College Preparation Guide

3Finding and Applying for the Right Financial Aid

In Why Students Choose an Online Education, we discussed how earning your undergraduate degree online offers many advantages, not the least of which is flexibility. It turns out online degree programs are also often cheaper than traditional universities. Still, no matter where you’ve decided to apply, obtaining a four-year degree will be costly. Sound financial planning and a grasp of available aid options is crucial, lest you end up with a mountain of debt. Read on for an overview of the financial aid process and how best to use it to your advantage.

Costs of a Four-Year Degree

To the uninitiated, the cost of a year in school may seem to be what the school charges for tuition; sometimes tuition and housing are quoted as one fee, depending on the school. Attending an online college doesn’t require you to pay for a dormitory or meal plan, but there are still many other expenses that are not part of the tuition price quote. Books and classroom supplies easily amount to hundreds of dollars per semester; in 2012 the average annual cost for student supplies at public colleges was roughly $1,200. And unless you’re living at home, you need to factor living expenses, meals, and transportation costs into your budget.

To get a more realistic view of what each school will cost, estimate the net price of attendance. To calculate this number, add all extraneous costs to the price of tuition, then subtract the amount of financial aid you receive in the form of grants, loans or scholarships. Most schools have a net price calculation tool on their website to help you make an educated estimate of the true cost.

The net price of attendance is generally lower than the stated tuition. For example, average tuition for an in-state public college is $8,660 per year, but most families actually spend an average of $2,910. The significant difference in cost is made up by a combination of scholarships, loans, and grants.

What Are My Financial Aid Options?


Grants are funds that act as a gift, never have to be repaid, and are nearly always need-based. While grant funding may be provided through colleges and universities, a report from 2012 found that 44% of grant gift funding for all U.S. students was awarded by the federal government.

Eligibility is established by the financial information you provide when submitting the Free Application for Federal Student Aid (FAFSA). You must file for any government funding at any accredited school. Your financial needs are evaluated against your school’s costs and whether you are a part-time or full-time student. As long as your online school is properly accredited, you will be automatically considered for grant funds when the FAFSA is filed.

The most common grant is the Pell Grant, which can amount to a significant chunk of your net cost. The maximum grant for 2012 was $5,550 per student. Students who have dire financial needs may be eligible for a Federal Supplemental Educational Opportunity Grant (FSEOG), which is awarded alongside a Pell Grant and can award up to $4,000 per year. While the funding for FSEOGs is federal, it is administered by individual schools and not all schools participate. Check with your potential school’s financial aid office to determine whether FSEOGs are an option.

Future educators are also eligible for the Teacher Education Assistance for College and Higher Education (TEACH) Grant, which awards up to $3,760 per year. Aspiring teachers who receive this grant must commit to four academic years of service in positions schools are lacking in the most. This means teaching English, foreign languages, math, reading, or science to children of low-income families; special education may also be included. These years of teaching service must be completed within eight years of graduation.


The federal government recognizes that grant gifts are not enough to cover college expenses, and offers loan options to students and families. Federal student loans may be in the form of direct loans or loans for parents of students. Some are need-based and some are not.

Direct subsidized loans are based on financial need, and eligibility is determined using information on the FAFSA. The government subsidizes, or pays for, the interest that accrues on the loan as long as you are a full-time student. Direct unsubsidized loans have no need-based requirement; any amount may be borrowed, and interest accrues while you are in school. Your school determines how much funding you may borrow in both cases, based on your net cost to attend.

Perkins loans, administered by the Federal Perkins Loan Program, are available to students with strong financial need, and offered at very low interest rates. Your school must choose to participate in the Perkins program, and administer the loan according to the amount of funding available. After graduation, you will repay the school for a Perkins loan.

PLUS loans are also available to graduate students or to parents of dependent undergraduates, and carry no need requirement. PLUS loans are federally funded and  administered at a fixed, competitive interest rate. Borrowers must have good credit history to qualify, and the amount is limited to your cost of attendance that has not been covered by any other financial aid.

Colleges often offer private loans, and students are always able to consider other traditional sources of loans, like credit unions and banks. However, these resources are generally more costly and may not carry the deferment privilege that federal student loans do.


Unlike grants and student loans, scholarships are awarded on a merit basis, meaning that students who possess a specified quality are awarded funds that do not have to be repaid. This may mean academic or sports performance, or could be tied to a student’s ethnicity, religion, or even a parent’s workplace. Public and private organizations all over the country offer scholarships to students who apply for them. Also unlike grants and loans, consideration for scholarships is not necessarily automatic once you’ve filed the FAFSA; there is often a separate application process.

School-based scholarships are most commonly offered to incoming students, and generally all applicants are considered. The scholarship will usually carry requirements for students if funds are to be awarded over the course of four years. For example, nearly all colleges offer scholarships to students who perform well academically. If you are granted an academic scholarship, you will have to maintain a minimum GPA and meet other stipulations . Sports scholarships may also carry a minimum grade performance requirement, or departmental scholarships may require you to meet specific criteria within your major.

Many states have scholarship programs for students attending schools in their home state, usually based on academic performance. Other scholarships may be external, such as the academic scholarships sponsored by large corporate entities like Coca-Cola, Intel, the Seimens Foundation, and the Bill & Linda Gates Foundation. Other external scholarships are also offered by entities unrelated to a school or the government. Civic organizations, religious groups, and professional associations are just some of the granting bodies that have designated college scholarship funds.

External scholarships require some independent research to discover, and students must usually apply for them individually. While some of these scholarships will award relatively small amounts, others may provide a significant percentage of the student’s tuition. Making the effort to comb through scholarship databases and research local opportunities can pay off; in many cases, there is little competition for these funds because other students have not made the effort to find them.

Look through our comprehensive scholarship resource for more information.

How to Apply

Grants and Loans

Completing the FAFSA is an important step in the financial aid quest; every student who files becomes automatically eligible for all federal grant and loan programs. Many colleges also pull data from the FAFSA and award need-based funds based on that information. Parents may file the FAFSA for their dependent students, or students may collect their parents’ tax returns and file themselves.

Most schools require the FAFSA to be submitted by late February or early March, but students can submit them as early as Jan. 1 of the year they plan to attend college. Most of the documentation you need to complete the FAFSA is identical to the materials required to prepare a tax return, so some families opt to wait until a tax return has been filed. However, you may file the FAFSA beforehand with estimated figures, as long as you return after your taxes are filed to update the information.

Before you begin your application, gather the following materials:

  • Social security numbers or alien registration numbers
  • Birth dates
  • Driver’s license number
  • Completed tax return, or all W-2s and other legal income statements
  • Checking and savings bank statements
  • Untaxed income records
  • Investment records, including real estate
  • Business records if applicable

You will need a federal Personal Identification Number (PIN) to complete the FAFSA, which may be obtained online.

After you have obtained a PIN and have documentation at hand, you may file the FAFSA online. You may also download a PDF version. If you are filing before your tax return has been submitted, estimate your adjusted gross income (AGI) as accurately as possible. Answer every question. If you have already filed a tax return, you may import most of your information using the IRS Data Retrieval tool.

You may specify which colleges receive the information on your FAFSA; up to 10 colleges can be identified by five-digit codes provided for every accredited U.S. school. By January of your senior year you should already have some specific colleges in mind, but if you need to add a new school later you may do so.

After completing the FAFSA, use your PIN to electronically sign the form. Within a few weeks you will receive an award letter that details the financial aid you may receive. It’s important to remember this is only an estimate, as each school will prepare an individual financial aid package for each new student.


Most schools consider every applicant for the scholarships they award. Before you apply for external scholarships, exercise due diligence and research your options thoroughly; if you don’t meet the eligibility requirements, it’s a waste of time to apply. Once you have identified the external scholarships you’re interested in, carefully note the due dates and application requirements for each. Some entities may ask for a short essay or your high school transcripts, for example, while others will only need you to fill out an application. Carefully follow any instructions you are given, ensure that you meet your due dates, and make copies of each application. It’s also good practice to mail applications with tracking capability and request return receipts when submitting information online.

Financial Aid Timeline

While deadlines will vary between individual schools, future college students should begin to research financial aid opportunities during their junior year of high school. This sequential process should culminate in you attending the school of your choice with the best available financial aid package.

Junior year

  1. Take the PSAT in October; this automatically enters you into the National Merit Scholarship competition
  2. Consider where your interests lie and begin identifying possible external scholarship sources
  3. Begin the process of narrowing down your choice in schools, documenting all of the information you gather about each one

Senior year

  1. Create a spreadsheet or calendar with a visual display of each potential school’s deadlines and admissions requirements
  2. Create a spreadsheet or calendar that breaks down external scholarship deadlines; some of these can be quite early due to internal budgeting restrictions, even as early as the fall of your senior year
  3. Begin external scholarship applications
  4. Submit college applications
  5. File the FAFSA
  6. Continue pursuing external scholarships
  7. Compare award packages you are offered and select your school by the first week of May
  8. Apply for loans that are not part of your award package

Helpful Resources

  • College Board: Deadlines, links to sources of financial aid, loan information and a scholarship database are all found in this comprehensive website.
  • This Net Price Calculator is an invaluable tool in helping you estimate your end costs to attend any colleges you are considering.
  • This federal government-sponsored resource can help you determine eligibility for all types of federal financial aid; instructions for applying for these benefits are also included.
  • Sponsored by the U.S. Dept. of Education, this website is packed with articles and links to any resource a future college student could need: how to choose a major or a school, financial aid details, eligibility standards, application instructions, and loan management. The D.O.E. also manages a Net Price Calculator.
  • Mapping Your Future is a free resource that covers career information and financial aid for undergraduate and graduate students. Eligibility for various types of funding, a scholarship search tool, and an explanation of work-study programs are among the numerous articles and links listed here.
  • Explore degree programs, estimate your odds of acceptance at any school, read student profiles, and search for scholarships on College Data.
  • In the College Navigator database compiled by the U.S. Dept. of Education, the National Center for Education Statistics and the Institute of Education Sciences, this powerful search tool provides detailed information about every educational institution in the U.S.
  • This lengthy article from CNN summarizes financial aid options for today’s college student and provides funding strategies for future students and their families.
  • On this site targeted toward students and parents, the National Association of Student Financial Aid Administrators offers detailed explanations of each type of financial aid, state-by-state information, tax tips for savings, and other ways to reduce tuition.
  • The journey towards choosing a college is time-consuming and requires commitment from students and parents, especially when it comes to maximizing financial aid options. Starting early in the process, performing careful research and understanding one’s options does pay off in the long run, however.
  • Now that we’ve covered the most important considerations for negotiating your financial aid package, you’re ready to move on to Part 4 of our series, Starting Your Online Classes for the First Time. This section will discuss some strategies for selecting your first batch of courses, as well as some common technical requirements for today’s e-learners.