Financial Aid for Online Colleges

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In 2019, the amount of students taking online classes reached over seven million, a number that keeps growing. But can you use financial aid for online colleges? What about using financial aid for online certificate programs?

Fortunately, distance learners often qualify for the same types of financial aid as on-campus students. Federal aid programs, for example, apply to students attending accredited schools, which includes many online colleges.

This guide introduces financial aid options for online students. Distance learners often pay for online schools with financial aid, including grants, scholarships, and loans. Our guide offers resources and eligibility information for online students.

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Frequently Asked Questions About Financial Aid for Online School with Darcy G. Keller

Q. What types of non-loan options are available to reduce tuition costs for online students?

The same federal aid program options that are available to on-campus students are also available to online students. At City University of Seattle, for example, we offer grants, scholarships, veteran and military educational benefits, and tuition waivers to those students who are eligible, regardless of whether they are enrolled in a strictly online program. They are awarded at the same eligibility level, so there would also be no distinction in award amounts.

The benefit of enrolling in an online program is that a student’s costs may be reduced, because they do not need to pay transportation costs to and from an actual building. Their living expenses also will not differ since there is no need to relocate to the campus community. In addition, there is flexibility in the student’s schedule that lets them continue full-time employment while earning a degree.

Q. Are there inherent student financial aid risks associated with online programs?

There are no inherent risks that are specific to online programs. Students must always be thoughtful about the programs they apply to, and whether that program will be a good fit.

Q. Do online students take advantage of financial aid and, if not, what commonly blocks participation?

Due to the growth in online learning, financial aid offices are very familiar with this learning mode. At City University of Seattle, all of our programs are eligible for the federal aid programs we are authorized to offer. However, depending on the institution, there may be online learning programs that are set up in a way that makes them ineligible to participate in federal aid programs. Students should always check to be sure online programs of interest are eligible for federal aid programs.

Q. How can online students avoid running up debt?

All students, whether they’re pursuing degrees online or in person, should keep track of their overall borrowing for their educational program. Students should only borrow what they need to meet their educational expenses each award year. Students can keep track of their overall borrowing by accessing the National Student Loan Data System. They can also use the Federal Student Aid Program’s Loan Simulator to learn how their aggregate loan debt will calculate out to a monthly payment.

Types of Financial Aid for Online Schools

Distance learners attending accredited institutions qualify for several types of financial aid for online colleges. Learn more about scholarships, grants, and loans below.

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    Federal Loans

    The federal student aid program offers many student loans to help students cover college costs. Some programs let parents borrow money for their children. Borrowers must repay loans plus interest. The government offers many repayment plans. Students apply by filling out the FAFSA each year.
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    Direct Subsidized Loan

    Undergraduate students qualify for Direct Subsidized Loans by demonstrating financial need on their FAFSA. The program offers a low interest rate. The federal government covers the interest while borrowers attend school and during grace periods. The government sets an annual and lifetime cap on Direct Subsidized Loans. Borrowers should prioritize these loans over other types of loans.
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    Direct Unsubsidized Loan

    The Direct Unsubsidized Loan program does not require proof of financial need on the FAFSA. Both undergraduate and graduate students qualify for these loans. Interest begins accruing on the loan once borrowers receive their first distribution. Borrowers get a six-month grace period after leaving school before they need to start making payments.
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    Direct PLUS Loan

    The Direct PLUS Loan program loans money to graduate and professional students. Parents of undergraduates can also take out PLUS loans. The program does not set financial need requirements. Instead, applicants must pass a credit check. Borrowers take out PLUS loans to cover any unmet financial expenses related to school.
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    Federal Perkins Loan

    Students can no longer take out Federal Perkins Loans. Before 2017, Perkins Loans offered low interest rates for qualifying undergraduate and graduate students. Congress stopped financing the program in 2017, and borrowers stopped receiving Perkins Loans in 2018. Borrowers with Perkins Loans still qualify for several federal loan repayment options.
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    Private Loans

    Private banks and financial institutions loan students money to pay for college. These private loans often come with higher interest rates and fewer repayment options than federal loans. For example, private loans do not offer grace periods or loan forgiveness programs. As a result, borrowers should prioritize federal loans when possible.
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    State and Institutional Loans

    In addition to federal and private loans, some states and colleges offer loans to students. Like other loans, borrowers must pay these back with interest. Students can apply for state loans through their state’s financial aid program. School financial aid offices manage institutional loans.
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    Pell Grants

    The federal student aid program gives Pell Grants to students who complete the FAFSA and meet financial need requirements. Pell Grants provide up to $6,495 in aid for the 2021-2022 year. Unlike loans, recipients do not repay Pell Grants, making them a great way to pay for online colleges.
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    Other Grants

    Grants lower college costs with no repayment requirement. Besides Pell Grants, federal grants fund teachers, military veterans, and those with high financial need. Many state grants also help students pay for college. Online learners should check their grant eligibility by completing the FAFSA and contacting their state financial aid office.
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    Work-Study Programs

    Work-study programs connect eligible students with jobs on campus or at qualifying off-campus employers. Students work part-time while attending school and earn at least the federal minimum wage. The federal work-study program requires proof of financial need. Some states also offer work-study programs.
  11. 11

    Employer-Sponsored Programs

    Around half of employers offer tuition assistance programs. These programs help undergraduate and graduate students pay for school. Many employers cap their tuition benefits at $5,250 per year. Recipients may need to pay upfront and get reimbursement from their employer after the semester.
  12. 12


    Private organizations, colleges, and professional associations award scholarships to online students. Scholarships provide free money for college with no repayment responsibilities. Students find scholarships based on their major, location, school, and career goals. Many scholarship applications require transcripts, recommendation letters, essays, and other application materials.

Military Education Benefit Questions with Ron Kness

Q. What are the most common mistakes made or misconceptions held among service personnel and veterans looking for college aid?

There’s the confusion for multiple GI Bill® holders over the number of months of entitlement they can get. Under the Rule of 48, service members or veterans with two or more GI Bills can use up to a maximum of 48 months between all their GI Bills.

The other common misconception is how they can use each GI Bill to get those 48 months. To get the 48 months, they have to first exhaust their 36 months under the Montgomery GI Bill, then switch to the Post-9/11 GI Bill to get the additional 12 months of entitlement. They can’t do it the other way around. Also, if they switch from the Montgomery GI Bill to the Post-9/11 GI Bill without first exhausting their Montgomery GI Bill benefits, then all they get is the same number of months they had left under the Montgomery GI Bill and not the additional 12 months of entitlement.

Q. Which programs are commonly used by veterans, active service members, and spouses to pay for online education?

Since the GI Bill 2.0 initiative in 2011, there really isn’t a difference in programs in regard to whether classes or programs are online or in a brick-and-mortar classroom. However, there is a difference in what is available to use for each type of person. Veterans usually use the Montgomery GI Bill-Active Duty or the Post-9/11 GI Bill, while active-duty personnel use both of the above GI Bills in addition to Tuition Assistance (TA) and Tuition Top-Up.

TA will pay up to a certain amount per credit or per year. The individual is then responsible for the difference. Most of the services will pay up to $250 per credit or up to $4,500 per year. Tuition Top-Up operates the same way, but instead of the service member paying the difference out-of-pocket, they can choose to use their GI Bill to pay the difference.

Spouses use transferred Post-9/11 GI Bill entitlement and, in some cases, the MyCAA program. The Montgomery GI Bill is not available to them, as it doesn’t have a transfer option.

Q. Can military students receive credit for previous schooling or military training and service?

Most colleges (online or otherwise) will accept up to a certain number of credits from military training and military occupational specialties. Prospective students can request that a copy of those credits on a military transcript be sent to their school for review and acceptance. The benefit of using those credits is that not only does it save time in taking classes (getting the student a degree sooner), but it also conserves GI Bill entitlement. Under the DANTES program, service members can “test out” in a number of classes and thereby get awarded credits for the course without actually having to take the course.

Q. What are the restrictions, if any, facing military students taking online courses and completing degrees?

The only restriction is the difference in Post-9/11 GI Bill monthly housing allowance (MHA). The MHA is calculated based on the number of credits a student takes and the zip code of the school. When students attend an online school, the MHA isn’t tied to a zip code to calculate the benefit.

Before GI Bill 2.0, an online student didn’t get any MHA. Now, they get up to $754.50, which is about half of the national MHA average for those attending class on campus. The way around getting the lower amount is to take one class (that is on their degree plan) per semester at a local campus, and take the rest online. That way they can get the full MHA.

Financial Aid Eligibility Checklist

Financial aid programs, including the FAFSA, set eligibility requirements. Use the eligibility checklist below to make sure you qualify for financial aid for online colleges.

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    Basic Eligibility for Financial Aid

    College students must meet several eligibility rules to receive financial aid. Federal student aid eligibility requirements include attendance at a qualifying school. Only accredited institutions can distribute federal aid, so distance learners should choose accredited online colleges.

    Other federal aid eligibility requirements include holding a Social Security number and either U.S. citizenship or noncitizen eligibility. Some programs, such as the Pell Grant program, require proof of financial need. Certain loan programs require at least half-time enrollment status.

    Applicants fill out the FAFSA with their information to certify their eligibility. The federal student aid office follows up with students needing to provide additional information to verify eligibility.

    In addition to federal aid, private and institutional aid may set different requirements. For example, some scholarships fund noncitizens. College aid may set GPA minimums to remain eligible.

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    Maintaining Financial Aid Eligibility Checklist

    The federal student aid program requires recipients to maintain their eligibility. Students receiving grants, loans, or work-study money must meet basic eligibility rules to continue receiving support. They need to fill out the FAFSA every year to continue receiving aid. The FAFSA renewal form offers a streamlined way to reapply annually.

    Distance learners must make satisfactory academic progress to remain eligible. The federal student aid program defines satisfactory progress in several ways. First, degree-seekers must complete enough credits each year. They also need to get passing grades.

    Each college sets its own definition of satisfactory progress, which the federal program uses to determine eligibility. Schools may set a minimum GPA, a minimum number of credits per year, or a limit on incompletes or withdrawals. Students should contact the financial aid office at their school for more on the academic progress policy.

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