Financial Aid Options for the Online Learner

Everything about the logistics of online learning—scheduling, lectures, exams, even applying in the first place—is set up for ease of use. But there is one area in which learning online rather than at a traditional school can't do all that much for you: financial aid. There's just no way of getting around the forms. Worse yet, at some online schools, financial aid can be even harder to arrange than at a brick-and-mortar counterpart.

While it seems to make the most sense to pick your program first and then go after financing, one big financial aid hitch merits serious consideration as part of the program-picking process: not all online programs are eligible for federal aid (grants and loans). Due to the preponderance of Internet "degree mills", or unaccredited institutions selling degrees with little or no quality control, the federal government placed restrictions on federal aid available at nontraditional institutions. While such restrictions doubtlessly save some students from wasting time and money on fraudulent diplomas, they hurt the millions of students at bona fide online universities.

But, with the online education market growing at a rate of 40 percent per year according to the U.S. Census Burea, the government is beginning to realize the importance and benefits of online learning. After careful review, the federal government has certified 24 online programs (representing just over 100 institutions) that have proven themselves to be every bit as rigorous as traditional pro

If you're paying cash for your education or your employer is footing the bill, the availability of financial aid may not matter to you. But if you're a student on a budget going after a degree on your own, federal grants (which do not have to be repaid) and loans (which are repaid according to specific terms) can make a big difference. In that case, ask whether the program you're interested in is eligible for federal monies.

Below we examine a variety of the options available to prospective online college students. Whatever way you go, know that the investment in yourself will be worth it. According to the College Board, Bachelor's degree holders earn 81 percent more than workers with a high school diploma. Over a lifetime, the gap in earning potential between high school and college graduates exceeds $1 million.

Federal Aid

All federal aid—Pell Grants, Stafford Loans—and most state aid starts with the Free Application for Federal Student Aid, or FAFSA (http://www.fafsa.ed.gov). Based on income, assets and a variety of other variables, the FAFSA generates the "expected family contribution" (EFC). For instance, a family of four with $65,000 in income and $20,000 in nonretirement savings would be expected to come up with about $8,600 for the year. But that doesn't mean the government will pony up the rest. Stafford Loans are capped at around $6,000 for the first year and about 50 percent of that for the second year. Pell Grants range from $400 to $4,050. "We always try to convince people to save for their educations," says Keith New, Vice President for Communications at American Education Services, a company that works with online and traditional students to finance their educations. "Education is an investment that pays off with much higher future earnings."

Alternative (or Private) Loans

For those who don't qualify for government loans (usually individuals whose income is perceived as too great or who are enrolling in an unapproved school), individual banks offer private education loans. These loans require that you either have established sufficient credit or co-sign with someone who does. Interest rates are generally higher than on government loans, but loan amounts are often much more generous. You can often get $30,000 per year!

Employer Reimbursement

Recognizing that a well-educated workforce is a stronger workforce, more and more employers offer at least partial, and very often full, tuition reimbursement to employees seeking degrees. Your company's human resource department is the best place to start looking into reimbursement options and what sort of obligations you may have to the company after the completion of your degree.

Cash

Of course, cold, hard cash is still an option. Understanding that many students wanting to pay cash might not have a full year's tuition available at once, most online institutions are happy to work out individualized cash payment plans for students.

Scholarships

Like grants, scholarships are considered gift aid and do not have to be repaid. Most are based on academic performance, talent or other factors. According to American Education Services, over $7 billion is available in scholarship awards annually. Dozens on online databases keep track of different scholarships. One site, www.educationplanner.org, helps match students with scholarships. Plug in basic information about yourself, and the web page will compare it to its database and spit out the names of any scholarships for which you might be eligible.

School Aid

Oftentimes, online universities themselves have endowments or other funds set aside to offer aid in the form of grants or scholarships to incoming and current students. It never hurts to ask.

One Final Note

Not all online institutions have a staff of trained financial aid advisers ready and willing to help you figure out how to pay for your education. If your school does, by all means take advantage of them. They've helped thousands of prospective students in positions just like yours and know all the ins and outs of state and federal systems, dozens of sources for alternative loans and how to best handle financial paperwork between the school and your company. Use their expertise.