Steps to Getting Student Loans for Online College

If you need help covering the cost of attendance for your online classes, many financial aid options are available, including grants, scholarships, and federal and private loans. 

The exact types of aid you’ll be eligible for will depend on the school you’re attending, the academic program you’re enrolled in, your earned income, assets owned, and dependent status. We’ll share what you need to know to get student loans for online school. 

4 steps to getting student loans for online college

These steps can help guide you to the aid needed to address your specific financial need. We’ll discuss the following four steps in more detail, so keep reading.

1. Check your school’s eligibility for federal financing
2. Apply for federal financial aid
3. Look for a private student loan lender
4. Consider alternatives if you aren’t eligible for student loans

1. Check your school’s eligibility for federal financing

Most accredited schools that offer higher education after high school—including public, private, nonprofit, and for-profit institutions of higher education—are eligible to participate in the federal student aid program the Department of Education administers. 

To be eligible, your school must first be accredited by a federal accrediting agency. The Department of Education gives accredited schools a unique Federal School Code. You can search the Federal Student Aid database using this code or the school’s name. 

You can also check to see that your specific degree program is covered using this tool.

2. Apply for federal financial aid

How you attend school—online or in person—doesn’t affect your funding. If your online school offers federal student aid, you’ll apply for federal financial aid like you would for any other eligible educational institution.

If your school is eligible to offer federal student aid, you should:

1. Fill out the Free Application for Federal Student Aid (FAFSA). This application is used to determine eligibility for all federal student loans and grants.
2. Use any federal aid awards before considering private options. Federal student loans may have lower interest rates and more flexible repayment terms than private loans.
3. Max out your Direct Subsidized Loans first. These result in less interest paid than on Direct Unsubsidized loans. Once you’ve maxed out these two options, you can consider PLUS Loans.

You must adhere to the maximum federal student loan limits. If you need more funding than is available via federal loans, you may need to turn to other financing options, such as private student loans.

3. Look for a private student loan lender

If your school isn’t eligible for federal financial aid, or you’ve maxed out the amount of federal aid you’re eligible for, you can also consider using a private student loan lender. 

---

Tip

Most accredited institutions of higher education are eligible to offer federal financial aid. If your school isn’t eligible, evaluate the school’s reputation and your job prospects. Before proceeding, it’s essential to ensure the education you receive is worth the cost. 

---

Eligibility for private loans hinges on your credit score and income. If you have no credit history, a low credit score, or little to no income, you may need to apply with a well-qualified cosigner. You could also consider loans designed for college students without cosigners. 

Many private lenders only offer loans to students enrolled in specific schools and programs, so check your online college’s eligibility before applying. If your school isn’t on the approved list, you’ll need to consider other options (e.g., choosing a different school or lender).

Various banks, credit unions, and lenders offer private student loans, which are not backed by the Department of Education. Rates, terms, and eligibility criteria can vary, so it’s important to shop around.

Once you’re ready to start your search, our guide to the best private student loans can help. You can also compare the lenders below.

Company	LendEDU Rating	Rates (APR)
College Ave	4.8 out of 5	4.07% – 16.69%
Earnest	4.3 out of 5	4.11% – 16.20%

4. Consider alternatives 

Some online schools and other educational institutions may not be eligible for federal or private student loans. Sometimes, this is the case with for-profit colleges.

If your school is ineligible for either type of loan, you still have options. First, talk to your school’s financial aid office. Some schools offer loans, grants, or scholarships specific to their students and programs. Your school can tell you whether these funding options are available. 

Our expert’s recommendations

Erin Kinkade

CFP®

First, I suggest considering the degree you’re pursuing: an associate, undergrad, master’s, Ph.D., or something else. Then, research accredited nonprofit online college institutions that offer your education track, accept financial aid, and offer grants or scholarships. It will take time, strategy, and patience to find what is right for your education and financial goals.

You can also consider these options:

• Student loans for trade school & career training
• Student loans for certificate programs
• Part-time student loans
• Other types of student loans

How do you pay for online college with student loans?

Paying for online college with student loans is the same as paying for traditional on-campus programs. You’ll get approved for the student loan, and then your lender will distribute the funds to you, your school, or both. 

How the funds are distributed depends on the type of student loan you receive: 

• Federal student loans: The proceeds are disbursed to your chosen school. First, they cover tuition and fees, ensuring your enrollment costs are met. The school releases any surplus funds to you so you can use them for other educational expenses.
• Private loans: Depending on your lender, the funds can be sent to the school or you. Since this can vary by lender, it’s essential to coordinate with your lender and college to avoid payment mishaps.

Online colleges often have financial aid offices, just like physical schools. They play a crucial role in helping you manage your loans and tuition payments. Most schools will assign you a financial aid officer who will ensure the loan disbursements match the tuition deadlines.

Remember, whether attending an online or in-person school, student loans are designed to finance your education. Managing them wisely, starting with understanding how the funds are distributed, sets a solid foundation for your financial well-being before and after college.

How much does it cost to take out student loans for online college?

How much it costs to take out student loans for an online college is often the same as for a traditional in-person school. The amount you’ll pay for your student loans mostly depends on the type of loan you get, not the type of school you attend. 

With federal student loans, the interest rates are fixed and may be lower than private student loans, so the costs tend to be predictable. 

Not only might you pay a higher interest rate with a private student loan, but private lenders sometimes use variable interest rates. For this reason, it’s essential to shop around for the best possible rates and terms if you choose to get a private student loan. 

Let’s assume you have $10,000 in student loans with a 10-year repayment term and a 6.87% interest rate, which recent research suggests is the average rate across all types of student loans (private and federal). Here’s how much the student loan would cost monthly and in total: 

Loan amount	$10,000
Repayment term	10 years
Interest rate	6.87%
Monthly payment	$115.44
Total interest cost	$3,852.75
Total cost	$13,852.75

How to repay student loans for online college 

Student loans used to finance your online college education must be repaid. So, it’s essential to plan for repayment before you get a student loan. After finishing your education, you’ll make monthly installments until you repay the loan in full.

These factors are critical to consider:

Understand the payment terms 

The first item you need to understand is when you’ll start repaying the loan. Knowing this upfront will help you avoid unpleasant surprises in the future. 

Some loans offer grace periods that allow you to skip loan payments during school and up to six months after graduation. Others allow interest-only payments as long as you’re enrolled for a certain number of hours. 

Know how long repayment will take

Identify the repayment term on your loan. Student loan terms vary, ranging anywhere from a few years to a few decades. Make sure you understand how long it will take you to pay down your loan.

While a longer repayment term will result in a lower monthly payment, you’ll pay more in total interest costs in the long run. For this reason, to minimize your costs, choose the shortest term your monthly budget can reasonably support. 

Ask about hardship options

You can’t predict the future, so it’s important to know what hardship options your lender offers. 

Federal student loans offer many hardship options, including loan forbearance, deferment, and forgiveness programs. While private lenders typically don’t offer these same options, they might be willing to work with you as long as you stay in open communication with them. 

Consider student loan refinancing

Don’t forget that refinancing is also an option. It could help you lower your interest rate, reduce your monthly payment, or extend your loan term. Here are some of our top-rated student loan refinancing options to get you started.