Financial Aid for Online College Students What's Available, Who Offers It, and How to Successfully Apply

Fellowships are grants usually offered to fund study or research in graduate school, although there are some undergraduate fellowships as well. Many fellowship programs target a specific field of study. Because fellowships are lucrative, they are very competitive.

• Internal, or institutional, scholarships are typically merit-based awards offered by a student's university. They cannot be used at any other school.
• External scholarships are federally-funded or offered by sponsoring organizations and can be applied at any school. They can be merit-based, academic-based or need-based.

Next Steps: Contact your school's financial aid department.

Grants are another form of “gift aid,” meaning students don't have to pay them back. The U.S. Department of Education and many individual states offer several types of grants to online college students.

Federal Grants

A grant is one of many different forms of federal financial assistance used by the U.S. government to redistributes financial resources. Financial assistance for college can come in the form of:

Pell Grants

Awarded to undergraduate students who have not yet earned a bachelor's degree. They may also be awarded to students enrolled in a qualifying post-baccalaureate teacher certification program.

• Maximum Federal Pell Grant amounts change each year. The maximum award for the 2016-2017 year is $5,815. Awards are based on financial need, cost of attendance and enrollment status.

Federal Supplemental Educational Opportunity Grants (FSEOG)

This campus-based aid, worth $100 to $4,000 per year, is available to students with the most financial need who already receive Federal Pell Grants. Unlike the Federal Pell Grant Program, which awards money to all eligible students, FSEOGs are limited to each school's available funds.

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

TEACH Grants are worth up to $4,000 per year. They are different from other federal student grants in that they require students to teach in low-income areas. The grant is automatically converted to a Direct Unsubsidized Loan if the recipient does not meet the conditions.

Iraq and Afghanistan Service Grants

Iraq and Afghanistan Service Grants are worth the same as Pell Grants. To receive these federal grants, students must have a parent or guardian who was a member of the U.S. armed forces and died as a result of military service in Iraq or Afghanistan after 9/11.

Next Steps: Complete the FAFSA®

State Grants

Most state education agencies administer at least one grant or scholarship to student residents, and many offer a long list of grants. In most cases, students must attend an in-state college to qualify. Some examples include:

• The state of Florida offers a dozen different state-sponsored grants and scholarships.
• California's grant opportunities are reserved for students in specific demographics.
• A half-dozen grant opportunities make up a small part of Illinois' state financial aid options.

Next Steps: Contact your state's department of education or related agencies

Federal loans are offered to students who qualify as part of a school's financial package. Students must pay back all money they borrow with interest to the lenders, whether it is the federal government, state or a private bank. The following table presents the types of loans available to online students, the maximum amounts that can be borrowed and the associated interest rates.

Federal Loans

Funded by the federal government, these loans have rules and restrictions set by law, including fixed interest rates and income-driven repayment plans, that are usually not offered by private lenders.

Direct Subsidized Loans

Undergraduates enrolled at least half-time in a degree or certificate program with financial need may apply for these loans from the U.S. Dept. of Education. Award amounts vary depending on grade level and include an interest-free grace period.

• Interest Rate: 5.05%
• Loan Fee: 1.062%
• Repayment Start Date: 6 months after student graduates or drops below half-time enrollment

Direct Unsubsidized Loans

Undergraduate, graduate, and professional students enrolled at least half-time may apply for these loans from the U.S. Dept. of Education. Financial need is not required, and award amounts vary depending on grade level and whether a student is a dependent (independents may receive more than dependents). There is no interest-free grace period.

• Interest Rate: 5.05% for Undergraduate, 6.6% for Graduate & Professional
• Loan Fee: 1.062%
• Repayment Start Date: 6 months after student graduates or drops below half-time enrollment

Direct PLUS Loans

Graduate or professional students and parents of dependent undergraduate students with good credit history may apply for these U.S. Dept. of Education loans. Award amounts are for the cost of attendance minus other scholarships/aid, but there is no interest-free grace period.

• Interest Rate: 7.6%
• Loan Fee: 4.248%
• Repayment Start Date, Students: 6 months after student graduates or drops below half-time enrollment
• Repayment Start Date, Parents: After disbursement, but parents may apply for deferment while student is enrolled at least half-time and for 6 months after graduation

Federal Perkins Loans

Undergraduate or graduate students with exceptional financial need can apply for this loan if they are attending a participating school. Award amounts are $5,500 for undergrad students and $8,000 for graduate students, and there is an interest-free grace period.

• Interest Rate: 5%
• Loan Fee: None
• Repayment Start Date: 9 months after student graduates or drops below half-time enrollment

Source: U.S. Department of Education

*Note: Interest rates are updated every year. See current interest rates for federal loans.

Next Steps: Complete the FAFSA® Loans may be offered as part of your school's financial aid package.

Private Loans

These loans are offered by private organizations such banks, credit unions, and state-based or state-affiliated organizations. Most experts advise students to pursue federal and state loans rather than private loans for several reasons. Take a look at the red flags below.

• Credit History Check – Private loans are credit-based. Those with the best credit histories get the best rates. Because most undergraduates don't have an extensive credit history, they usually need a co-signer willing to take over the debt if they miss payments.

  Red Flag: Private loans with no credit check requirement. Legitimate lenders pull your credit report.

• Higher Interest Rates – Federal loans have lower interest rates than private loans. The rates are fixed, so it's easy to predict monthly payments. Private loans with fixed interest rates are out there, but they are less common.

  Red Flag: Interest-only rates that keep your payments low but extend the life of your private loan.

• Extra Fees – Private lenders often tack on extra fees to each loan, particularly for borrowers with bad credit. A report from the National Consumer Law Center found some lenders added fees as high as 3% to 4% of the loan, equal to a 1% interest rate.

  Red Flag: Low-interest rates with extra fees that send your private loan skyrocketing over time.

Next Steps: Contact your state's department of education or related agencies to see state-sponsored loan options, or connect with a financial advisor at your local bank.

Undergraduate and graduate students who participate in Federal Work-Study are able to earn money to offset their educational expenses. To qualify, students must have financial need. Participating schools administer the Federal Work-Study Program through their financial aid office on a first-come, first-served basis.

When possible, students are placed in jobs related to their course of study, and many students work for the school on campus. Off-campus jobs are usually with private nonprofit organizations or public agencies. Students are guaranteed to earn at least the minimum hourly wage and can only work the number of hours they are awarded.

Next Steps: Complete the FAFSA®

A 2017 survey by the Society for Resource Management found 53 percent of companies offered undergraduate tuition assistance, and 50 percent offered tuition assistance for graduate studies. Reimbursement amounts vary, but some employers will cover the full cost of tuition. In most cases, employers specify which areas of study are acceptable for reimbursement. In addition, students must typically maintain a minimum GPA to qualify for reimbursement.

Next Steps: Speak with your employer's human resources manager.

While scholarships, loans, and grants are the most popular types of financial aid, they aren't the only options for offsetting the cost of an online college education. Here are some alternative financial aid options.

Crowdfunding

Crowdfunding involves raising money from large groups of people. It often involves the help of a third-party website, where each person contributes a relatively small amount. Along with general crowdfunding sites like GoFundMe and Indiegogo, which are known for helping businesses and charitable causes, education-specific crowdfunding sites are now used by students to help pay for college or graduate school.

• ScholarMatch: This crowdfunding site was founded by author Dave Eggers and allows individuals to contribute to the college scholarship funds of underserved youths.
• Piglt: Piglt users can make campaign videos showcasing their talents and explaining the educational goals they hope to reach with the help of funding. People who watch these videos can make donations in exchange for incentives–usually skills or products–offered by the video-maker.
• AlumniFunder: This crowdfunding website connects donors with students attending their alma mater. Students get help paying for school, and donors get the security of knowing their donations are actually going to a verified student.

Federal Tax Breaks

The IRS offers several tax credits and deductions for students.

• The American Opportunity Tax Credit and Lifetime Learning Credit can reduce the amount of tax owed on your tax return by up to $2,500.
• The tuition and fees deduction allows eligible students to reduce taxable income up to $4,000 while the student loan interest deduction can lower taxable income up to $2,500.

Veteran Benefits

Veterans may qualify for tuition assistance and higher education benefits through programs like the Post-9/11 GI Bill.

Financial Aid for Veterans

Alumni Programs

Some schools offer special scholarships or grants for students who have already attended that school or are the children of former students. Contact college financial aid offices for more information.