Financial aid for online education: Helping students pay for online degrees

Since 2000, the cost of attending school has increased at an annual rate that is more than twice the 2.5 percent annual rate of inflation. At this rate, the cost of attendance in 2015 will most likely be twice what it was in 2000, according to the Federal Student Aid Strategic Plan FY 2011-15. Without some form of financial aid, many students may not be able to attend school, including students enrolled online.

Federal financial aid: An overview

Federal Student Aid (FSA) programs are the single largest source of funding for post-secondary education in the U.S. According to data from the FSA Strategic Plan, in 2009 the federal government funded 50 percent of post-secondary education expenses by paying out approximately $130 billion in grants, work-study and loans.

Federal grant programs

Federal grants do not have to be repaid as long as the student meets all eligibility requirements. Some of the most well-known grants offered by the federal government include:

  • Federal Pell Grants. Awarded primarily to the neediest undergraduate students, the maximum Federal Pell Grant award for full-time, full-year attendance in 2011-12 is $5,550.
  • Federal Supplemental Opportunity Grants (FSEOG). These grants are funded by the government, but awarded and administered by the school. More information about FSEOG grants is available on the FSA website.
  • Teacher Education Assistance for College and Higher Education (TEACH) Grants. These grants, which are not based on demonstrated financial need, are awarded to both undergraduates and graduates who plan to teach full time in a high-need field. More TEACH grant information is available on the FSA website.

Federal Work-Study program

Federal Work-Study awards are available to both undergraduate and graduate students. Work-study may not be practical for online students because it often requires working on campus or at organizations in the school's community. Online students should contact their schools for more information.

Federal Perkins Loan program

This loan is funded by the federal government, but administered by individual schools and is generally awarded to the neediest students. Undergraduates can receive up to $5,500 per year; graduates can receive up to $8,000 per year. The interest rate is 5 percent and repayment begins 9 months after the student graduates or leaves school. More information on Federal Perkins Loans is available on the FSA website.

Federal Direct Loan program

Students have to be enrolled at least half time to be eligible for Direct Loans, which include:

  • Direct Subsidized Stafford Loans. Based on financial need, this loan is available to undergraduate and graduate students. Interest rates range from 3.4 to 6.8 percent depending on when the loan is disbursed and whether it's a graduate or undergraduate loan. Students are not charged interest while they are in school and have an interest-free six-month grace period before repayment begins.
  • Direct Unsubsidized Stafford Loans. Available to both undergraduates and graduates, this loan is not based on financial need. The interest rate is 6.8 percent and begins accruing from the date of the loan disbursement.
  • Direct PLUS Loans. This loan, which is not based on need, is available to graduate and professional students and parents of dependent undergraduate students. The interest rate is 7.9 percent.
  • Direct Consolidation Loans. This loan allows federal loan borrowers to consolidate multiple federal educational loans into one consolidation loan. Parent and student loans cannot be combined. The weighted average of all loan included in the loan cannot exceed 8.25 percent.

More information on Direct Loans is available on the FSA website.

Other financial aid resources

Some other sources of financial assistance include:

  • Scholarships. Scholarship information is provided free of charge by online search websites. Note: students should never have to pay for scholarship search services. Local organizations and businesses are also good sources for scholarship information, and online colleges may also offer scholarship programs. Eligibility requirements vary; some scholarships are based on need, while others are based on academic merit, athletic ability or other achievement.
  • Tuition reimbursement programs. Businesses sometimes have programs to reimburse their employees or their employees' children for educational costs.
  • Military benefits. Military servicemembers and their family members may be eligible for benefits for online education.

Applying for financial aid

File the Free Application for Federal Student Aid (FAFSA) online anytime after January 1 for the following academic year. For example, for September 2012 through June 2013, the optimum time to file is January 2, 2012. Although students can file the FAFSA anytime during the academic year and be eligible to receive federal aid, states and schools may have strict deadlines because of limited funding--first come, first served. Students who would have been eligible had they met the deadlines, might not receive funds if they wait until later to apply.

When applying for aid, students should:

  1. File the FAFSA early
  2. Contact school financial aid offices for aid application information
  3. Do an Internet search for free online scholarship services and find out what's available
  4. Contact any other possible sources of aid (employer, military, community)
  5. Meet ALL deadlines
  6. Contact school financial aid offices with any questions

Following these six suggestions can give students a chance at receiving the most financial aid to which they are eligible and help pay for their online educations.