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Financial Aid Guide for Online College Students

A large number of online students receive financial aid. Students attending a college, university, graduate school or a career school online or on-campus can receive federal financial aid and other types of financial aid.

Online and on-campus students basically use the same financial aid process. Every student should complete the Free Application for Federal Student Aid (FAFSA) form. Certain factors affect the type and amount of financial aid students receive.

Online programs consider the students' enrollment status such as full-time or part-time and may require students to meet a set number of credit-hours.

Financial Aid Guide for Online College Students

Accreditation and Federal Financial Aid Schools must receive accreditation from an accrediting agency which has recognition from the Department of Education in order to receive federal financial aid funds.

Federal Loans

Choosing a federal loan has many benefits, students do not need a credit check to receive federal student aid, including most federal student loans, whereas many organizations providing private loans consider credit history. Federal loans provide:

  • Low, fixed interest rates
  • Income-based repayments
  • Loan cancellation options
  • Deferment/postponement options

Many private loans do not allow such flexibility.

When should students apply for financial aid?

Overall, the earlier a student applies for loans or grants the better as financial aid dollars are limited. A few federal student aid programs have limited funds, also several states have financial aid programs with limited funds and some types of financial aid have deadlines.

Some states and colleges provide their financial aid on a first-come, first-served basis. Students should complete the FAFSA application as soon as the application is available.

Free Application for Federal Student Aid (FAFSA)

The majority of financial aid granting institutions, from private colleges to the federal government, use the FAFSA to evaluate a student's economic need. All students (including U.S. citizens, nationals, and legal permanent residents) gain access to grants, loans, scholarships, and more through the FAFSA. Students complete the FAFSA annually to remain eligible for federal student aid.

How to complete the FAFSA:

Students complete and submit the FAFSA online starting October 1st of each year and have until June 30th to submit the application.

To begin, students create a user name and password. The FAFSA requires information from a student or family's most recent income tax return. The U.S. Department of Education evaluates the FAFSA and responds with the Student Aid Report. Colleges determine a student's financial aid based on the Student Aid Report. Programs such as the IRS Data Retrieval Tool help save time and effort.

College Student in Library

Submit a Free Application for Federal Student Aid:

FAFSA form

FAFSA4caster - The FAFSA4caster estimates student eligibility for federal student aid. Individuals provide the appropriate information and a worksheet generates an estimated net cost of attending a selected institution.

Federal Direct Subsidized Loans

The federal government offers Federal Direct Subsidized Loans (also known as Stafford Loans) only to undergraduate students who meet financial need criteria. The school's evaluation of a student's financial need is the deciding factor for the sum of money the student can borrow.

The Department of Education covers the interest rate for the loan while the student is enrolled at least part-time, up to 6 months upon graduation, and during any periods of deferment. Typically, students receive up to $5,500 annually based on their grade level and dependency, however this is subject to change. Students make payments to the Department of Education.

Federal Direct Unsubsidized Loans

Different from a Subsidized Loan, students do not need to prove their financial aid needs when applying for a Federal Direct Unsubsidized loan. Undergraduate, graduate and professional students can receive this type of government loan.

The schools decide the appropriate amount of the loan based on the cost of the student's attendance, and any different financial aid the student receives. The student is responsible for the interest of the loan at all times, which accumulates during any periods of deferment. The government may award up to $20,500 based on the student's grade level and dependency status.

Federal Pell Grants

To apply for the Pell Grant, a student must complete the FAFSA annually and be an undergraduate who has not yet earned a degree. However, under certain circumstances, students getting a post-bachelor's teacher's certification may get a Pell Grant.

Except under specific circumstances students do not have to repay the money. The government awards up to $5,775 based on:

  • Financial need
  • Cost of attendance
  • Enrollment status
  • Yearly attendance

Parent Plus Loans

The Department of Education awards the Parent Plus Loan, available through the Direct Loan Program, to the parents of dependent undergraduate students to cover costs their children's aid packages do not already cover, up to the full cost of attendance.

The Parent Plus Loan has no cumulative limit. The applicant does not need to demonstrate financial need. However, the Department of Education considers the applicants prior credit history.

Grad Plus Loans

The Department of Education funds the Grad Plus Loan and uses the FAFSA to determine student eligibility. Only graduate and professional students qualify for the loans. The loans allows students to borrow up to the full cost of attendance minus any other financial aid. Students do not demonstrate financial need for this loan.

The federal government reviews a student's prior credit history. Students with poor credit history require a cosigner or a document detailing the extenuating circumstances. Fixed interest on the loan accumulates immediately after disbursement of the loan, minus an origination fee.


Numerous establishments provide students with grants including:

  • Colleges
  • State and Federal Government
  • Private Organizations
  • Employers

Most often the College awards the grant. Also known as 'gift aid', students do not repay a grant. The establishment providing the grant typically considers the student's financial circumstances when determining the amount of the grant.

Teacher Education Assistance for College and Higher Education Grant

Also known as the TEACH Grant, this program awards up to $4,000 annually to students in a Teach-Grant-eligible program which leads to a bachelor's degree or master's degree or is a post-baccalaureate program (not eligible if provided from a school which also provides a bachelor's degree in education). Students must also agree to the following stipulations:

  • Complete the FAFSA
  • Maintain academic achievement requirements
  • Sign the TEACH Grant Agreement to Serve

The TEACH Grant Agreement to Serve requires individuals to work for a minimum of four years in a high-need field at an elementary school or a secondary school or educational service agency serving students from low-income families. Individuals have up to eight years to complete this requirement after graduation.

Iraq and Afghanistan Service Grants

Students must complete the FAFSA each academic year to apply for this grant. Student must meet the following criteria:

  • Have a parent or guardian who died in Iraq or Afghanistan post 9/11 as a result of military service
  • Be under the age of 24 or enrolled in college at least part-time at the time of the parent or guardian's passing
  • Meet the majority of the requirements for the Federal Pell Grant with the exception of the Expected Family Contribution

The Iraq and Afghanistan Service Grant awards annually up to the same amount as the Federal Pell Grant. The amount cannot exceed the cost of attendance.

Federal Supplemental Educational Opportunity Grant (FSEOG)

Undergraduate students who demonstrate exceptional financial need on the FAFSA qualify for the FSEOG. Not all schools participate in the FSEOG. Financial aid offices at each college provide information and administer the grant directly to qualifying students.

Students can receive between $100 and $4,000 annually. Usually, students do not repay the FSEOG, except under certain circumstances.

Volunteer Work in Exchange for Loan Forgiveness from the Federal Government

The following organizations provide loan forgiveness in exchange for volunteer work:


The Federal Government forgives the balance of student loans after 10 years of full-time work at an eligible nonprofit or government agency. The federal government expects Individuals to make loan payments based on living allowance during this time. Acceptable career areas include:

  • Social Work
  • Teaching
  • Emergency Management
  • Disability Assistance
  • Military Service

Peace Corps

Service in the Peace Corps may count towards Public Service Loan Forgiveness. The Public Service Loan Forgiveness program forgives the balance of a Federal Direct Loan after a minimum of 10 years of work or 120 qualifying payments.

The federal government forgives other types of loans only if students have them consolidated under a Federal Direct Loan.

Volunteers in Service to America

Students provide 1,700 hours or more of volunteer service to private, non-profit groups working to eliminate hunger, homelessness, poverty and illiteracy. Students receive up to $4,725 in exchange for their work.

Teaching and Loan Forgiveness

The National Defense Education Act forgives up to $17,500 for eligible individuals' Stafford or PLUS loans. Full-time teachers at elementary and secondary schools serving low-income families are eligible for the program.

The American Federation of Teachers provides a list of loan forgiveness programs and funding opportunities for teachers.

Employer Tuition Assistance

Some students work full-time or part-time while pursuing higher education. Both graduate and undergraduate students can inquire about employer education assistance benefits. These benefits apply whether or not the student is seeking a degree.

The Internal Revenue Service, per section 127, grants employers up to $5,250 for an employee's academic courses tax-free each year. Each employer has different policies for students to follow.

Federal Education Tax Credits and Deductions

An education tax credit reduces the amount a student owes on his or her federal income tax. If the amount a student owes reduces to less than zero, the student receives a refund. The American Opportunity and the Lifetime Learning offer education tax credits individuals can deduct from their federal income tax.

American Opportunity Tax Credit

The American Opportunity Tax credit is an extension of the Hope and Lifetime Learning credit and allows students a maximum annual credit of $2,500. If the credit amount owed reduces to zero, people can have up to 40 percent, or $1,000, refunded to them. The credit is available during the first four years of college. Students must meet the following eligibility requirements:

  • Pursuing a degree
  • Enrolled at least part-time at the beginning of the tax year
  • Attending college four years or less
  • Have not claimed the credit for more than four years
  • No felony drug conviction

Lifetime Learning Credit

The Lifetime Learning Credit helps pay for qualified tuition and other educational expenses for undergraduate, graduate, and professional degree courses. Students can claim the credit indefinitely as long as they meet the eligibility requirements. The government awards up to $2,000 per tax return.

Federal Work-Study Programs

Work Study programs offer eligible students part-time jobs on or near campus. Typically, a student receives the current federal minimum wage and the money earned helps to pay educational expenses. The school awards a work-study program based on a student's financial need and the funding availability.

The financial aid office or the employer considers a student's class schedule and academic progress when arranging work hours. The Federal Work-Study program encourages community service work and work related to a student's course of study. To apply, students complete and submit the FAFSA.

Financial Aid for Military Service and Family Members

Many public and private organizations offer educational funding to military personnel or their family members. The programs have unique qualifying requirements and paid benefits. The Military's Tuition Assistance Program is one example of a service which pays up to 100 percent of the cost of tuition. Certain Reserve and National Guard units also provide tuition aid.

Search for Scholarships

State Financial Aid Programs State Financial Aid programs vary from state to state; some have more than others and eligibility requirements differ. Most often the state restricts the financial aid to students attending an in-state college, but not always. Students can research the available resources of their residency State Index.

Estimate your financial aid using this financial aid estimator.

CSS Profile The U.S. College Board distributes the College Scholarship Service (CSS) Profile. This online application collects detailed student financial information used mainly by private colleges to award non-federal aid. Similar to the FAFSA, the CSS profile is usually available starting October 1st each year. See a list of participating institutions - Participating Institutions.

Student loan borrowers can consolidate all federal student loans at a fixed interest rate with the Department of Education.

It's important not to miss repayments, and not to default on your loans. But if you do default, this is what you can expect to happen - Consequences of Defaulting on Student Loans

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