Paying for an Online College Education

Innovative Ways to Finance Your Education

student at computer looking for an online school

You've made up your mind to enroll in an online college program, but the thought of paying the tab still makes your head spin.

Don't worry, this is a common reaction, and while the price tag might make you flinch now, your education will pay for itself - and then some - over the years. But in the meantime, here are some valuable tips and financial aid information that will help to calm your fears over paying for an online college education—and tackle your education costs.

Getting Financial Aid for Online Schools

Just because you're pursuing a degree online instead of at a physical university doesn't mean it's going to cost any less. Luckily, student financial aid and college scholarships are available for people pursuing online degrees. But how do you qualify for college financial aid?

In order for students to apply for financial aid, many institutions and programs have some requirements. Student must be:

  • Citizens or permanent residents of the United States
  • Able to demonstrate financial need (as established by the institution, or by federal formula)
  • Enrolled half- or full-time as students

While these qualifications may vary from school to school, all schools have a financial aid department that is experienced with dealing with these questions. They can quickly give you the run-down on the school's financial aid policies. Attending an accredited online school opens the way to federal loan and grant eligibility. Federal loans and grants for education can be given only to students attending federally accredited massage schools.

While it’s always wise to speak with a prospective school about financial aid options, online financial aid resources such as Student Aid on the Web or College Board can provide further information.

The 529 Plan, Employment Scholarships and Reimbursement

When paying for an online college education, it pays to get creative. Do you have a 529 plan your kids didn't use? Don’t hesitate to use it for yourself! 529 plans, the popular college saving options managed by individual states and named for the IRS code they’re filed under, are useful for anyone paying for their postsecondary education. Money can be withdrawn from these investment plans free from federal taxes as long as it is spent on higher education.

If you don't have a 529 plan, or if your children already used it up, consult your place of employment and find out if your company offers employee scholarships or reimbursement plans for continuing education. Many companies offer these incentives to encourage job skill growth.

Popular College Loans, Grants and Tax Credits

Once you've scoured your job and community for college scholarships and have spoken with your school's financial aid office, it's time to hit Uncle Sam up for cash.

FAFSA

The Free Application for Federal Student Aid is the largest source of student aid in America. To qualify, you need to demonstrate financial need, be enrolled as a regular student in an eligible program and be a U.S. citizen (or eligible non-citizen), according to the FAFSA website.

Federal Pell Grant

Unlike student loans, federal Pell Grants don't need to be repaid. These grants are generally awarded only to undergraduate students or individuals enrolled in a teacher certification program. The amount awarded for this grant depends on a number of factors including school tuition rates, family income, family size, whether a student is part time or full time, and whether a student attends school for the full academic year.

Eligible students must demonstrate financial need, be enrolled or accepted as a student in an eligible degree or certification program, and be a U.S. citizen or resident non-citizen. Students may apply for the Federal Pell Grant by completing a FAFSA application.

Federal Stafford Loan Program

Like the Federal Pell Grant, students become eligible for the Federal Stafford Loan by completing the FAFSA; you can’t get this loan without it. After filing the FAFSA, students generally receive an award letter from their school of choice indicating how much aid they are eligible for, and in what form it will take (i.e., work study, loans, etc.).

Once a student accepts the aid and returns the form to his or her school, he or she will need to fill out an online application for a promissory note to sign and send back to the school for certification. This completes the process. Learn more about Stafford Loans.

Hope Scholarship Tax Credit

Contrary to its name, the Hope Scholarship is not a scholarship, but a tax credit. It allows families who file federal tax returns to claim eligible dependents for up to two years. It is available only through each student's first two years of postsecondary education. Eligible taxpayers and students who are enrolled at least half-time and have not completed their first two years of undergraduate study qualify for this tax credit.

Lifetime Learning Tax Credit

When filing taxes, this credit is worth 20 percent of the first $10,000 of educational expenses paid for all eligible students. Thus, the maximum amount of a Lifetime Learning tax credit is $2,000. In addition, this tax credit is available for all years of postsecondary education, as well as for courses or certification programs that improve job skills. Taxpayers who owe taxes are eligible for this tax credit, as well as students enrolled in an undergraduate degree, graduate degree or instructional course meant to enhance or acquire job skills.

Veteran Educational Benefits

There are many education benefits available to U.S. military veterans and their families through the Montgomery GI Bill and education benefits such as the Reserve Educational Assistance Program (REAP). The spouse or children of military personnel are also eligible for assistance through the Survivors' and Dependents' Educational Assistance Program (DEA). To find out if you qualify for assistance, visit the United States Department of Veterans Affairs website.