Introduction
From tuition and fees to room and board, paying for college can be challenging. For many students, covering the cost of college is probably the toughest part of earning a degree. However, students today have numerous options to help defray these costs. The average undergraduate student received $13,000 in financial aid money in 2013, according to The College Board. With the right information and resources, you can find ways to close the gap between the cost of a college degree and what you can actually afford.
The following page explores financial aid options and offers tips, advice and resources for future college students and their parents. It also examines financial aid at online colleges, with a special eye on the importance of accreditation.
Financial Aid for Online College
Not long ago, Congress required a school to conduct more than 50 percent of its teaching in a classroom setting in order to qualify as federal financial aid distributors. This tactic prevented so-called “diploma mills” from qualifying for federal aid, yet negatively impacted many students who were pursuing a degree through legitimate online programs. Many of these students were working adults, rural residents or military personnel who benefited from the flexibility of distance learning, but needed help paying for a college education. In February 2006, the requirement was lifted, making financial aid available to eligible students who wanted to attend an online college.
The Importance of Accreditation for Federal Financial Aid
Accreditation means that a college or university meets certain accrediting agency standards to ensure that the training and education it provides is rigorous enough to meet the needs of employers in a specific field. While accreditation is important because it ensure that students receive a high quality education, it is also important when it come to financial aid. If the online school you attend or plan to attend is not accredited, not only will you be unable to transfer credits to another school and jeopardize your chances for future employment, but you will also be ineligible for any financial aid. Only accredited institutions are allowed to participate in federal student aid programs.
Types of Accreditation
The U.S. Department of Education does not accredit any institution or program. Instead, private associations known as accrediting agencies develop evaluation criteria, conduct assessments and ultimately grant accreditation to institutions and/or programs that meet all requirements.
There are two types of educational accreditation—institutional and specialized (or programmatic).
- Institutional accreditation is granted to an entire institution and verifies that all parts contribute to the institution’s overall objectives and meet all requirements necessary to provide a rigorous, high quality education.
- Specialized or programmatic accreditation applies to programs, departments or schools that are a part of a larger institution. Some programmatic accrediting agencies may also accredit freestanding professional and specialized or vocational schools and, therefore, also act as institutional accrediting agencies. A number of programs at non-educational settings, such as hospitals, can also be accredited by a specialized agency.
Institutional and specialized accrediting agencies can be national or regional. Regional accreditation means that the institution or program has been evaluated by a regional agency that presides over its home state. There are six regional accrediting bodies that are recognized by the U.S. Department of Education and the Council for Higher Education Accreditation. National accreditation, on the other hand, is not based on location. Instead, it is designed to assess specific schools and colleges where the method of instruction or course material is different from traditional degree programs – for example, trade, religious and online schools.
Financial Aid 101
While every student – online and traditional – is encouraged to seek out federal student aid, there are some basic requirements that need to be met. According to the U.S. Department of Education’s Federal Student Aid Office, students must meet the following criteria in order to be eligible for federal assistance:
- Have a high school diploma or recognized equivalent
- Must demonstrate financial need
- Be a U.S. citizen or an eligible non-citizen (the most common example of eligible non-citizenship status is a green card holder, also referred to as a permanent resident)
- Have a valid Social Security Number
- Be registered with Selective Service, if you are a male between the ages of 18 and 25
- Be admitted to or enrolled in an eligible degree or certificate program as a regular student
- Complete and sign the Free Application for Federal Student Aid (FAFSA)
- Be enrolled at least half-time in order to be eligible for Direct Loan Program funds
Once you have met the above requirements and received your federal aid package, you will need to stay eligible throughout your college career in order to continue receiving financial assistance. This means maintaining a satisfactory grade point average and meeting all quarter or semester course load requirements (credits, hours, etc.). Each college and university has a satisfactory academic program policy for financial aid. Be sure to consult with your school’s financial aid office to find out specific details as well as how you can regain eligibility in the event that you no longer qualify.
Lastly, you will need to fill out the FAFSA each year that you wish to receive federal financial assistance. The FAFSA website has made this process easier by allowing students to submit a Renewal FAFSA that will auto-complete certain information from the previous year to relevant sections for the new FAFSA.
Financial Aid Options
Financial aid can be awarded in a few different ways. Aid can come from the following sources:
- U.S. federal government
- The state in which you live
- The college you plan to attend
- Nonprofit or private organization(s)
Types of U.S. Federal Aid
The Federal Student Aid Office notes that each year, more than $150 billion is available to students who need help paying for college, and that includes students attending accredited online colleges. Funding can be used to cover academic expenses such as tuition, room and board, textbooks and supplies. If you qualify for federal aid, you will receive the money in one of four ways:
Grants
Also referred to as “gift aid”, this type of federal aid does not need to be repaid. Grants are typically need-based, which means that the student’s family does not have sufficient financial resources to cover the cost of college. This is determined by a formula established by the federal government that analyzes a family’s income and assets to determine Expected Family Contribution (EFC), or the amount that a family is expected to put towards the cost of college. The most common types of federal grants are:
Pell Grants
Awarded only to undergraduate students, though in some cases it may be awarded to students enrolled in a post-baccalaureate teacher certification program. The maximum award for the 2014-15 year will be $5,730 and amounts change every year. Based on a family’s financial need, cost of attendance and enrollment status.
Federal Supplemental Educational Opportunity Grants (FSEOG)
Also referred to as “campus-based” aid, this grant is available at participating institutions and is administered through the school’s financial aid office.
Teacher Education Assistance for College and Higher Education (TEACH) Grants
Targeted to students who are pursuing a career in teaching in a high-need field; an elementary school, secondary school or educational service agency that serves low-income students; and teach for at least four years within eight years after graduating. Grant money becomes a Direct Unsubsidized Loan if conditions are not met.
Iraq and Afghanistan Service Grants
Grant specifically for students whose parent or guardian was a member of the U.S. armed forces and died as a result of military service in Iraq or Afghanistan after 9/11. Other eligibility criteria apply.
Scholarships
Like grants, federal scholarships do not need to be repaid. Some scholarships are need-based, but most are merit-based, meaning that students who meet certain academic, sports or philanthropic standards qualify.
Work-Study
Work-study allows undergraduate and graduate students to work part-time jobs (usually on campus, although some schools have off campus options such as nonprofit organizations or public agencies) to earn money to help pay for a college education. The program encourages community service work and is usually related to a student’s course of study. Students cannot earn more than their designated work-study award and employers will assign hours accordingly, taking the student’s class schedule and academic progress into consideration.
Loans
Unlike grants and scholarships, federal loans are borrowed money and, therefore, must be paid back with interest. The government offers a few different options when it comes to loans and these are usually more ideal as they have lower interest rates than banks and other private loans.
The William D. Ford Federal Direct Loan Program
This is the largest student loan program offered through the government. The U.S. Department of Education is the lender and offers either direct subsidized loans, direct unsubsidized loans, direct consolidation loans or direct PLUS loans.
The Federal Perkins Loan Program
Fixed-rate, low-interest loans to undergraduate and graduate students with exceptional financial need. Under this program, the school is the lender and some 1,700 institutions participate. Graduates have up to ten years to repay a Perkins loan, but some qualifying grads can have part or all of their loans cancelled.
State Financial Aid
Almost every state offers grants, scholarships and loans to residents who attend or plan to attend a college in-state. Most state government aid programs also require the completion and submission of the FAFSA. Other eligibility requirements and deadlines vary so be sure to visit your state education agency for specific information.
College-Sponsored Aid
This type of aid is given by a specific college or university and typically comes from the school’s own funds such as its endowment. It is usually merit-based, although some schools also consider financial need. In most cases, it is awarded as an incentive for students to attend the institution. As a result, it can only be used towards an education at that particular college or university.
Many Ivy League institutions as well as top-tier schools offer some sort of financial aid to students. Princeton, for example, is well known for its no loan policy, which is dedicated to meeting 100 percent of admitted students’ financial need through generous grants.
Some colleges and universities also offer student loans on top of federal loans. While these loans usually have lower interest rates than third-party lenders, you should talk to your school’s financial aid office for more details on terms and conditions as well as repayment.
Private Scholarships
Many nonprofit and private organizations are dedicated to academic achievement and higher education development and, therefore, offer private scholarships and awards to qualifying students. This type of financial aid can be more difficult to find, but in some cases can be the most generous. Private scholarships can be need or merit-based and some also target specific demographics based on ethnicity, gender or academic field.
The break down of undergraduate students financial aid sources
The break down of graduate students financial aid sources
Institutional Aid from Online Colleges
Many online colleges recognize that their student body tends to consist mostly of individuals who need financial assistance to pay for college. As a result, they offer competitive financial aid packages as an incentive for enrollment and graduation. Accredited online colleges are eligible to participate in federal financial aid programs and, therefore, can offer grants, loans or both to students enrolled in a degree or certificate program. Like traditional students, online students must meet federal requirements and submit a completed FAFSA form.
Some online colleges offer their own forms of financial assistance to students. The University of Phoenix, for example, has its “Phoenix Scholarship Reward Program” in which undergraduate students who have completed 24 credit hours within 52 weeks of their program can receive reduced tuition for the following years. DeVry University also offers various scholarships and grants to its students who meet certain requirements. For the 2013-2014 academic year, DeVry is offering a total of $45 million in available funds to its students in the U.S. and Canada.
Online schools may also offer payment options to help alleviate the stress of college costs. The University of Phoenix has a cash plan program, in which students have the option to pay for their education one course at a time. There is also a Tuition Deferral Plan available for students taking advantage of their employer tuition reimbursement benefits. Under this plan, University of Phoenix students have a 60-day “grace period” to wait for employer reimbursement before making a payment.
Conclusion
Much like campus-based students, online students have many options when it comes to financial aid, so don’t let the potential cost of a distance learning program deter you from exploring. Paying for an online degree or certificate is certainly possible with federal and/or institutional help.
