Do online colleges offer financial aid?

There is little dispute that a college degree can increase your employability and income potential. According to a 2011 Georgetown University study, those with a bachelor's degree can expect to earn an average of $2.27 million during their lifetime, compared to $1.30 million for high school graduates. While the pay-off is certainly worthwhile, tuition costs can still take a bite out of the healthiest budget. Fortunately, financial aid is available for both traditional and online degree programs.

Types of financial aid

Financial aid comes in many different forms. The most common types of aid include funds from private and public sources:

• Government loans
• Government grants
• Private loans
• Private or school scholarships
• Work-study programs

While scholarships and grants are considered "gifts," loans must be repaid. Work-study programs connect students with approved employment programs while they are in college.

Federal loans for students are broken down into two categories: subsidized and unsubsidized. Subsidized loans are available to students based upon their financial need, and the government pays the interest on these loans until six months after a student is no longer registered at least half-time. Unsubsidized loans are available to all students regardless of financial need. Other federal loans may be taken out by parents on behalf of a student.

Private loans may be granted by banks, credit unions or other financial institutions. These loans may have a variable interest rate and require students submit to a credit check as part of the loan application process.

Scholarships may be available from a variety of sources such as community organizations, high schools and foundations. Some colleges and universities also administer their own scholarship programs.

Financial aid for online degree programs

Generally speaking, the financial aid application process for online degree programs is the same as for traditional ones. Western Governors University is an online school that participates in the federal student aid program.

"The process at WGU is essentially the same as it would be at a traditional university," said Pat Partridge, vice president of marketing and enrollment at the university. "To apply for federal financial aid through WGU's website, you need to first complete an application for admission to WGU. You then apply for a personal identification number with the Department of Education, complete the FAFSA online, fill out the legal document opening your line of credit, and complete entrance loan counseling to ensure you understand your financial obligations."

The FAFSA, or Free Application for Federal Student Aid, is required by the government to receive federal loans and grants. Even students who do not plan to use federal assistance should complete the application as part of the online college admissions process, since many schools use it to make their own financial aid decisions.

While federal money can be an important part of any financial aid package, some admissions experts advise that online students shouldn't feel limited to only government assistance.

"Online students should not rule out private scholarships," said Don Fraser, director of education and training with the National Association for College Admissions Counseling.

In addition, students may be able to reduce their costs by transferring credits from previous schooling, applying for prior learning credits or investigating the possibility of employer or military reimbursement for tuition.

Special considerations for online degree programs

Although the process of applying for financial aid is similar for all types of colleges, there are some important distinctions for online degree programs. Fraser notes that online colleges often have more flexibility as to when students can begin classes. This means students may be able to submit a FAFSA at any time during the year rather than by a school-imposed deadline. However, Fraser cautions some state funding may be doled out on a first-come, first-served basis, so it is best not to delay applying for aid once you've selected a degree program.

In addition, Haley Chitty, director of communications for the National Association of Student Financial Aid Administrators, says online students should be aware that students must make satisfactory academic progress, or SAP, to maintain their eligibility for aid.

"Online students should be aware of any requirements they need to meet to demonstrate SAP so they don't inadvertently lose eligibility for aid," Chitty said.

Each school creates its own criteria to determine SAP, and many traditional colleges review a student's attendance record. Since it may be more difficult to gauge student participation in some distance learning programs, Chitty says the Department of Education's Office of the Inspector General is taking a closer look at some online colleges.

"The federal government and schools are looking to eliminate any chances for fraud and abuse by verifying that online students are who they say they are and aren't just trying to get federal student aid funds," said Chitty.

Finally, before students begin the online college admissions process, they should confirm the school is indeed eligible for federal aid. Only students attending a Title IV institution are eligible for federal aid. While many online schools participate in the government's financial aid program, some unaccredited online degree programs do not.