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Here’s a look at the top government grants and loans that can help you get your college or university degree online. There is more government money available for both traditional and online learning students today than there was just a few years ago. But you need to be careful to borrow only as much as you should — signing on the dotted line for an education loan is something that can affect your financial life for many years to come.
Make sure you understand exactly what interest rate and payment schedule you are agreeing to. Also, be prepared to spend some real time filling out forms in order to get a government loan for your degree. A good tip to keep in mind: try to borrow as much as you can from a single source that offers you a good interest rate. It will be easier to keep track of your payments and debt balance than it will be if you borrow from lots of different lenders.
A Better Deal For Online Learners
The federal government made an important move two years ago that has opened up more aid to online learners specifically. For years, government student loans to elearners were restricted by the terms of the Higher Education Act of 1965. That law included the so-called “50 per cent rule,” which dictated that classes had to be delivered in a brick and mortar lecture hall for at least 50 per cent of the time in a school for any students there to qualify for government tuition aid. The rule, originally designed to keep a lid on phony degree programs where students signed up and never did any class work, was scrapped by Congress early in 2007. As a result, a college student in an online degree program can qualify for just about all the same government loans and grants as an on-campus learner.
Say Hello To FAFSA
Filling out the the “FAFSA” (free application for federal student aid) application online is the first thing just about everyone does when they’re looking for college financial aid. Unfortunately, it involves quite a bit of work. FAFSA requires you to provide in-depth information on all aspects of your personal finances, whether you are pursuing an online degree or a tradition college course of study.
You use the FAFSA form after you’ve made a decision about which school you will attend – you have to reference your school on the online form. Before signing up for any degree program, find out if your school participates in federal loan programs. If it doesn’t, you’ll need to look for student financial aid from non-government sources, which is unfortunate because no one else has quite as much tuition assistance to offer as Uncle Sam (though the FAFSA does also allow you to apply for some state-sponsored grants). Two main types of financial aid offered by the government are available to students getting university degrees online: Pell Grants and Stafford loans.
Pell Grants: The “Expected Family Contribution”
Federal Pell Grants are given, on the basis of need, to undergraduate students working toward their first bachelor’s degree. That need – the ability to pay really – is determined by a calculation of the student’s “expected family contribution” (EFC), which is based on family financial assets and income.
Total family income, or the “Expected Family Contribution” (EFC) to your tuition bills, can be a tricky question for online degree students who are paying for school tuition on their own. You are basically required to include your parent’s financial resources in your estimate until you are 24 years old, unless you are married or have a child. After age 24, only your income will be factored into the government’s estimate of your need for a Pell Grant. Keep in mind, though, that if you are married, your spouse’s income will be counted in the formula.
There is a FAFSA “dependency status form” you will need to fill out if you are an adult and have income of your own. The lower your EFC is, the more aid you will be eligible for, and vice versa. The EFC is calculated on not just your income, but also on whatever assets you or your family own as well. If you have low income but have a valuable house you’ve inherited, for example, your financial need will seem less in the eyes of the government – a problem given that it’s become a lot harder to borrow against a house than it was before the recession.
Pell Grant Limits
You can receive up to $5,500 in Pell Grant money per year (the minimum grant is $555). The grant cannot exceed half of the total cost of your annual tuition. The government uses a complicated formula to determine exactly how much it should give you, and it does not reveal exactly how your number is arrived at. A few points to be aware of, however:
- In the past, Pell Grants were only available to students enrolled on a full-time basis. They are now available to part-time students, but the grant will limited if you’re only attending school part-time.
- If you get a grant for your spring and fall semesters, there’s now also an option to get a second Pell Grant within the same year to help cover additional summer courses you may take. But you cannot get Pell Grants to use toward two different schools in the same year.
- The government does factor in college costs beyond tuition, like textbooks and supplies, in estimating your need. – You need to be either an American citizen or an eligible non-citizen and have a GED or high school diploma to apply for a Pell Grant.
Some great things about Pell Grants: They are, as the name implies, grants that don’t have to be paid back, which means that your ability to pay back is not even considered in your application. The information you put on the application is also confidential, so it cannot have any impact on your credit score. Keep in mind however that you generally have to keep up an academic average of at least a “C” to keep your eligibility for ongoing Pell Grant money. If you do receive a Pell Grant, it will be administered through your school. Your school may credit back the grant money to your account, give you a check or do a little bit of both. You must be given your grant money at least once every semester that the school has.
Stafford Loans
Stafford Loans, on the other hand, do have to be paid back. But they still offer real advantages over the other kinds of education loans that are available to a distance learner with limited resources. The interest rates on Staffords are generally among the lowest available, there are no origination fees, and you will have anywhere from 10 years to as many as 25 years (due to recent legislation), to repay your debt. These school loans come in two forms.
“Subsidized” Stafford Loans are given, like Pell Grants, on the basis of financial need, based on your estimated family contribution to your education. They are currently being offered with a fixed interest rate of 5.6%. The government actually pays any interest that accumulates while you are in school. This “grace period” represents a crucial advantage over just about any type of private education loan you can get. The terms of the Stafford Loans are so favorable that some lenders require you to state that you have already tried to get one before they will talk to you about any other type of education loan.
“Unsubsidized” Stafford loans are not based on financial need, and are currently being given at a 6.8% fixed interest rate. A key difference is that, while you don’t have to pay any interest on the loan while you are in school, it does accrue until you graduate and you are required to pay it in full over time. You’re required to apply for either of these loans through the FAFSA form.
More Than One College Loan
You are allowed to take out both (subsidized) and a non-subsidized loans. The formula for how much you can borrow on an unsubsidized loan takes into account how much money you are already getting on the subsidized loan.
Loan limits are based on whether you are financially dependent on your parents or not. Dependent undergrads can borrow a total of about $31,000 in combined subsidized and unsubsidized Stafford Loans over four years towards a degree program, but the subsidized part of the loan cannot be greater than $23,000. Independent students can borrow more – up to $57,000 for a four year program, though the subsidized portion of the loan can’t be more than $23,000.
Formulas for how much you can borrow each year are a bit complex, ranging from $5,500. per year for dependent freshmen up to $12,500 for independent seniors. Unlike Pell Grants, the Stafford Loans are available to graduate students, who can use them to borrow up to $138,500. To qualify for any of these loans, you must not currently be in default for any other federal loan, be in a program that will result in a degree, be in a school that participates in the Federal Family Education Loan Program and be planning to attend school on at least a half-time basis.
Next: Less-known government education loans.
