Federal student loans offer distance learners the opportunity to pay for their online class tuition without draining their bank accounts or seeking additional employment. By filling out a single online application, you might qualify for federal student loans with reasonable interest rates and terms.
Federal Student Loan Benefits
Many banks offer private student loans. However, federal student loans are almost always the best choice for students who qualify. Federal student loans generally offer the lowest interest rates available. Federal loan borrowers are also given generous terms and might be able to defer loan payments if they return to college or are facing hardship.
Types of Federal Student Loans
The federal government offers several financial aid opportunities for students. Some of the most common federal student loans include:
- Federal Perkins Loans: These loans offer a very low interest rate and are available to students who demonstrate “exceptional financial need.” The government pays the interest on Federal Perkins Loans while the student is enrolled in school and for a nine-month grace period following graduation. Students begin making payments after the grace period.
- Federal Direct Subsidized Loans: Federal direct loans feature a low interest rate. The government pays the interest on subsidized loans while the student is enrolled in school and during a six-month grace period after graduation. Students begin making payments after the grace period.
- Federal Direct Unsubsidized Loans: Unsubsidized loans also feature a low interest rate. However, these loans begin accumulating interest as soon as the loan money is dispersed. After graduation students have a six-month grace period before their first payment is due.
- Federal Direct PLUS Loans: The Parent Loan for Undergraduate Students is available for parents who intend to pay for their child's education. Parents must pass a credit check or have a qualified cosigner. The first payment is due after the loan is disbursed.
- Federal Direct PLUS Loans for Graduate and Professional Degree Students: Adult students may also take out PLUS loans after exhausting the limits for other federal loan options. Students must pass a credit check or have a cosigner. Interest begins accumulating after the loan is disbursed. However, students may ask for a payment deferment while they are in school. In the case of a deferment, the first payment is due 45 days after the end of the deferment period.
Online School Student Loan Laws
Before 2006, many online students were unable to receive federal aid. In 1992, Congress enacted the 50 Percent Rule, mandating that schools qualify as financial aid distributors by offering more than 50 percent of courses in traditional classrooms. In 2006, the law was overturned. Today a growing number of online schools offer federal student aid. To offer aid, schools must still meet requirements, but the percentage of online courses no longer applies.
Online Schools Offering Federal Student Loans
Keep in mind that not all online schools offer federal student loans. To find out if your school is able to distribute student loans, call the school's financial aid office. You might also search for the college's federal school code on the federal financial aid website.
Qualifying for Federal Student Loans
To be eligible for federal student loans you must be a U.S citizen with a social security number. You must have a high school diploma, a GED certificate or have passed an alternative exam. You must be enrolled as a regular student working toward a certificate or degree at a school that is eligible to offer federal aid.
Additionally, you must not have certain drug convictions on your record (convictions that happened prior to your eighteenth birthday don't count, unless you were tried as an adult). You cannot currently be in default for any student loans you already have, or owe the government refund money from grants you were awarded.
If you are a male, you must register for Selective Services.
If you don't meet these qualifications, it's still a good idea to discuss your situation with a financial aid counselor. There is some flexibility with the rules. For example, some non-citizens are eligible to apply for federal aid, and students with recent drug convictions may be able to receive aid if they attend drug rehabilitation.
How Much Aid Will You Receive?
The type and amount of federal aid you receive is determined by your online school. Aid amount is based on several factors including your financial need, your year in school and the cost of attendance. If you are a dependent, the government will determine an expected family contribution (how much your family should be expected to contribute, based on your parent's income). For many students, the entire cost of college attendance can be covered by federal student loans and grants.
Applying for Federal Student Loans
Before applying for federal student loans, set up an in-person or phone appointment with your online school's financial aid counselor. He or she will be able to offer advice for applying and suggestions for alternative sources of aid (such as scholarships and school-based grants).
Once you've collected the needed documents such as social security numbers and tax returns, it's easy to apply. You will need to fill out a form called the Free Application for Federal Student Aid (FAFSA). The FAFSA can be filled out online or on paper.
Using Student Loans Wisely
When you receive your federal aid award, the bulk of the money will be applied to your tuition. Any remaining money will be given to you for other school-related expenses (textbooks, school supplies, etc.) Often, you will be eligible to receive more money than is necessary. Try to use as little money as possible and return any money you do not need. Remember, student loans must be repaid.
Once you finish your online education, you will begin student loan repayment. At this point, consider refinancing your student loans so you have one monthly payment at a lower interest rate. Meet with a financial counselor to discuss your options.