Unless you have a rich uncle, paying for your education is going to require careful thought and a lot of planning. Very few students can afford to write a check for the full amount of tuition.
Sixty-five percent of all undergraduates receive some type of financial aid, according to a 2007-2008 report by the National Center for Education Statistics.
Federal loans, private loans, grants, scholarships, military tuition assistance and employer tuition assistance are all possible forms of financial aid to pay for your online degree.
A growing number of people entering, or returning, to school are adult or non-traditional students. The challenges are different 18 years after high school graduation. By then there is a lot more to consider than cramming for midterms, nursing a hangover, or dealing with a sloppy roommate. And flinging burgers or delivering pizzas isn't likely to bridge the gap between the amount of money you have and what you owe. Older students tend to have fulltime jobs, families, household expenses and consumer debt. The question of how to pay for your education is timeless. There are really only three answers. You can have someone else pay, pay for it yourself, or borrow the money.
- Getting Someone Else To Pay For Your Online Degree
- Paying For Your Online Degree Yourself
- Borrowing The Money To Pay For Your Online Degree
Employer Tuition Assistance For Your Online Degree
By far, the best option is to get someone else to pay for your education. Tuition assistance, or tuition reimbursement, programs vary widely. Generally, the larger the company, the better the plan. General Electric, Hewlett Packard, Dell, Citigroup, and Motorola have very generous tuition assistance plans.
In an ideal world, the best tuition assistance would:
- Provide assistance for undergraduate level work, graduate level work, or continuing education
- Arrange for 100% payment up-front for each course
- Cover related expenses like textbooks and materials
Tuition assistance programs are based upon an employer's objectives for recruiting, retention, and productivity. The benefits can vary from company to company, and even within various divisions of the same company. Make an appointment to speak with the human resources specialist about your employer's caveats, rules and restrictions. For some reason, the benefits are often not widely, or enthusiastically, promoted. Unless you have a very proactive supervisor who truly takes an interest in your professional development, you may not be encouraged to take advantage of this benefit. Indeed, many employees toil away in call centers, branch offices, or sales offices for years without even knowing that a tuition assistance policy exists. According to the International Foundation of Employee Benefit Plans, less than 15% of eligible employees actually use their tuition assistance benefits.
Tuition assistance may have been covered in a very general sense in the employee handbook you were given your first week on the job. Whether you read it then, or filed it away in your drawer, it is worth taking the time to review it before your meeting with HR. Still, policies and benefits may have changed. In order to make the best decisions about your education, you need precise, current information.
Your employer may require you to:
- Choose from a select group of colleges or universities
- Enroll in a course of study that is job-related
- Pay the tuition yourself and await reimbursement after the successful completion of the course*
- Pay any tuition that exceeds an annual cap of $5,250 or less
- Earn a "C" or better
- Pay back the tuition if you leave the company
* Some employers do not reimburse 100% of the tuition. Usually, they do reimburse at least up to 80%.
If you are fortunate enough to work for a Fortune 500 company with its own online course offerings, fitness center, and onsite daycare, there is a plan in place already, and all you have to do is follow it. But 38% of all employees work in firms with 100 employees or less. (Source: Bureau of Labor Statistics.) If your company is so small it doesn't even have an HR department, it's a good bet there is no tuition assistance plan either.
Depending on the state in which your company is located, your employer may be eligible to receive tax credits and tax deductions for providing training or tuition assistance programs to employees. If you are an employer, the eLearners.com Debt-Free College Guide lists programs that can help your company provide tuition assistance and training to employees.
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.
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