Whether you attend college online or on campus, you have aid options to help pay for the cost of education. Learn more about how grants and loans can work for you.
Investing in higher education and earning a college degree is a costly prospect for most students in America today. As college costs have increased in recent years, financial aid has become a necessity for most undergraduate and graduate students. As of 2014, 85% of first-time, full-time degree-seeking undergrads at four-year postsecondary institutions and 78% of undergraduates at two-year schools received some form of financial aid, reaching an all-time high since the debut of the GI Bill® after WWII. While statistics vary among online schools with financial aid, one fact remains clear: the need for financial assistance continues to rise at all types of colleges and universities in the U.S. From online colleges that accept FAFSA to online colleges that give refund checks, there is an array of financial aid sources suitable for today’s diverse student enrollment, including grants and loans.
Grants are similar to scholarships in that they are “free money” given by an organization or college to help students pay for school. However, there are some differences. Grants are usually provided by governmental agencies or non-profit organizations. A student may receive his or her grant money in three different ways: by check or direct deposit, credited to a student’s account at his or her college, or a combination of the two. All government grant money goes to the college, which then passes it on to the student.
While scholarships are often merit-based, many grants are awarded on the stipulation that the recipient will pursue a rigorous course of study or obtain a degree in an in-demand field. In addition, because many grants are need-based, be prepared to put in some legwork for the grant, as applying for them can be a long and involved process. Applying for financial aid for online college may require essays and/or letters of recommendation from teachers or community members. Those based on need, such as Pell grants, typically ask for statements regarding the applicant’s family income. In some cases, grant money is exchanged for professional service following graduation.
Those who need additional financial aid for online college can apply for student loans, which involves money borrowed from the government or private financial institutions. Each lender sets their own guidelines for determining to whom they should lend money and how much they should offer. If you’re having trouble being approved for a loan, consider getting a cosigner, such as a parent or guardian, spouse, relative, or family friend. A cosigner assumes joint responsibility for your loan, which can help you get approved by a lender. In some cases, lenders allow parents to take out loans on behalf of their students, a common option for many students struggling with getting approval.
Unlike scholarships and grants, loans consist of borrowed money and must eventually be paid back to the lender. This means that loans typically accumulate interest over time in addition to the borrowed amount, although interest rates will vary with each loan. Some are subsidized, which means that the student will not be charged interest while he or she is attending school. Other unsubsidized loans may accumulate interest regardless of the student’s academic status. Students who have borrowed from the federal government and work as teachers or public service officials, or who have endured a major, life-changing event, may be eligible to have their loans forgiven, canceled, or discharged.
Why the FAFSA is Important
Whether exploring traditional or online colleges that accept financial aid, the process often begins with completion and submission of the Free Application for Federal Student Aid (FAFSA). Financial need, as determined by the FAFSA, is crucial to your eligibility for federal grants and loans, as well as a variety of college-based programs, including work study and institutional scholarships. Even supplemental aid, intended for application after primary sources of financial aid have been disbursed, is typically determined according to the student’s FAFSA status. Though many of the basic requirements for on-campus and online students are the same, online colleges that accept FAFSA may be particularly interested in enrollment status; some programs requirefull time status in order to be eligible for online financial aid, for example. Other online schools that accept FAFSA may even extend federal work study opportunities to online students, allowing them employment in an approved, off-campus location near their residence in exchange for funding a portion of their education costs.
How to Make the Most of Your Financial Aid Refund
For some students, financial aid for online college not only pays for tuition and expenses, it also provides a refund of “leftover” funds. Though refunds are typically addressed individually by each school, there is some universal wisdom in handling refunded money responsibly. After all, while the offer of a spending spree is tempting, leftover funds are not “free;” they come subject to the same terms as the rest of the borrowed money — with interest. Once online colleges that accept FAFSA have disbursed money for tuition, leftover financial aid for online college should be applied to expenses like room and board, books, transportation, or set aside for a study abroad or internship experience. Some students may choose to simply deposit their refund directly into an account reserved for paying back the loan and/or interest in as timely a manner as possible.
At a Glance: Grants vs. Loans
Terms to describe types of financial aid for online college are often used interchangeably, though there are some key differences between grants and loans that make each of them unique. Consult our quick guide below for an at-a-glance breakdown of the basics:
- …do not require repayment.
- …are typically provided by governmental agencies or nonprofit organizations.
- …mostly base themselves on financial need, as determined by the FAFSA and other factors.
- …might require study in a specific field or professional service following graduation.
- …require repayment, typically with interest.
- …are typically provided by the government or private financial lending institutions.
- …can incorporate a cosigner if the student alone cannot get approved.
- …may offer a variety of options, including subsidized or unsubsidized repayment.
* GI Bill® is a registered trademark of the U.S. Department of Veterans Affairs (VA). More information about education benefits offered by VA is available at the official U.S. government website at http://www.benefits.va.gov/gibill.