With the cost of college rising, and student loan debt becoming a major problem for the United States economy, online degrees are on the rise. For students who cannot afford to attend college, or do not want to take on the crushing debt, online schools offer a more affordable option.

These types of schools will be the future of education, and so it should be no surprise that VCs are starting to become interested in investing in them.

One online education company, Baltimore, MD based StraighterLine, raised $10 million in financing, the company announced Friday.

The fundraising was led by New York City based FirstMark Capital and City Light Capital, as well as previous investor Chrysalis Ventures, based out of Louisville, Kentucky.

StraightLine is not the only online company to recently raise funds in the education cateogry. Earlier this month 2tor, also based in Maryland, raised $26 million to bring its total fundraising to just under $97 million. Piazza raised $6 million for social learning. Memrise raised $1.05 million to gamify language learning. Schoolfeed received $1.75 million in February.

StraighterLine, which was founded in 2008 by CEO Burck Smith, offers online general education courses that would be necessary for a bachelor’s degree. The site is not accredited, but it is affiliated with a number of accredited universities, such as Albany State, the University of Phoenix New England College of Business and DeVry University.

StraightLine plans to use the money it raised to expand its course offerings and the number of colleges it is partnered with. 

Student loan crisis

The S&P recently warned that student loans may be the next bubble to burst, and might do serious harm to the economy. Student loan debt is now greater than credit card debt and is approaching $1 trillion, while the unemployment rate among young adults is at a 60 year low. Students are coming out of school with greater amounts of debt, and fewer viable options for paying it off.

With student loan debt growing as a national concern, online colleges like StraighterLine and 2tor might just become the norm in the coming years, as fewer students are able, or willing, to put themselves in debt in their early 20s.

During fall 2010, over 6.1 million students took at least one online class, a 10% increase from the previous year, a report from The Sloan Consortium said.

The number of students enrolled in at least one online course rose for the ninth straight year, as did its percentage of total enrollment, reaching over 30% in 2010.

65% of higher education institutions cited online classes as a key part of the long-term goals, the report also noted. 

With that in mind, Smith said in the release that his company is “providing a more affordable and lower-risk pathway into college” and called his business model “timely.”

StraighterLine could not be reached for comment

(Image source: college-warehouse.com)