Financial Aid for Online Colleges
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Key Takeaways
- Online students at accredited colleges can access the same federal, state, and private financial aid as on-campus students including grants, scholarships, and loans.
- Filling out the FAFSA is the first step in securing financial aid, and institutional accreditation is required for eligibility across most aid sources.
- Prioritize grants and scholarships that do not require repayment before considering federal student loans, and only turn to private loans after exhausting all other aid options.
According to the National Center for Education Statistics (NCES), in 2022, more than 10 million undergraduate students took at least one online course, and the number of online learners continues to grow. How are all these students paying for higher education? Can financial aid be used for online colleges?
The short answer is yes. You can often pay for online schools with financial aid, including grants, scholarships, and loans. The college financial aid landscape, however, can be complex and challenging to navigate. Use our guide below to help you learn more about financial aid options for your online degree.
What Is Financial Aid?
Financial aid is money that helps you pay for college or career training. The federal government, state governments, private companies, nonprofit organizations, and colleges themselves all offer financial aid.
The NCES reports that for the 2021-2022 school year, 87.3% of first-time, full-time undergraduate students received some form of aid, mostly federal and state grants, private scholarships, or loans. You can secure grants and scholarships based on your financial need or merit, but loans are borrowed money that you must repay with interest.
Do Online Colleges Accept Financial Aid?
As an online student, you can possibly qualify for the same financial aid as on-campus students. If an accredited online college is eligible for federal student aid, it generally offers the same federal student aid as an eligible brick-and-mortar college.
Why Accreditation Matters for Financial Aid
Only students at qualifying institutionally accredited colleges and universities can access federal financial aid dollars. That includes Pell Grants, most veterans’ benefits, and federally subsidized loans. Almost all scholarships, employer-based tuition assistance, and other private financial aid also go to students at accredited schools.
While important, holding state authorization does not guarantee that an online school is accredited. Authorization simply means the college can legally grant degrees. Accreditation means the school has undertaken a rigorous process that validates its academic quality and organizational stability.
To determine if your prospective school is accredited, check the school’s website for an accreditation tab, or ask your admissions counselor. Further, to check if your college is eligible for federal student aid, look on its website for a Federal School Code, or use the U.S. Department of Education’s Federal School Code Search.
Types of Financial Aid for Online Schools
Distance learners attending accredited online institutions can qualify for several types of financial aid, including scholarships, grants, and loans.
1. Federal Loans
The federal student aid program offers loans specifically earmarked to help students and their families cover college costs. Borrowers must repay loans plus interest and any applicable penalties. Below are the most common federal student loans.
- Direct Subsidized Loan: If you are an undergraduate student earning your first degree, you can qualify for direct subsidized loans by demonstrating financial need on your FAFSA. The federal government covers the interest while you attend school, during a six-month grace period after graduating or leaving school, and during deferment. These loans cannot exceed the annual and lifetime caps established by the U.S. government.
- Direct Unsubsidized Loan: The direct unsubsidized loan program does not require proof of financial need. Both undergraduate and graduate students qualify for these loans. Interest begins accruing on the loan once you receive your first disbursement. You get a six-month grace period after graduating or leaving school before you start making payments.
- Direct PLUS Loan: The Direct PLUS Loan program loans money to graduate and professional students. Eligible parents of undergraduates can also take out PLUS loans. The program does not require demonstration of financial need. Instead, applicants must pass a credit check.
2. Private Loans
Private banks and financial institutions also can lend you money to pay for college. These private loans come with higher interest rates and fewer repayment options than federal loans. Additionally, private loans rarely offer grace periods or loan forgiveness programs.
3. State-Established Scholarships and Grants
Many states offer scholarships or grants to residents who have graduated from a high school within the state and are planning to attend an in-state college. Some online schools qualify as in-state colleges.
These benefits can be awarded on the basis of academic achievement or financial need, and some scholarships and grants may require the student to pursue a specific major. Check with your high school guidance counselor for more information about your state’s financial aid options for online colleges.
4. Federal Pell Grants
The U.S. government awards Pell Grants to students who demonstrate significant financial need. These grants only support learners who have not yet earned a bachelor’s degree. In some cases, people who are incarcerated may qualify for Pell Grants.
5. Employer-Sponsored Tuition Assistance Programs
According to the Society for Human Resource Management, in 2022, 48% of employers offered tuition assistance programs to help undergraduate and graduate students pay for school. Check with your company’s human resources department to learn about what financial aid for online classes might be available to you.
6. Scholarships
Scholarships provide free money for college with no repayment responsibilities. Many scholarship applications require transcripts, recommendation letters, essays, and other materials.
You can search online or ask your college admissions counselor to help you find scholarships based on your major, location, school, or career goals. Many colleges also award merit-based scholarships when you apply to the school.
How to Pay for College: Prioritizing Your Financial Aid
Your first step to securing money for college is to complete the Free Application for Federal Student Aid (FAFSA).
If you are an undergraduate student, take whatever grant money the federal government offers before accessing other funds. Grants are the best form of financial aid because you do not have to repay them and can use them for tuition or living expenses.
After maximizing your free federal student aid, look for private scholarships that support students from your hometown, background, or major. State-established scholarships and employer-sponsored tuition assistance programs can also be easy to access. While you often have to keep up your grades to maintain this funding, you do not have to repay your state or employer.
Once you’ve exhausted all sources of aid that you don’t have to repay, consider student loans, prioritizing them as follows: direct subsidized loans, direct unsubsidized loans, and PLUS loans. Remember, only after exhausting all other sources of aid should you consider private loans.
Other Forms of Financial Aid
If you are a first responder, veteran, or member of the military, you can receive discounted tuition at many online colleges along with extensive federal aid packages. Your professional experience also may qualify you for credit through prior learning assessments, which can reduce the number of credits you need to earn and, therefore, the cost to graduate.
Some careers make you eligible for Public Service Loan Forgiveness. For example, if you work full time for a government agency or an eligible nonprofit organization and make 120 qualifying monthly payments on your student loans, you may qualify for loan forgiveness.
Financial Aid Eligibility Checklist
Financial aid programs establish eligibility requirements. Use the eligibility checklist below to ensure you qualify for financial aid for online schools.
Basic Eligibility for Federal Financial Aid Checklist
Attend a qualifying school. Only accredited institutions can distribute federal aid.
Be a U.S. citizen with a Social Security number or be an eligible noncitizen, such as a permanent resident or refugee.
Provide proof of financial need (for need-based aid) using your tax returns or, if your parent claims you as a dependent, their tax returns.
Verify your full- or part-time enrollment status (depending on your aid requirements).
Private, state, and institutional aid may set different requirements, such as GPA minimums or state residence.
Maintaining Your Financial Aid Checklist
Complete the FAFSA every year to maintain your eligibility for financial aid.
Make satisfactory academic progress by completing enough credits and maintaining the minimum GPA.
Contact the financial aid office at your school or your scholarship provider to learn about additional conditions you may need to meet to keep your aid.
Did You Know…
According to CollegeBoard’s Trends in Student Aid report, undergraduate and graduate students received $145.3 billion in grant aid in 2022-2023.
Interview With Financial Aid Expert 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 qualifying schools. At City University of Seattle, for example, we offer grants, scholarships, veteran and military educational benefits, and tuition waivers to eligible students 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 increase because there is no need to relocate to the campus community. In addition, flexibility in the student’s schedule 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 those programs 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 logging in to the Federal Student Aid dashboard. They can also use Federal Student Aid’s Loan Simulator to learn how their aggregate loan debt will calculate out to a monthly payment.
Frequently Asked Questions About Financial Aid for Online Colleges
Can you get financial aid for certificate programs?
Yes, some federal loans and grants can help you pay for undergraduate certificates in fields such as phlebotomy, pharmacy tech, and medical coding and billing. However, you must attend an accredited college, university, or community college to secure financial aid.
What is the best student loan?
A direct subsidized student loan offers the most favorable terms and conditions. The U.S. government pays the interest on this loan while you are in school and during grace periods. However, all loans — subsidized student loans included — must be repaid with interest and can accrue penalties.
What is need-based financial aid?
Need-based financial aid is calculated according to your financial need, while merit-based aid is awarded based on your achievements. Financial need is the difference between total annual college costs, such as the cost of attendance, and your ability to pay, as measured by the FAFSA. The federal Pell Grant, probably the best-known example of need-based assistance, offers a maximum award of $7,395 for the 2024-2025 school year.
What top schools offer merit scholarships?
Many private organizations and virtually all accredited colleges, including Emory University, Lehigh University, the University of Southern California, and Villanova University, offer merit-based scholarships. Check with your prospective school’s admissions counselor about what scholarships you may qualify for and how to apply for merit-based aid.
