An Overview of Grants, Scholarships and Student Loans

There are several different options when planning how to fund your college education, most of which can be used for online degrees as well as traditional campus degree programs.

Combining a variety of grants, scholarships and loans is a highly effective way to pay for tuition and books, and even to offset the cost of decreasing your work hours for mature students returning to school. In fact, with most online degree programs, it is possible to work full-time and still obtain your degree, resulting in less of a financial burden than a full-time on-campus student. Online education can decrease the amount of money you may need to repay upon graduation, and allows you to continue to work and build seniority and experience as you advance your degree.

There are three main types of funding for online college programs: scholarships, grants, and student loans. The following is a brief description of each, along with any special considerations.

Scholarships

Scholarships are unique among college funding options since they typically have no strings attached and do not ever have to be repaid. Essentially, they are free money. Scholarships can be awarded based on financial need, merit (both “need” and “merit” will be covered in a future lesson), area of study, specific talent (sports, music, academic), ethnicity, gender, geographic location, or a combination of factors. Often, an essay or detailed application is required to provide information to the group offering the scholarship.

Scholarships are typically given for one year; however some may offer funding for different years of a program of study. Scholarships are offered most often for undergraduate degrees but can also be offered for graduate level programs. They can be from a private individual, offered by a group, company or organization, or offered through a school or program.

According to a recent report by scholarship fund Sallie Mae, approximately 23% of college costs are paid for by scholarships and grants for the average family. In addition almost 43% of all families apply for and receive some type of scholarship or grant to help defer the cost of secondary education.

Grants

Grants are similar to scholarships in that they don’t require repayment. However, most grants require that a student meet specific criteria to continue to receive the grant money. This can include a service requirement during or after the term of the grant to avoid having to repay. Grants may also be awarded to graduate level students to help with research projects. Sometimes the terms scholarships and grants are used to mean the same thing.

Other grants, such as Pell Grants, are based solely on the financial needs of the student, usually an undergraduate without an existing two or four year degree.

It is important to complete a FAFSA (Free Application for Federal Student Aid) to determine your eligibility for a Pell Grant as well as other grants and scholarships. The FAFSA will be covered in the next lesson.

Student Loans

There are both government-offered and private student loan options available. Stafford and Perkins loans are the two most commonly used government funded student loans. Generally, most students first obtain grant money and scholarships and then seek the balance of their financial needs through student loans. Remember that student loans do have to be paid back, typically within a specific period after completing the degree or program of study. Interest is charged on student loans and penalties will be assigned for late or skipped loan repayments.

Most student loans, particularly through private lenders, will require a good credit history or a cosigner. A cosigner is needed if the student doesn't have a credit rating or any secured assets to offset the value of the loan. Typically, parents are cosigners to a student loan. However, other individuals, such as spouses, may also cosign.

Limiting the amount of student loans (that have to be repaid) and focusing your efforts on getting grants and scholarships is the best way to lower the long-term cost of your online degree. Being able to work and earn an income during your education will also help limit your debt upon graduation, allowing you greater financial freedom.