Financial Aid for
Online Colleges

Updated on: 02/04/2019
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Robert Friedman University Director of Student Finance
Scott Seibring Director of Financial Aid
Linda Parker Financial Aid Director

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Financial Aid, FAFSA, & the Online College Landscape

Many online colleges offer financial aid to students enrolled in full-time programs, and distance learners may also obtain federal financial aid if they enroll in an online school holding regional accreditation from an agency approved by the U.S. Department of Education (ED). There’s virtually no difference between online and on-campus students receiving federal student aid, and those who qualify for such aid should be able to apply their benefits at any school mentioned in this guide. Our program search tool denotes online colleges that accept the Free Application for Federal Student Aid (FAFSA), along with campus-based colleges featuring accredited online programs and courses. Begin your search by answering a few questions to determine what’s most important to you in selecting an online program, then select “search now” in the drop down menu to find your accredited, FAFSA-approved school.

It doesn’t have to be a chore to secure financial aid for online colleges and degrees. Start here, ask questions, find answers, and make the right moves for your education.

Financial Aid 101: The Basics

Both online and traditional students are encouraged to seek out federal student aid, but they must fulfill some basic requirements first. According to the ED's Federal Student Aid Office, students must meet the following criteria in order to qualify for federal assistance:

  • Have a high school diploma or recognized equivalent.
  • Must demonstrate financial need.
  • Be a U.S. citizen or an eligible noncitizen (for example, hold a green card, or permanent residency).
  • 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 FAFSA.
  • Be enrolled at least half-time to qualify for direct loan funds.
See Online Degree Programs at Schools that Offer Financial Aid

Funding candidates who meet the above requirements and receive federal aid must remain eligible through their college careers to continue receiving financial assistance, meaning they must maintain a satisfactory GPA and meet all course load requirements each term. Each college and university implements its own satisfactory academic program policy for financial aid. Consult with your school’s financial aid office regarding specific details on aid, and how to regain eligibility in the event that you no longer qualify.

Funding recipients must fill out the FAFSA for each year they wish to receive federal financial assistance. The FAFSA website simplifies this process by allowing students to submit renewal forms, which auto-complete information from the previous year.

The FAFSA: Maximizing Your Financial Aid

Aid applicants submit the FAFSA to the ED's Federal Student Aid (FSA) office. The FSA collects information about student and family finances to determine students' eligibility for any of nine federal financial aid programs, including grants, work-study programs, and federal student loans. The FSA also determines applicants' eligibility for more than 600 state aid programs.

The FSA sends your FAFSA information to your selected colleges and universities, as well. These institutions may also require students to complete other, college-specific financial aid forms, using the combined information to award scholarships and other funding. Your federal and institutional aid compose your total financial aid package. Each school awards its own aid package — or none, depending on your eligibility.

Even if you think you or your parents make too much money to qualify for federal financial aid, make sure to submit the FAFSA. You could otherwise be leaving loan dollars on the table, but you won’t know unless you apply.

See Online Degree Programs at Schools that Offer Financial Aid

Understanding Your Student Aid Report & EFC

Within two weeks of filing the FAFSA electronically, you should receive a student aid report (SAR). The SAR indicates the contribution you and your family are expected to make toward your education expenses that year, otherwise called the expected family contribution (EFC). Schools use the EFC to calculate your eligibility for institutional financial aid, subtracting your EFC from each school's cost of attendance to calculate your need for that specific institution. The formula essentially works as follows:

Cost of XYZ College – EFC = Your Financial Need for XYZ College

Colleges award financial aid on a first-come, first-served basis. The sooner you file your FAFSA, the more aid that will be available to you. The FSA begins accepting FAFSA forms after Oct. 1, at which point you may file at any time, even if you need to estimate your tax information for the current year. Each college imposes its own financial aid form requirements and deadlines, as well.

Filling Out the FAFSA

Filing the FAFSA is a relatively simple process, but it helps to know a bit about it before diving in. See the following list for documents and information you’ll need during the application process.

Applicants who are dependents should prepare to provide their parents' information in addition to their own. If you are not a dependent, prepare to provide your own information through the following:

  • Social Security numbers.
  • W-2 forms for the previous year.
  • Federal tax returns for the previous year, or foreign tax returns or tax returns for Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federal States of Micronesia, or Palau.
  • Records of additional, untaxed income (e.g. child support, welfare, veteran’s benefits, interest income).
  • Bank statements and account information (including balances).
  • Investments records for the previous year.

Selecting a Format

Students and parents filling out the FAFSA can do so in one of three ways:

  • Online at www.fafsa.gov.

  • Fill out a PDF FAFSA (go to https://www.fafsa.ed.gov/options.htm and select desired year.) You must submit the PDF FAFSA by mail.

  • Complete a paper FAFSA. To order one, call 1-800-4-FED-AID ( 1-800-433-3243 ) or 334-523-2691. If you are hearing impaired, contact the TTY line at 1-800-730-8913. Your high school college counselor may also have forms available.

Filing online comes with a handful of benefits:

  • A secure and easy-to-navigate website.

  • A built-in help guide.

  • Skip logic, which eliminates questions that don’t apply to your situation.

  • IRS retrieval tool that automatically populates answers to various questions.

  • Option to save your work and continue later.

  • Ability to send FAFSA to as many as 10 colleges that accept financial aid, whereas the print form limits you to four schools.

  • Reports reach schools more quickly.

Understanding FAFSA: Question Groups

The FAFSA's questions split into specific groups, such as the following:

Questions 1-31: General personal information and citizenship status questions.

Questions 32-57: Financial information questions regarding income, assets, exemptions, and household size.

Questions 45-57: Questions to determine whether the student is a dependent.

  • If the student is a dependent, questions 58-92 gather parents' financial information.
  • If the student is not a dependent, skip to questions 93-100, which review number of family members.

Questions 101a-h: Choose the schools you want to receive your report.

FAFSA Deadlines

For the 2018-19 academic year, you must complete the FAFSA between Oct. 1, 2018, and midnight Central Time on June 30, 2019. Make any corrections or updates by midnight Central Time on Sept. 14, 2019.

For the 2019-20 academic year, you must submit the FAFSA before Oct. 1, 2019 and midnight Central Time on June 30, 2020. Make corrections and updates before midnight Central Time on Sept. 12, 2020.

Many states and colleges impose deadlines that come earlier than the federal deadlines. Students can find state deadlines on the FSA website, and should check with their prospective colleges for their individual deadlines. To qualify for the maximum amount of aid, students should apply as early as possible during the enrollment period.

Tips for Submitting the FAFSA

  • Complete the FAFSA whether or not you’ve been accepted to a college yet. It's better to be ahead of the game.

  • Double-check your answers, especially the numbers. For example, an incorrect Social Security number slows down the process.

  • Do not use nicknames. Only legal names as they appear on your Social Security card are acceptable.

  • If an answer is “0”, do not leave it blank. Write in “0.”

  • When the FAFSA refers to “you” and “your,” it is referring to the student, NOT the parents.

  • Don’t forget to count the student as one of the people in the household attending college.

  • When parents are divorced or separated, the parent with whom the student lived for most of the past year should fill out the FAFSA. Legal custody does not come into play here.

  • If you answer “yes” to work-study and student loan questions, you qualify for more aid options, but are not required to accept them.

  • Fill out the FAFSA even if you’re sure you don’t qualify for federal aid. Most schools use the information from your FAFSA to determine financial aid at the institutional level, as well.

What Happens Next

  • After submitting the FAFSA, you should receive notification that your submission was successful. FSA notifies applicants if their form has issues, and informs them on how to remedy the situation.
  • Successful applicants receive their SAR, which shows their EFC.
  • The schools you’ve selected to receive your FAFSA info should receive it within a few weeks. Each school then creates a financial aid package for you based on the information you submitted to the FSA.

FAFSA Financial Aid Eligibility

In order to qualify for federal student aid, students must meet the following requirements:

  • Be a U.S. citizen or eligible noncitizen. Eligible noncitizens include:
    • U.S. nationals (includes natives of American Samoa or Swains Island), U.S. permanent resident (who has an I-151, I-551 or I-551C [Permanent Resident Card]).
    • Individuals who have an Arrival-Departure Record (I-94) from U.S. Citizenship and Immigration Services (USCIS) showing one of the following designations:
      • Refugee.
      • Asylum granted.
      • Cuban-Haitian entrant (status pending).
      • Conditional entrant (valid only if issued before April 1, 1980).
      • Victims of human trafficking, T-visa (T-2, T-3, or T-4, etc.) holder.
      • Parolee (You must be paroled into the United States for at least one year and you must be able to provide evidence from the USCIS that you are in the United States for other than a temporary purpose and that you intend to become a U.S. citizen or permanent resident).
  • Have a Social Security number.
  • Males between the ages of 18 and 25 must register with Selective Service.
  • Be accepted for enrollment or enrolled in an eligible program offering degrees or certificates.
  • Enroll at least half-time to qualify for direct loan program aid.
  • Show satisfactory academic progress in the educational program.
  • Not be in default on a federal student loan.
  • Not owe money on a federal student grant.
  • Certify that they are using federal student aid only for education expenses.
  • Hold a high school diploma or recognized equivalent, such as the GED.
  • If homeschooled, the setting must be approved under state law, or the student must obtain a completion credential. Students enrolled in eligible career pathway programs may be exempt from this requirement.

Losing FAFSA Eligibility & Gaining it Back

Students may lose federal student aid eligibility for several reasons, and their ability to gain it back depends on why they lost it in the first place. See below for examples of how a student may lose and regain federal aid eligibility. For more information, visit the FAFSA page on eligibility.

  • Past Student Loan Default:

    Get your loan out of default. You may need to pay it back in full or seek loan rehabilitation or consolidation. Loan rehabilitation is often the best solution, but it’s a several-tiered process that can take up to 10 months, and it requires on-time payments during that time.

  • Failure to Make Satisfactory Academic Progress:

    You may need to petition your school if you have been deemed ineligible to receive federal financial aid due to poor grades, withdrawing from or failing too many courses, or failing to take the required number of credits each term to move toward graduation. Possible reasons to appeal your ineligible status include illness and a death in the family. You may also resume classes without federal aid, show a pattern of satisfactory progress, and thereafter appeal your ineligible status. Make sure to understand what your school considers "satisfactory progress,” and adhere to that standard.

  • Drug Conviction:

    If convicted of certain drug offenses while receiving federal student aid, a student may lose federal student aid eligibility. Students filling out the FAFSA are asked if they have received a drug conviction, and if they answer “yes,” they must complete a worksheet to determine whether their student aid is suspended. If federal student aid is suspended due to a drug conviction, qualified students may regain eligibility by attended an approved rehabilitation program or passing two unannounced drug tests.

  • Incarceration:

    Inmates at state and federal prisons may not receive federal student loans or Pell Grants. Inmates at other detention facilities may receive Pell Grants, but not other federal student loans. Upon release, eligibility restrictions are removed for most parolees, unless the student was incarcerated for drug offenses, or is subject to an involuntary civil commitment for a sexual offense. Otherwise, students who are on probation, on parole, or living in a halfway house most likely qualify for federal student aid.

See Online Degree Programs at Schools that Offer Financial Aid

Ask the Experts: FAFSA Advice for Online Students

When researching financial aid for online college, you'll find the best advice from those who actually worked in financial aid, helping hundreds of students each year reconcile their financial needs and earn their online degrees. These veterans have seen it all and share key information about aid and FAFSA.

Robert Friedman University Director of Student Finance Yeshiva University New York, NY

The person in the household who communicates with the accountant should file FAFSA. If another person tries to file it, there may be pain and suffering involved!

Don’t wait — estimate. Estimate your income and file the FAFSA, instead of waiting until you file your tax return. If you wait, you risk missing the school’s deadline. In addition, institutional aid is generally awarded on a first-come, first-served basis.

If you’re filing online, use the “help” button. A detailed explanation will pop up and should answer your questions.

If the answer to a question is $0, put "$0." Don’t stress if you have nothing to report to a specific question. Put "$0" and move on.

Don’t include the value of the primary residence in real estate value.

Don’t include the value of retirement accounts.

If you’re a parent, get the student involved! This is a learning process for them, too, and for many is the first step on a journey of managing their own personal finances.

Scott Seibring Director of Financial Aid Illinois Wesleyan University Bloomington, IL

Have as much documentation on hand as possible before you begin filling out the FAFSA.

Read the instructions carefully. Most mistakes can be avoided by reading and following the instructions.

If you’re estimating your taxes, but your income hasn’t changed much, it may be best to use last year’s tax return until you file the current year’s. People who estimate frequently use the amount of taxes withheld. This can result in an underestimated amount if you pay additional taxes at the time of filing, or an overestimated amount if you get a refund.

Do not use the tax withholding amount or the self-employment tax amount when estimating. Neither of those is cited in the FAFSA instructions as an amount to use for taxes paid.

It is important to note carefully what is excluded as what is included in the asset question. Applicants frequently list home equity and retirement funds, such as 401Ks and IRAs, even though the FAFSA instructions say to exclude place of primary residence and any qualified retirement funds.

Payments to tax deferred pensions are frequently not answered correctly. This amount is on the W-2, but people frequently omit the answer on the FAFSA, because it is not on the tax return.

Connie Brown Associate Director Student Financial Aid and Scholarships Texas Tech University Lubbock, TX

Rest assured that while the FAFSA application takes some time, it is not difficult to complete.

Since financial aid in most institutions is limited, getting the FAFSA submitted as early as possible is important. Find out what the priority application date is for your college, and don’t miss the deadline.

Submitting the FAFSA online is the fastest way to get the information processed.

Be sure you are submitting the correct FAFSA. 12-13 and 13-14 are both currently available at www.fafsa.ed.gov. A student beginning his/her college study in the fall of 2013 will submit the 2013-2014 FAFSA.

Unless a student is 24 years old or meets some other specific criteria, the student is likely a dependent and will need to supply parental information on the FAFSA.

Use the IRS Data Retrieval Tool to access the IRS tax return information needed to complete the FAFSA. If you are eligible to use the tool it is the easiest way to provide your tax data; it’s the best way of ensuring that your FAFSA has accurate tax information, and you won’t have to provide copies of the tax return transcript to your college.

Contact your school’s financial aid office after your FAFSA is processed to ensure they’ve received it and to ask whether they need any additional documents to complete your financial aid file.

Linda Parker Financial Aid Director Union College Schenectady, NY

Make sure you understand and meet the requirements, which vary between schools.

Early decision applicants must meet earlier financial aid deadlines.

If you estimate your tax information, make the estimate as accurate as possible so that schools can make awards that don’t require dramatic changes upon verification of the final tax data.

Every incoming freshman has access to $5,500 in unsubsidized Stafford loans, an amount that increases every school year. Whether families need students to shoulder some college costs or simply want children to make a personal investment in their educations, access to loans can be helpful. Remember, students don’t have to accept loans. But the money is there if needed.

Don’t answer “No” to the question: Are you planning to apply for need-based financial aid? Checking “No” directs students’ applications away from schools’ financial aid offices, taking them out of the running for awards. Families should check “Yes” on this question to ensure the student’s application reaches a school’s admissions and financial aid offices.

If you have special challenges that aren’t reflected on the applications — say a parental job loss, or major medical expenses — write a letter to the school’s financial aid office. Such factors can be considered when awarding aid.

Do everything online. Union has access to FAFSA information within 10 days of a student’s submission. It’s the most efficient way to conduct all financial aid business.

All colleges and universities are required to offer a net price calculator online, which enables you to estimate the real price of attendance. These estimates can contextualize the perceived “sticker shock” of higher-priced schools, which might actually offer more aid. Families can use the calculators years before students apply, which may help influence choices.

Proofread all forms. Some parents who fill out applications for students accidentally enter their own names, causing major confusion.

Stay away from “services” that charge to fill out FAFSA forms (some up to $500). There is so much free help available, and families can also call schools’ financial aid offices, the College Board, and federal processors with questions.

Above all, stay calm and follow directions. FAFSA usually only takes about an hour to complete. Updates can be made at anytime.

Bob Walker Financial Aid Director Creighton University Omaha, NE

Be sure to use the student’s full legal name and Social Security number. The FAFSA is compared against SSA records and the two must match.

Dependent FAFSA filers should not include parents in the number of people in college, even if one or both is attending a post-secondary school.

If at all possible, use the data retrieval system provided by the Department of Education and IRS, as this will speed up FAFSA processing once the information is received by the school(s).

Respond promptly to all requests for additional information from schools in order to not delay your financial aid award.

Whenever questions come up, contact your school for help, guidance and assistance. That’s what they’re there for.

Heather McDonnell Associate Dean of Financial Aid Sarah Lawrence College Bronxville, NY

Take your time filling out the form. Speed causes mistakes.

When the form asks for your Social Security number, it’s asking for the student’s number. Many parents put down their Social Security numbers, which is a fatal mistake and very difficult to undo.

Pay attention to the deadlines. Any deadline in the college process is important, because it means there’s a limitation.

When parents are divorced, figuring out whose information to include can be tricky. For FAFSA purposes, the parent with whom the student resides is considered the custodial parent. If this custodial parent is remarried, the step-parent information must also be included in the FAFSA. Schools don’t assume step-parents will contribute to the student’s education, but they do feel step-parents may be able to take over more of the household expenses, relieving the custodial parent from some of that responsibility.

Don’t call schools with questions before the FAFSA data has arrived. The most effective conversations occur when the financial aid officer has your information on hand.

Everyone should fill out the FAFSA. Only your school can evaluate your financial aid situation, and the only way for the schools to do so is to review your FAFSA.

If you make an egregious mistake, the college will likely see it and help you correct the information. They, too, have a vested interest in ensuring the information is correct.

Types of Financial Aid

You might be surprised to learn that more than $241 billion in financial aid was available to college students in the 2017-18 academic year. While the primary source is the federal government, aid also comes from the colleges themselves, state governments, and scholarships from private companies, nonprofits and religious organizations. According to The College Board, each source contributed as follows to that $241 billion:

Total Student Aid, 2017-18

Aid Type Total Amount (In Billions)
Federal Aid $154
State Government $11
Private $16
Institutional $60

Source: The College Board

Federal Aid

Federal Perkins Loans are fixed-rate, low-interest loans given to students with the greatest financial need. They are federally funded, but administered by your school. Approximately 1,700 institutions participate in the Perkins Loan program. Graduates have up to 10 years to repay these loans, but those working in certain fields (teaching, military, healthcare) or with volunteer organizations (Peace Corps, AmeriCorps) may qualify for full or partial loan forgiveness.

Federal Direct Loans (also known as Stafford Loans) feature fixed interest rates and come in two forms: subsidized and unsubsidized.

  • Direct subsidized loans depend on financial need and feature low, fixed interest rates, which generally fluctuate between 3.5% and 5% for undergraduate study. You are not responsible for interest payments while in school.
  • Direct unsubsidized loans do not depend on financial need. Their interest rates compare to those of subsidized loans for undergraduate education, but can run between 5% and 6.5% for graduate programs. You’re responsible for paying all interest during the life of the loan, and interest starts accruing as soon as you receive the money.

Federal Parent PLUS Loans allow parents to borrow money for their child’s college education. These loans feature interest rates ranging from 6%-7.5%, contingent upon the borrower’s credit history. The ED provides Parent PLUS Loans to eligible borrowers through schools participating in the federal direct loan program. The loan amount cannot exceed the cost of attendance, including other financial aid.

State Financial Aid

Thirty-eight individual states also administer student loan programs, many with terms similar to those of federal direct loans. Most offer interest rates below those charged by private lenders. Programs vary in size and scope, so check with your state’s department of education for specifics. State loans are generally unsubsidized, so count on paying interest while you’re still in school.

Private Student Loans

Private lenders, such as banks, private foundations, credit unions, schools, and organizations, also offer credit-based student loans. These loans often have higher interest rates (both fixed and variable) than federal or state loans. They may also charge fees, and are not subsidized. Private loans don’t offer many options to reduce or postpone payments. Consider a private loan only after you’ve maxed out your federal and state loan options.

In October 2012, the Consumer Financial Protection Bureau reported that $150 billion of the more than $1 trillion dollars Americans owe in student loan debt comes from private loans. After tracking student loan complaints, the bureau found that 87% of these loans come from seven large lenders, with Sallie Mae generating 46% of complaints. For this reason, student borrowers should shop around, and may want to consider smaller lenders like community banks and credit unions.

When comparing private loans, look at the Annual Percentage Rate (APR). Unlike the interest rate, the APR takes into account all loan costs, such as finance charges and fees. It also considers deferment periods and repayment terms, all of which can significantly impact the loan’s cost. Review the lender’s reputation for customer service, plus any borrower benefits, such as discounts for automated debit payments.

College- and University-Sponsored Aid

Many colleges award merit scholarships based on students' academic promise, independent of financial need. Schools generally award these scholarships as incentives for students to attend their institution. The more your academic profile exceeds the school’s average profile, the higher your likelihood of obtaining a merit scholarship from that school. On the flip side, the more selective the school, the fewer merit dollars available, with zero merit dollars awarded at Ivy League institutions.

All Ivy League schools and many top-tier institutions (including highly rated online colleges) generously award grants and scholarships to students who demonstrate need. At Yale University, for example, accepted students whose family income totals less than $65,000 are not expected to contribute anything to the cost of the student’s education. Princeton University upholds a no-loan policy, through which it commits to meeting students' financial needs through grants, scholarships, and work-study funds, so students with financial need can graduate debt-free.

Some colleges also offer loans to students in addition to what’s available through the federal loan programs. If your college offers this option, make sure to compare the terms and interest rates with those of other third-party lenders (banks and credit unions included) to ensure you’re getting the best deal.

Institutional Aid From Online Colleges

Some online colleges offer their own forms of financial assistance to students. The University of Phoenix, for example, offers a variety of scholarships to prospective students. DeVry University also provides various scholarships and grants to students who meet certain requirements.

Online schools may also offer payment options to alleviate the stress of college costs. The University of Phoenix features a cash plan program, which gives students the option to pay for their education one course at a time, and a tuition deferral plan for students receiving tuition reimbursement benefits from their employers. Under this plan, the University of Phoenix allows a 60-day grace period for students to receive employer reimbursements before making payments.

Grant

Also called “gift aid,” this type of federal aid does not require repayment. Grants are typically need-based, meaning they serve students whose families do not have sufficient financial resources to cover college expenses. Need is determined by a federal government-established formula, which analyzes a family’s income and assets to identify its EFC, or the amount the family is expected to contribute to the cost of college. The most common types of federal grants include:

Pell Grants

Awarded primarily to undergraduate students, though in some cases they may cater to students enrolled in post-baccalaureate teacher certification programs. The maximum award for the 2017-18 academic year reached $5,920, but amounts change every year. These grants are based on a family’s financial need, the college's cost of attendance, and the student's enrollment status.

Federal Supplemental Educational Opportunity Grants

Also referred to as “campus-based” aid, participating institutions administer this grant through their financial aid offices.

Teacher Education Assistance for College and Higher Education Grants

These grants serve students pursuing careers in teaching. Recipients plan to teach a high-need subject; at an elementary school, secondary school, or educational service agency serving low-income students; and teach for at least four of the eight years following graduation. Students who fail to meet these conditions must repay their grant money as a direct unsubsidized loan.

Iraq and Afghanistan Service Grants

This grant funds students whose parents or guardians served as members 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.

Private Scholarships

Companies, nonprofit organizations, clubs, and religious entities award $7.4 billion in college scholarships, which vary widely in criteria and requirements. These awards include:

  • A memorial scholarship serving students from a specific high school who are pursuing nursing careers.
  • The Gates Millennium Scholars grant, funded by the Bill & Melinda Gates Foundation to assist African-American, American-Indian/Alaska-Native, Asian-Pacific-Islander-American, and Hispanic-American students.
  • Ford Motor Company’s “Ford Blue Oval” scholarship, which assists up to 16 high school students from southeastern Michigan.

It takes a bit of research to find appropriate scholarship matches for your interests, talents, and qualifications. Consider starting your search at https://www.fastweb.com.

The Breakdown of Undergraduate Student Financial Aid Sources

Aid Type Percentage of Undergraduate Financial Aid
Federal Loans 39%
Institutional Grants 25%
Federal Pell Grants 12%
Federal Education Tax Credits and Deductions 7%
Veterans and Military Grants 5%
Private and Employer Grants 7%
State Grants 5%
Federal Work-Study and FSEOG 0.7%

Source: College Board

The Importance of Accreditation

Accreditation indicates that a college or university meets the quality standards of an independent educational agency. Criteria for accreditation include a clear mission statement, rigorous academics, qualified professors, sufficient technological and student resources, and more. Agencies with the authority to vet colleges and confer accreditation must hold endorsement from the U.S. Department of Education and be listed on the federal register. Six agencies hold the authority to provide regional accreditation. Agencies also exist to provide national accreditation and programmatic accreditation, which focuses on a specific industry or subject area, such as engineering or business. For an in-depth breakdown of the accreditation process, including criteria and key players, please read through our complete guide to college accreditation.

When it comes to online colleges, accreditation is key. From nonprofit state universities featuring limited online offerings to for-profit schools with a full collection of distance learning programs and courses, accreditation denotes academic merit and qualifies students to receive federal financial aid. Moreover, credits from accredited institutions transfer more easily to other accredited institutions, should you choose to switch schools. All prospective online students should make sure their potential schools hold the proper accreditation. For a list of institutions that fit the bill, review our ranking of the top online colleges in the U.S.

Financial Aid Dictionary

The world of financial aid seems at times to speak its own language. We’ve compiled a glossary of terms to help you as you navigate your funding options:

  • Academic Year

    The time during which school is in session, typically from September through May.

  • Accreditation

    Accreditation ensures a college or school meets certain minimum quality academic standards, as defined by an accrediting body recognized by the U.S. Department of Education. Only accredited schools can participate in federal student aid programs.

  • Assets

    In the FAFSA, "assets" refers to income, checking and savings accounts, stocks, bonds, trusts, material goods, and investment or vacation real estate. Do not include your primary residence or retirement accounts, such as IRAs and 401Ks, under FAFSA assets.

  • Award Letter

    An official notice from a school’s financial aid office detailing all aid awarded to a particular student. If you decide to attend that school, you must return a signed copy of your award letter indicating whether you accept or decline each type of aid.

  • Award Year

    The school year for which financial aid is requested or awarded.

  • Base Year

    The tax year prior to the award year for which you’re requesting financial aid.

  • Cost of Attendance

    The total cost of attending a particular school, including tuition, fees, room and board, books and supplies, transportation, loan fees, childcare, and personal expenses. COA for a specific school may differ depending on whether the student lives on- or off-campus, is married or unmarried, or resides in- or out-of-state. The COA allows students to budget college expenses accurately.

  • CSS Profile

    Some private colleges and universities use the College Scholarship Service Profile to determine whether a student qualifies for nonfederal loans.

  • Department of Education

    The federal agency that establishes financial aid programs and processes the FAFSA form.

  • Deferment

    A temporary period, common in federal loan programs, during which a borrower is not required to make loan payments. In the case of deferred student loans, such as Stafford and Perkins loans, the student begins loan payments after graduation.

  • Custodial Parent

    When parents are divorced or separated, the parent with whom the student lived the most over the past year is considered the custodial parent, and the parent who fills out the FAFSA.

  • Dependent

    A student is considered a dependent if he lives with his parents and depends on them for more than half of his living expenses.

  • Direct Loan

    A federal, low-interest loan administered by the college or university.

  • Disbursement

    The time during which loan funds are administered to the college or student.

  • Expected Family Contribution

    The contribution the student and/or family are expected to make toward education expenses. This calculation depends on information filed in the FAFSA. Schools use the EFC to calculate students' eligibility for institutional financial aid.

  • FAFSA

    A free form you submit to the Office of Federal Student Aid at the Department of Education. It collects information about student and family finances, which the FSA uses to determine students' eligibility for financial aid.

  • Federal Pell Grant

    Federal grants awarded to students with significant financial need. Students do not need to repay grants.

  • Federal Student Aid Office

    The entity within the Department of Education that processes the FAFSA.

  • Financial Aid Offer

    The total amount of aid a school offers you, sometimes called a financial aid package.

  • Financial Aid Office

    The office at a college or university responsible for making financial aid award decisions and communicating with and assisting students and families.

  • Financial Aid Package

    The total amount of aid a school offers each student. Sometimes called a financial aid award.

  • Financial Need

    The difference between a school’s cost of attendance and the family’s expected contribution. It’s how much each student needs in financial aid dollars to afford a specific school.

  • Financial Aid

    Money awarded to help a student pay for the cost of higher education. Financial aid comes in many forms, including loans, grants, scholarships, and work-study programs.

  • Financial Aid Administrator

    Also called financial aid officers, financial aid advisers, and financial aid counselors, these professionals work with families to award and administer financial aid.

  • Fixed Interest Rate

    A loan interest rate that remains the same throughout the life of the loan.

  • Gift Aid

    Financial aid, such as grants and scholarships, which the student does not need to repay.

  • Grace Period

    The time period, usually 6-9 months, between a student’s graduation and when he or she must begin repaying student loans.

  • Grant

    A type of financial aid award that does not require repayment.

  • Independent Student

    A student who meets any of the following criteria:

    • 24 years or older
    • A graduate or professional student
    • Married
    • Has legal dependents
    • A veteran of the U.S. Armed Forces
    • An orphan or ward of the court
  • Institutional Methodology

    A formula colleges use to determine how to allocate a school’s financial aid funds (rather than federal funds), based on need.

  • Interest Rate

    The cost of borrowing money. Student loan interest rates are generally lower than standard loan rates.

  • Lender

    The bank or lending institution from which you take out a loan.

  • Loan

    A type of financial aid a student must promise to repay with interest.

  • Merit-Based Financial Aid

    Financial aid, usually scholarships, that is not calculated based on need, but rather on academic, athletic, or artistic merit.

  • Need Analysis

    The process of determining a student’s financial need, which typically begins when the FAFSA is filed.

  • Need-Based Financial Aid

    Aid, such as most federal aid, that is awarded based on financial need.

  • Need-Blind Admissions:

    An admissions process used by most schools that does not consider the student’s ability to pay. The objective is to eliminate admissions decisions based on whether a student needs financial aid or not.

  • Net Cost

    The difference between a school’s cost of attendance and the financial aid package. The net cost includes all financial aid, such as loans. The out-of-pocket cost, by contrast, includes only need-based aid. Families should evaluate financial aid awards using the out-of-pocket cost, not net cost, of attending that institution.

  • Parent Contribution

    Unless you’re an independent student, the federal government expects your family to contribute to the cost of your education. The PC estimate depends on parental income, assets, and other criteria.

  • Out-of-Pocket Cost

    The difference between a school’s cost of attendance and the need-based financial aid package. It indicates the amount the family needs to pay out of savings, income, and loans. Out-of-pocket costs can vary greatly between colleges, depending on how much aid students obtain through grants and loans. Families should evaluate financial aid awards using the out-of-pocket cost of attending each institution.

  • Parent PLUS Loan

    A federally guaranteed loan program that lends credit-worthy parents funds to pay for educational expenses. These loans feature a fixed 7.9% interest rate.

  • Pell Grant

    A form of federal financial aid available mostly to undergraduate students, which does not have to be repaid. Grant amounts depend on student need, school costs, and other criteria, up to a maximum of $5,500 per academic year.

  • Selective Service Registration

    Males ages 18-25 must register for the military draft to qualify for federal financial aid.

  • Scholarship

    A form of financial aid that does not have to be repaid. Scholarships are often restricted to students in specific courses of study or with academic, athletic, or artistic talent. Schools, nonprofit organizations, and private entities award them.

  • Stafford Loan

    A federal, fixed-rate loan available to undergraduate and graduate students attending college at least half-time. These loans represent one of the lowest-cost methods of paying for school.

  • Student Aid Report

    The official summary of your FAFSA information, indicating your eligibility for financial aid. The FSA sends the SAR via email a few days after you complete the FAFSA®, or by mail within 10 days of filing.

  • Student Contribution

    The amount of money the federal government expects the student to contribute to their cost of education. This amount is included in the EFC and may encompass a portion of student savings and student work earnings.

  • Unmet Need

    Schools can’t always compensate each student for the difference between their ability to pay and the cost of attending the institution. When schools award less financial aid than the student needs, the gap is called “unmet need.”

  • Variable Interest Rate

    A loan rate that can fluctuate during the life of the loan, but usually only up to a set amount within a certain period of time.

  • Work Study

    A federal program that provides part-time jobs for students, allowing them to earn money to pay education expenses.