Financial Aid for Online Schools A Guide to Paying for Distance Education

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The cost of college continues to rise. Fortunately, online students qualify for many of the same types of financial aid as on-campus students. This page outlines different types of financial aid for online students, including online student scholarships, to help learners save money on college. Every year, the U.S. Department of Education provides over $120 million in financial aid for students. To receive federal student aid, applicants must fill out the FAFSA every year. The FAFSA uses financial information to determine a student's expected contribution to college costs. Eligible applicants can receive Pell Grants, subsidized loans, and other forms of federal aid.


Online college financial aid also includes state grants, private scholarships, and employer tuition assistance programs. Keep reading to learn about the types of loans for online schools, how to reduce college costs, and what to keep in mind when applying for online college financial aid.

Types of Loans for Online Schools

Online students attending accredited institutions qualify for the same loans as on-campus students. In fact, students may qualify for more than one type of loan. By researching student loans early, online learners can make an informed decision before signing any documents.

Federal Student Loans

Federal student loans generally offer lower interest rates than private loans with more repayment options. The federal student aid program offers multiple types of loans, including subsidized and unsubsidized direct loans and PLUS loans. Depending on the loan, borrowers may receive benefits like interest grace periods, income-based repayment programs, and deferment options.

To receive a federal student loan, online learners must submit the FAFSA form each year they attend school. Unlike private loans, federal loans rarely require a co-signer. With most federal loans, borrowers can begin making payments six months after graduating or leaving their program.

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Direct Subsidized Loan

Direct subsidized loans offer the best interest benefits of any type of student loan. Many borrowers pay thousands in interest over the course of repaying their loan, so subsidized loans can help students save a significant amount. With a subsidized loan, the Department of Education pays the interest while students attend school, during a six-month grace period after leaving school, and during any periods of deferment. However, only undergraduates who meet income requirements qualify for subsidized loans. The student aid program also caps the annual and lifetime borrowing limit for subsidized loans. Recipients must attend school at least part time to receive subsidized loans.

Direct Unsubsidized Loan

Unlike direct subsidized loans, which only lend money to undergraduates, direct unsubsidized loans lend money to undergraduate and graduate students, including professional degree students. The unsubsidized loan program also does not require proof of financial need. With an unsubsidized loan, borrowers must repay all interest that accrues during the life of the loan, starting when they take out of the loan. However, borrowers do not make payments on the loan until six months after leaving school or dropping below part-time status. Students qualify for unsubsidized loans by filling out the FAFSA. Schools administer the loan program and determine the amount students can borrow.

Direct PLUS Loan

Direct PLUS loans come in two forms: parent PLUS loans and grad PLUS loans. Parents can take out PLUS loans to cover costs for their dependent undergraduate children. The program does not take financial need into account, but borrowers must complete a credit check. Grad PLUS loans lend money to graduate and professional students. For both forms of PLUS loan, students must complete the FAFSA. Parents must also submit an online application to take out a PLUS loan for their child. The program caps the loan amount based on the cost of attendance minus other forms of financial aid.

Federal Perkins Loan

The Federal Perkins Loan program offered low-interest loans to undergraduate and graduate students who met financial need requirements. However, the program ended during the 2017/2018 academic year when funding for the program lapsed. As a result, students can no longer take out Perkins Loans to pay for school. Borrowers who took out Perkins Loans may still fall within the program's repayment grace period. The program gives students nine months after graduating, leaving school, or dropping below half-time enrollment to begin repaying the loan. Like other federal loans, recipients of Perkins Loans must repay the loan amount plus interest.

Private Loans

Private loans also help students pay for college. However, most private loans offer higher interest rates and fewer repayment options than federal loans. Therefore, students should take out federal loans before considering private loans.

Students can apply for private loans through a bank or other financial institution. Lenders typically run a credit check and determine the interest rate based on the results. Students may need a co-signer to qualify for a higher loan or to lower the interest rate.

Like federal loans, borrowers must repay private loans. The repayment requirements, including the option to only pay interest after graduating, vary depending on the loan.

State and Institutional Loans

In addition to federal and private student loans, many states and colleges offer loans as well. Each state may administer its own student loan program, with different requirements to receive loans and repayment options depending on the state. As a result, online learners need to research loan programs in their state to compare state loans with federal or private loans.

Some colleges also offer loans to students to bridge the gap between the cost of attendance and other forms of financial aid. Borrowers may be able to take out a short-term loan to cover immediate expenses while waiting for other forms of financial aid or a long-term loan to pay for school.

Financial Aid FAQ

Can you apply late for FAFSA?

Students can submit the FAFSA between Oct. 1-June 30 for the coming academic year. If students miss the deadline to complete the FAFSA, they cannot receive federal student aid.

Can I use financial aid for online degrees?

Yes, online students can take advantage of several types of financial aid, including online student scholarships and grants. The federal student aid program also offers financial aid to online learners attending an accredited school.

Can I get paid to go to school online?

Several programs offer free money for college, including the federal Pell Grant program, state grant programs, and institutional grants. Thanks to these programs, students can get paid to attend school online.

Can you use a scholarship for online classes?

Yes, most scholarships award money to on-campus and online students. Many scholarships require recipients to attend an accredited school.

In 2016-17, 30 percent of undergraduate students took out federal subsidized or unsubsidized loans to help finance their education Source: The College Board

How to Reduce Tuition Costs

Loans are not the only type of financial aid. Online learners can also apply for other forms of financial aid, like scholarships and grants, to lower the cost of college. Unlike loans, which recipients must repay, these types of financial aid reduce tuition costs with no repayment requirements.

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Pell Grants

The federal Pell Grant program supports undergraduates who meet financial need requirements. Applicants must fill out the FAFSA to qualify for the Pell Grant. The federal student aid program calculates Pell Grant awards based on each applicant's expected family contribution, their estimated cost of attendance, and their enrollment status.

For the 2020/2021 academic year, students can receive a maximum Pell Grant of $6,345. Recipients can reapply for the Pell Grant every year by filling out the FAFSA. The award amount may change from year to year, with a maximum cap on lifetime Pell Grant awards.

7.2 million students were awarded Pell Grants in 2016-17 Source: The College Board

Other Grants

In addition to the Pell Grant, online learners can receive grants from their state or college. The federal government also offers the TEACH Grant, the Federal Supplemental Educational Opportunity Grant, and Iraq and Afghanistan Service Grants.

The requirements for these grants vary. Some require proof of financial need, like the Pell Grant, while others carry service obligations. For example, TEACH Grant recipients agree to teach in a low-income school or high-need field after earning their degree. Recipients who do not meet the service requirement must repay the grant as a loan. Before applying for grants, students should carefully review any requirements.

Federal Supplemental Educational Opportunity Grants (FSEOG)

Based on financial need and administered through a school’s financial aid office. Learn more.

Teacher Education Assistance for College and Higher Education (TEACH) Grants

For students who commit to teaching elementary and secondary school in low-income communities. Learn more.

Federal Iraq and Afghanistan Service Grants

For students whose parent or guardian was a member of the U.S. armed forces in Iraq or Afghanistan after 9/11 and died during military service. Students must not be eligible for Pell Grants based on parental assistance and must be registered for school at the time of their parent or guardian’s death. Learn more.

Transfer Credits

Transfer credits let students apply college credit earned at other institutions toward their current degree. Students can save time and money on their degree by using transfer credits. However, not all credits transfer to all institutions. In general, credits earned at a regionally accredited school will more likely transfer.

Many schools offer a free transfer credit evaluation for prospective applicants. By researching transfer credit policies, learners with prior college credit can maximize their savings. Undergraduates can also save money by completing general education requirements at a community college. Thanks to the lower tuition rate at two-year colleges, students can potentially cut their college costs by thousands of dollars.

Aid for Online International Students

International students do not qualify for federal financial aid, including federal loans. However, they can receive other forms of financial aid to pay for college, like private loans. Some countries also offer financial aid for citizens attending colleges in the United States.

While some scholarships require proof of citizenship, others award funds to international students. International students can search scholarship databases or reach out to their college to learn more about scholarship opportunities. At the graduate level, international students may benefit from fellowships or assistantships offered by universities.

Work-Study Programs

Work-study programs connect eligible students with part-time job opportunities while they earn a degree. The federal work-study program, for example, places qualifying students in jobs offered through their college. To qualify for the federal work-study program, applicants must fill out the FAFSA and meet financial need requirements.

Work-study recipients may work in a variety of settings, including on-campus and off-campus jobs. Students earn a paycheck for the hours worked, with an annual cap on the total amount. In addition to a paycheck, work-study programs can provide valuable experience.

Tax Benefits

The federal government offers several tax benefits that lower the cost of college. The American Opportunity Credit lets tax filers claim up to $2,500 per student each year for the first four years of a degree-granting program. The Lifetime Learning Credit provides up to $2,000 in tax credits per student to offset the costs of tuition, fees, books, and supplies.

Students cannot claim both tax credits in the same year, and these tax benefits phase out for filers with higher incomes. The American Opportunity Credit offers up to $1,000 for filers with no income or no tax liability.

Employer Tuition Assistance Programs

In 2018, over half of employers provided tuition assistance programs to their employees, according to the Society for Human Resource Management. These employer tuition reimbursement programs can help working professionals pay for a college degree. In general, employees cover their college costs upfront, and their employer reimburses their tuition costs at the end of the semester. Some employers only cover programs related to their field or require a minimum GPA for reimbursement.

Prospective online learners can check with their employer or human resources department to learn more about how to apply for their tuition assistance program and how to use the benefit.

Military Benefits

Active-duty military servicemembers and veterans qualify for military benefits to pay for college. These benefits include ROTC scholarships, which support students earning a degree, VA education benefits, like the GI Bill, and the Iraq and Afghanistan Service Grant.

Military benefits also include lower interest rates on federal loans, deferment options, and a grace period for accruing interest during activity duty and National Guard duty. To qualify for some forms of military benefits, students must complete the FAFSA. The VA administers other education and training benefits programs.

Scholarships

Scholarships provide free money for college. Professional organizations, private foundations, and nonprofit organizations may award scholarships to students earning certificates and degrees at all levels. Applicants can find online student scholarships by searching online databases or reaching out to their college.

Scholarship requirements vary widely. Some require proof of financial need, most commonly by submitting a FAFSA form. Others award funds based on factors like identity, field of study, and/or merit. Applicants may need to provide proof of their major, transcripts showing a minimum GPA, letters of recommendation, and/or essays as part of the application process.

Find Scholarships

More than 7,000 scholarships can be searched at the Department of Labor’s CareerOneStop. Students can search by location, academic grade level, and affiliations (religious, union, accreditations, disabilities, ethnicity, and military).

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Important Things to Keep in Mind When Applying

The process of applying for financial aid can feel overwhelming. When researching online college financial aid opportunities, online students should keep several things in mind, including accreditation, eligibility requirements, and FAFSA deadlines.

College Accreditation

College accreditation plays an important role in financial aid. Only accredited schools can distribute federal financial aid to students, and many scholarships and grants require recipients to attend an accredited institution. As a result, prospective students should carefully research accreditation before applying for financial aid. The Database of Accredited Postsecondary Institutions and Programs lists schools that meet the requirements for federal financial aid. In general, liberal arts and research institutions hold regional accreditation, while trade schools, religious schools, and vocational schools typically hold national accreditation.

Eligibility Criteria

Loans, scholarships, and grants feature different eligibility requirements. For example, students taking out federal loans must demonstrate financial need and enroll at least part time. Many grants carry income restrictions, while scholarships can come with specific eligibility criteria, such as declaring a certain major or attending a certain school. Before filling out applications, online learners should research the eligibility requirements to avoid wasting time if they do not meet the criteria. For instance, many forms of financial aid only fund full-time students, while others also accept part-time students. Undergraduates taking fewer than six credits will not qualify for most forms of financial aid.

Complete the FAFSA®

Most students should plan to complete the FAFSA every year they attend school. By filling out the FAFSA, applicants can receive federal loans, grants, and scholarships. In 2018, new college students missed out on $2.6 billion in Pell Grant money because thousands never filled out the FAFSA. Applicants should plan to fill out the FAFSA as soon as possible after it becomes available on Oct. 1st. While you can submit the form as late as June, some programs distribute funds on a first-come, first-served basis. In addition, make sure to fill out the entire form. Leaving some parts blank can mean receiving less financial aid.

Financial Aid Eligibility Checklist

9th - 12th Grade
  • Consult the FAFSA®4caster, a Department of Education program that creates a "College Cost Worksheet”, to estimate student eligibility for aid and the types available
  • Take Preliminary SAT/National Merit Scholarship Qualifying Test (PSAT/NMSQT) tests by 11th grade for participating in National Merit Scholarship Programs
  • Register for and take standardized exams for college admission such as the SAT, the SAT Subject Tests, and the ACT
  • Begin college scholarship searches at the Labor Department’s Career OneStop
  • After October 1st in your senior year, complete and submit the Free Application for Federal Student Aid (FAFSA®)
Basic Eligibility for Federal Aid
  • Have completed high school or General Educational Development (GED) Certificate program
  • Be accepted for enrollment in an accredited post-secondary certificate or degree program
  • Have most-recent income tax forms from parents who support your education
  • Complete Selective Service registration (male students, 18-25 years of age)
  • Valid Social Security registration number
  • Affirm on the FASFA that you are not in default of previous Federal loans and intend to use financial aid solely in the pursuit of a post-secondary education
  • Provide proof of citizenship, green card, an immigration Arrival/Departure Record I-94, proof of immigrant status as a battered immigrant, or a T-1 eligibility visa
Maintaining Eligibility

Individual schools have specific requirements in place to continue receiving financial aid, but here are examples of common steps:

  • Continue to meet initial eligibility requirements
  • Maintain a minimum grade point average
  • Enroll in a certain amount of credits/courses each semester or quarter to show steady progress towards completion
  • Complete the FAFSA® every year
Tuition Tools and Cost Calculators

Tuition only represents a portion of the total amount a student needs to pay for college. In considering financial aid, online students need to account for items in addition to tuition such as books, lab materials, and supplies. Depending on the field and program, some online schools may mandate that distance learners come to campus from time to time to complete in-person sessions or courses. Many institutions offer web-based, net-cost calculators to estimate total costs. Students can also use the College Board’s online Net Calculator. The net-price calculator takes into account all potential financial expectations after deducting qualified financial aid totals. The FAFSA® operates the FAFSA®4caster, a tool that assists students in estimating the maximum eligibility amounts for a Federal Pell Grant and maximum Direct Subsidized and Direct Unsubsidized Loans.

Financial Aid Resources

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