College Finances

Financial Aid for Online College

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Online students can apply for financial aid through grants and scholarships, starting by determining FAFSA eligibility.

Colleges and universities offer online programs for students seeking flexible or self-paced study formats. More than 35% of U.S. college students enrolled in some distance courses in 2018, and about 17% enrolled exclusively in online courses. Online programs can provide the same immersive education, career training, and support resources as traditional programs, and students also have access to the same financial aid, for the most part.

Generally, learners apply for financial aid for both traditional and online programs in the same way. Federal sources award financial aid based primarily on the FAFSA, which also helps determine a student's eligibility for other forms of financial aid, such as scholarships, grants, or fellowships.

Online students often enjoy set tuition rates and savings on commuter costs, housing, and campus amenities. Some sources offer financial aid for distance learners pursing select majors or programs. This guide provides information about applying for financial aid when attending online college.

Online Student Challenges

While schools offer a variety of financial aid options, online students may encounter unique challenges when applying for financial aid. Many colleges extend the same financial aid opportunities to on-campus and online enrollees, but others restrict eligibility for students in distance programs.

Eligibility Restrictions

Some schools limit access to online college financial aid through enrollment restrictions. Most financial aid requires full-time enrollment, which some online students may find challenging due to professional and family obligations. Online students also don't qualify for financial aid that's designated for students attending on-campus programs.

However, distance learners usually qualify for Federal Pell Grants and other programs, and schools increasingly offer scholarships for online students. These funding sources sometimes cover graduate programs as well as undergraduate ones, too, though not in all cases. Federal financial aid typically excludes online summer courses and independent study projects.

Accreditation

Degree-seekers must attend accredited online schools to qualify for federal financial aid, and many private funding sources also use this eligibility restriction. Accreditation ensures that a school meets national standards for higher education. Schools can pursue either national or regional accreditation, which are both granted through agencies recognized by the U.S. Department of Education (ED) and the Council for Higher Education Accreditation (CHEA).

Regional accreditation is more rigorous and therefore more prestigious than national accreditation, which is typically reserved for schools providing religious or vocational education. Many programs only honor transfer credits from regionally accredited institutions, and some professional licensure or certification authorities also require degrees from regionally accredited schools.

In addition to providing a high-quality college education, only accredited schools may participate in federal financial aid programs based on FAFSA eligibility. Most private scholarships and grants for online college also stipulate that the awardee must attend an accredited school.

How to Apply for Financial Aid for Online College

Applying for financial aid for online college is a multi-step process, beginning with the FAFSA. Many non-federal funding sources also use this application to determine student eligibility, but each program has its own rules, requirements, and deadlines for applicants, so it's best to research any program you're considering in more detail.

Complete the FAFSA

Students intending to attend colleges online with financial aid must start with the FAFSA. It's common for online colleges to require a completed FAFSA with a student's admission application. While FAFSA is the primary determinant of financial aid eligibility, degree-seekers can also pursue other forms of financial aid.

Eligibility

The FAFSA determines eligibility for federal education funding and other forms of financial aid. To qualify for financial aid through the ED, students must be U.S. citizens or eligible noncitizens who can demonstrate financial need. Students should also make sure they enroll in online colleges that accept FAFSA.

Students who complete the FAFSA may qualify for federal financial aid, including grants. Once a student submits the FAFSA to determine their eligibility, they must maintain those basic eligibility requirements for the duration of their education. Additionally, each school monitors academic progress for awardees, which track things like GPA, credit minimums, and progress evaluations.

Students can lose financial aid eligibility by failing to meet basic requirements. Recipients can also lose eligibility by transferring out of an eligible program; for example, a TEACH grant recipient switching to a non-education major would lose that funding. The ED offers a few pathways for regaining eligibility, including reinstating citizenship, turning in satisfactory progress evaluations, and getting out of default on current student loans.

Application

The FAFSA application uses personal information to verify a student's identity and determine their eligibility, based largely on taxed income. While not required, the ED strongly recommends that each student create an FSA ID account, enabling them to electronically sign and submit the FAFSA online.

Applicants should gather the following information for the FAFSA:

  • Driver's license number
  • Social security number
  • Parents' social security number (for dependent students)
  • Alien registration number (for non-citizens)
  • Federal tax information (tax returns), such as IRS W-2 and/or 1040 forms (for students or the parents of dependent students)
  • Records of untaxed income, including child support, interest income, and veterans benefits (for students or the parents of dependent students)
  • Bank statements and investment, real estate, and asset portfolios (for students or the parents of dependent students)

Students must also identify at least one prospective school in order to receive FAFSA information.

Deadlines

FAFSA deadlines are on June 30, 2021, for the upcoming academic year. Additionally, each state declares its own deadlines for the FAFSA to determine a student's eligibility for state-based awards. Schools also have individual FAFSA deadlines, which specify either the processing date for the form or the date when the school can access the fully processed form.

Submission

Students who submit the FAFSA online or through the myStudentAid mobile app can check their application status by creating an account. The application takes 3-5 days to process, plus one additional business day before they are accessible by schools. FAFSAs submitted by mail typically take 7-10 days for processing.

Student Aid Report

After submitting their applications, each candidate receives a Student Aid Report (SAR) summarizing the information they provided. Students can receive their SARs digitally or through the mail, with arrival times varying. Applicants must inspect the SAR for any mistakes and, if necessary, make corrections or updates online or by return mail.

Review Your Award Letter

After the FAFSA is processed, a student's school issues an award letter with an offer of financial aid based on that information. Each recipient must review their award letter carefully to understand the types of available aid and select which awards they prefer.

While each student has unique aid options, most choose to accept scholarships and grants first. Most also accept federal student loans (which require repayment), but only after allocating the above forms of aid.

Award Letter Terminology

These award letters may use language you have not encountered before to describe your educational expenses and your level of financial aid eligibility. Here are a few terms you might encounter in your award letter:

  • Cost of Attendance: COA refers to the amount it costs to attend college, including tuition, supplies, and living expenses.
  • Expected Family Contribution: EFC is the estimated portion of COA that the FAFSA application has determined a student or their family can pay without financial aid assistance.
  • Need-Based Aid: This is the amount of additional money a student needs to be able to attend college. Schools determine this number by subtracting a student's EFC from their school's COA.
  • Non-Need-Based Aid: This refers to money a student is eligible for that is not based in financial need, but rather based on other factors, like merit. Colleges decide this amount by subtracting a student's need-based aid from the school's COA.

Loans

Degree-seekers may qualify for several federal student loans directly from the ED. The following types of federal loans are commonly awarded to on-campus and online learners:

  • Direct Subsidized Loans: Undergraduate students with demonstrated financial need qualify for these loans. A school determines how much the recipient can borrow based on their FAFSA and overall financial aid eligibility. The direct subsidized loan may provide up to $5,500 per year, with fixed interest rates of 4.53% for its duration. The ED pays interest on the loan as long as the student remains enrolled at least half time, for the first six months after graduation, and during loan deferment periods.
  • Direct Unsubsidized Loans: This type of loan extends to undergraduate, graduate, and professional students and does not require proof of financial need. Recipients must pay the interest at all times, with variable rates for undergraduate (4.53%) and graduate/professional (6.08%) student borrowers. These loans may be awarded annually up to $20,500.
  • Direct PLUS Loans: Parents or students at any degree level can receive Direct PLUS loans without demonstrating financial need. Borrowers must have a satisfactory credit history and pay a high interest rate (7.08%). Awards vary by school but may not exceed the total cost of attendance.

Grants

The ED offers many federal grants that do not require repayment for eligible students. Primary grant types are below.

  • Federal Pell Grants: Undergraduate students with exceptional financial need may apply for a Pell Grant. Applicants may not have existing degrees, though some post-bachelor's teaching certification students may qualify. An applicant with a deceased parent who died in service in Iraq, Afghanistan, or in the line of duty in public safety may qualify for a higher award. These grants provide up to $6,345 per year for a maximum of 12 semesters.
  • Federal Supplemental Educational Opportunity Grant: Undergraduate students with exceptional financial need who do not already hold bachelor's or graduate degrees may apply. Students who already receive Pell Grants have priority consideration. Participating schools set award amounts based on availability, providing up to $4,000 per year to recipients.
  • Teacher Education Assistance for College and Higher Education Grant: Bachelor's, post-bachelor's, or graduate students in high-need elementary or secondary school teaching fields can receive this grant. Each recipient must serve at least four years in a high-need teaching field with low-income students. The TEACH Grant awards up to $3,764. For students who do not meet the teaching service requirements, the ED converts the grant to a Direct Unsubsidized Loan, which requires repayment.
  • Iraq and Afghanistan Service Grant: Students whose parents died due to service in Iraq or Afghanistan after 9/11 may apply. Applicants must be younger than 24 or enrolled at least half time at the time of their parent's death. Recipients do not require financial need and must be ineligible for Pell Grants. They can receive up to $5,829.50 annually.

Scholarships

Like grants, scholarships do not require repayment. Unlike grants, many scholarships do not require financial need and are instead awarded based on factors like merit, demographic, or intended major or program. For example, scholarships might target female, graduate-level, minority, or military students. Many schools, nonprofits, and private organizations offer scholarships.

While most traditional scholarships can be used for online programs, some award aid specifically for distance learners. A student seeking scholarships for online programs should ask their college's financial aid office or their high school counselor for assistance. Other resources for scholarships include federal and state agencies, the U.S. Department of Labor, and local businesses and community organizations.

Evaluating Your Letter

Students must review their award letters carefully before accepting any financial aid. Applicants who listed more than one school on their FAFSA should compare the award letters from each school to determine the most affordable option. Each school will include instructions for accepting or rejecting each offer in its financial aid package.

Once a student knows the total financial aid package offered by their school, they should subtract the "free" financial aid (grants and scholarships) total from the COA. This determines the net COA. From there, students can consider accepting financial aid that requires repayment, such as loans, to make up the outstanding balance.

Aid candidates should always read the fine print of each type of student loan offered in their award letters, as the terms and conditions are binding. When in doubt, contact your school's financial aid office for clarification. A student who experiences a catastrophic event or family hardship can appeal their award letter. Recipients' total awards may be negotiable, provided they submit a written appeal to their school's financial aid office.

Apply for Additional Financial Aid

While required at most schools, the FAFSA is not the only path to financial aid for online college attendees. Learners can also pursue private scholarships and grants, which do not require repayment.

Private Grants

Many private foundations and organizations offer grants for college students. The criteria for private grants vary widely, especially when compared to the most common federal grant programs. Some private grants require applicants to demonstrate financial need, while others accommodate specific fields of study or demographic groups.

Private grants emphasize academic achievement and scholarly research in higher education. Organizations that support dynamic career and research fields — including STEM, information technology, and teacher education — commonly offer private grants. Students should seek out as many private grants as possible to supplement their federal financial aid.

Students can begin their search for online college grants through the ED. While many organizations offer private grants to online students, some programs have campus or state residency requirements. Schools typically offer information about local or regional private grant opportunities through their financial aid offices.

Private Scholarships

Advisors recommend that students prioritize scholarships as financial aid for online college. Since scholarships do not require repayment, learners should apply for as many online college grants and scholarships as they can.

While some scholarships require candidates to demonstrate financial need, many are merit-based, meaning they are more broadly accessible than grants. Other scholarships accommodate students who meet unique criteria, like belonging to a minority ethnic group, pursuing degrees in high-need service areas, or serving in the military.

Individual schools, state agencies, and community and civic organizations can all offer private scholarships. Many traditional scholarships also accommodate online students, and some scholarships specifically target distance learners.

Where to Find Grants and Scholarships

Students can begin their search for online college grants and scholarships by asking their financial aid advisors for assistance. Applicants can also use searchable databases for grants and scholarships to do research. The following list includes several relevant resources for finding funding.

  • Colleges and Universities: Candidates should start the funding search by contacting the financial aid offices of their prospective schools.
  • Community Organizations: Organizations such as Kiwanis club often have scholarship boards or databases, which include memorial and alumni scholarships.
  • Private Companies: Prominent international entities, like the Bill and Melinda Gates Foundation and the Coca-Cola Company, offer grant and scholarship opportunities.
  • Scholarship Databases: Databases enable students to filter scholarships by location, major, or level of study.
  • Employers: A student's employer (or their parent's employer) may offer unique scholarship opportunities for college students.
  • U.S. Department of Labor: The DOL offers CareerOneStop, which features a free scholarship search tool.
  • Religious Organizations: Some religious organizations, such as churches and synagogues, sponsor student-members through scholarships.

Private Loans

Once a student exhausts all "free" financial aid opportunities, they may also apply for private loans. Lenders of private loans include banks, credit unions, and organizations like Sallie Mae, College Ave, and Navient. Unlike federal student loans, private loans set individual terms according to each lender.

Private loans come with riskier terms than federal student loans. Lending and borrowing conditions for federal loans are set by law, but private loans do not need to meet the same standards. Additionally, private loans usually do not offer the same benefits, such as income-based repayment plans and fixed interest rates.

Learners seeking financial aid often turn to private loans only as a last resort. Most students accumulate financial aid through scholarships and grants first, then pursue federal student loans, before finally considering private loans. These loans are unforgiving compared to federal student loans, especially in the case of default or deferment.

Other Money-Saving Tips

Beyond seeking financial aid, online students can employ other methods of saving money and avoiding debt. Here are a few tips to help you save.

  • Create a Budget

    Budgeting is critical for financial fitness, both in college and beyond. Students should create plans for repaying student loans, such as setting monthly payments on a calendar or spreadsheet. They should also account for expenses like food and entertainment while completing their degrees.

  • Take Advantage of Student Discounts

    Financial aid for online college enrollees often includes embedded discounts, such as fixed, frozen, or in-state rates for all distance programs.

  • Consider a Tuition Payment Plan

    Many tuition payment plans enable students to pay in monthly or biannual increments. Some payment plans require a one-time enrollment fee, but most do not add interest to payments.

  • Make Sure Your Credits Will Transfer

    Each student should confirm their school's transfer policy, as some colleges accept only credits from regionally accredited institutions. Transferring credits for academic, professional, or military experience can lead to lower tuition costs and faster completion times.

  • Rent or Buy Used Textbooks

    Many schools provide programs for students to rent or buy textbooks instead of buying them new. Distance programs increasingly offer all-virtual textbooks for online learners.

  • Ask Employers About Tuition Assistance

    Some employers assist students who commit to working within their organization after graduation. Others sponsor candidates who plan to serve their local communities.

Frequently Asked Questions

Can You Still Get Financial Aid for Online Classes?

Yes. Many students attend online college using financial aid, often collected from multiple sources. In addition to saving on commuting and on-campus housing costs, online enrollees can also pursue scholarships and grants specific to distance learning programs. Some schools require students to enroll full time or in specific majors to qualify for online aid.

What Online Classes Qualify for Financial Aid?

Most schools offer financial aid for online classes, same as they do for on-campus programs, regardless of a student's major or level of study. However, undergraduate students tend to receive more financial aid than graduate students, who are often considered financially independent and thus ineligible for as many awards.

What Financial Aid Is Available for Online College Students?

Online college students can apply for most of the same financial aid as their on-campus counterparts. Online students may also seek scholarships, grants, and fellowships through accredited schools, along with loans from private lenders. The ED only allows accredited schools to participate in federal financial aid programs.

Does FAFSA Cover Online Certificate Programs?

Some students enrolled in certificate programs qualify for federal financial aid through the FAFSA, provided the certificate program covers an eligible area of study like healthcare, education, or computer technology. Most online undergraduate certificates in career-trade fields are FAFSA-eligible. However, FAFSA typically does not cover post-graduate certificate programs.

What Online College Gives the Most Financial Aid?

Online colleges award varying amounts of financial aid, typically offering aid based on available funding and which students demonstrate the highest need. Some schools even implement "no loans" policies that provide high-quality financial aid packages for online college students. However, actual award amount always varies by student.

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