Figuring out how to pay for an online university education may be a bigger challenge than selecting a major or even choosing which university to attend. Your online degree is an investment and, as such, a careful plan should be made for how to finance it.

Most students require some sort of financial assistance to cover the costs outside of what they are able to pay, and many turn immediately to student loans. However, it is important to remember that student loans are not the only way to pay for an online university education.

Scholarships and grants are the first things to research when looking into financial assistance, since this is money that you are not required to repay after graduation. These include scholarships offered by your school, community or private organizations as well as federal and state based grants. The free application for federal student aid (FAFSA) should also be filled out no matter how much financing you hope to receive. To learn how to properly fill out the FAFSA form, please watch our video entitled “FAFSA application How-to”.

If you are still unable to fully fund your online university education after exhausting all of the “free money” options, federal student loans may be the best solution. Typically based on financial need, federal student loans tend to be the best deal financially-speaking.

Federal Stafford Loan

The most popular, low cost borrowing option for students, the Federal Stafford Loan is available to those undergraduate and graduate students who have completed a FAFSA form. In order to be eligible for this federal student loan you must also attend an accredited university at least on a half-time basis.

Depending on your financial needs, a Federal Stafford Loan may not cover all of your costs. There is a loan maximum that varies by grade level and student status. The current loan maximums are:

  • $5,500 for freshmen
  • $6,500 for sophomores
  • $7,500 for juniors, seniors and fifth-year undergraduate students
  • $20,500 for graduate students
  • $40,500 for specific graduate medical professions

There are two types of Federal Stafford Loans offered: those that are subsidized and those that are not. A subsidized loan means that you will not have to pay any interest until you are out of school. While you are in school the government will take care of it. The current interest rate for a 2010/2011 subsidized Stafford Loan is 4.5%. To learn more about subsidized student loans, go to

Federal Perkins Loan

The Federal Perkins Loan is a need-based federal student loan that you can qualify for based on your FAFSA. Unlike the Federal Stafford Loan, this student loan is determined by the individual school’s financial aid office, since you will be borrowing the money directly from them.

A variety of factors determine the amount for which you may be eligible, including the financial assistance you may need, when you apply and the school’s funding level. The maximum loan amounts you can receive are:

  • $4,000 each year as an undergraduate totaling as much as $27,500.
  • $8,000 each year as a graduate student or for professional studies totaling $60,000 (including any financial assistance received as an undergraduate).
  • The current interest rate for this federal student loan is 5% for both undergraduate and graduate students.

Note: borrowers who graduate to become certain teaching, public, military or service employees may be eligible to have some or all of their loans forgiven

Federal PLUS Loan

Specifically for parents, the Federal PLUS Loan is a student loan made in the parent’s name. The loan maximum is the total cost of attendance minus any other financial assistance that the student received.

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