial aid.
In other words, they will offer financing up to 100% of the amount you still need after federal aid is factored in. Most private student loans can be used for tuition, housing, books, fees, living expenses, or other educational expenses.
Unlike the federal student loan program, private lenders don’t typically determine loam limits based on your year in school.
If you're looking for affordable ways to earn your degree online, start with our roundup of 20 Most-Affordable Online Bachelor Degree Programs.