Financial Aid for Online Education

Paying For Your Online Degree Yourself

Self-funding your education can be a complex process. It may involve re-framing your expectations in terms of the school you wish to attend, the time it takes to complete your degree, and the amount of personal sacrifice you and your family willing to take on.

Do some research about all your options to pay for school and then speak with a tax advisor to discuss the pros and cons and impact on your income tax before exercising your options.

• Personal Savings

If you have been fortunate enough to set aside money that you don't anticipate you will need in the immediate future, then writing a check is certainly an option. Weigh the amount of interest you could be earning, against the amount of interest you would pay on a loan.

• Credit Cards

Applying for a low-interest credit card, or placing some or all of the tuition on one of your current credit cards is an option. The interest rate may be higher than a loan. And you don't receive the tax benefit. But, you may earn cash back, points in a rewards program, or other incentives that you consider valuable. One couple placed their tuition for Walden University on a credit card and then used the points they earned to buy airline tickets to Hawaii.

• Borrowing from your retirement plan

Speak with your human resources specialist to determine your options. If you are not fully vested in your company's plan, you may not be eligible to use the funds. Penalties usually apply. Also see http://www.finaid.org/savings/retirementplans.phtml for more information.

• Borrow against your life insurance policy

Whole, or permanent, life insurance accrues a cash value which may be used by the policyholder. Call your insurance agent about the possibility of borrowing against your policy. Borrowing against the policy could put your family's security in jeopardy, and also expose you to stiff penalties. But it's still a good idea to get all the facts.

• Home Equity Loan or Home Equity Line of Credit (HELOC)

If you own a home you may be able to borrow against the equity—the difference between what you owe on the loan and what the home is worth. Even if you have only owned the house for a short time, if the home has appreciated in value you may have more equity than you think. Contact your lender and then shop around. You will probably incur an origination fee and closing costs, but you may be able to roll those into the loan.

• Loans or gifts from family or friends

Wouldn't everyone love a rich uncle who is generous, and a little forgetful? Of course. There would be no complicated application process, no credit check, and the terms of repayment would be considerably more forgiving than those of a traditional lender. But borrowing from people you know is tricky. That family member or friend may feel the need to "remind" you of the help constantly. Or, he or she may feel that the gift or loan gives license to provide "help" or "advice" in other areas of your life. Or worse, if that family member or friend falls on hard times--or the two of you have a falling out--you will feel compelled to escalate your repayment timetable. In the end, only you can evaluate the emotional cost of such an arrangement.

• Savings Accounts

Initiate a Section 529 education savings plan—for yourself. Many people already know that they can open an account and name their child as a beneficiary. But this option is open to adult students, or those who may become students, as well. Earnings are compounded and are tax free.

• Payment Plans

Tuition payment plans allow you to pay your college tuition in digestible monthly installments rather than in (gulp!) a lump sum. Expect an enrollment fee, but no interest charges.

• TuitionPay from Sallie Mae.
• Tuition Management Systems.
• FACTS Management Company.

Borrowing the Money To Pay For Your Online Degree

Your first step should be to speak with a financial aid advisor at the school where you intend to apply before you enroll. Ask what sort of financial aid resources are available at the school or through the school, and which the school accepts. For many students, loans will be a substantial part of the financial aid package. But it costs money to borrow money—rising interest rates make a significant impact on the amount your education will cost you over time. So, in the long run, it pays to borrow just what you need to cover your tuition and books.

Students who are seeking their degrees online have a distinct advantage over their counterparts—they only have to pay for their tuition, fees and books; in many cases, even books are available in electronic format. Online students usually do not have to borrow money for living expenses as most are already employed. And because the courses are taken online (on the student's own time) and not in residence, neither they nor their spouses have to leave their jobs, relocate, or find new housing. Moreover, online students are not subject to out-of-state tuition.

Your next step should be to complete a Free Application for Federal Student Aid. You can complete it online at the Department of Education website or fill out the paper version and mail it in. In most cases, this one application will be used to determine the amount you will be awarded for all federal, state, and school programs.

Cost of Attendance - Expected Family Contribution = Financial Need

After you complete your FAFSA, you will receive a Student Aid Report (SAR). Though funds for higher education are at historic highs, the federal government operates under the premise that your education should cost you something. That amount is your Expected Family Contribution (EFC). It is based upon information you reported on the FAFSA including income, savings, family size, and the number of family members in college. Schools you listed on your FAFSA also receive this information. The school uses the EFC to determine your financial need—the difference between the cost of attendance and your EFC.

You will then receive a Financial Aid Award Letter from the school. This letter details the financial aid package which represents the total amount of aid—grants, scholarships, loans, and work-study--for which you are eligible. View a copy of the U.S. Department of Education's Funding Beyond High School to learn more.