Why Should You Need Financial Aid?

If you're thinking of getting yourself or your child a college education, chances are that you'll also need financial aid. College education is costly these days, and it's difficult to get one out of your own pocket. What choices do you have?

Direct Financial Aid

If your needs are limited, you can go for one of the direct federal loans made to the student. Stafford and Perkins are examples of this type of loan. Since these are given out in the student's name who most likely doesn't yet have a credit history, they are limited in scope. Your total cost of education may not be covered by them. The maximum amount for a Stafford loan, for example, is set at $18500 per annum. However, this type of financial aid for college education has two advantages over other types.

The first advantage is that the interest rates are much lower than commercial rates, presently fixed at 6.8% per annum for the Stafford loans. The second advantage for this type of financial aid for college education is that your repayment needn't start till six months after the completion of the course.

Indirect Aid or PLUS Loans

Another type of financial aid for college education is the kind that is given out to parents, depending upon their credit records. These are called PLUS loans in the US. These have a higher ceiling on disbursed amounts, but the interest rates are also higher than the direct loans, currently at 8.5% per annum. Also, repayments for these loans start from the very beginning. For both types of financial aid, you need to fill out the Free Application for Federal Student Aid (FAFSA) form.

Private Financial Aid for College Education

If these loans do not cover your entire cost, you may also consider applying for private financial aid for college education. But be warned that these are in many cases fully commercial loans, with interest rates at par with the market.