College graduates in 2016 are leaving school with an average of $37,172 in student loan debt. Paying that back is intimidating enough before adding in the interest that accumulates over 10 years’ time.
Depending on the interest rate, borrowers are looking at up to $10,000 or more tacked onto their student loan debt. Fortunately, interest free student loans do exist. They’re not easy to find — or simple to get — but it is absolutely worth looking into.
How to find interest free student loans
The best way to discover no interest student loans is to look in your own backyard. Pick up the phone or pay a visit to the following people and organizations:
- High school guidance counselor
- College financial aid office
- Local chamber of commerce
- Rotary clubs
- Local nonprofits
- State education department
- Fraternity or sorority
- Religious organizations
What to expect
Many interest free student loans are limited to residents of certain geographic regions, which is why it helps to start your search close to home. Others, though, are open to pretty much anyone (provided you are a US citizen). Here are some places to start your search.
- The Bill Raskob Foundation, open to any US citizen provided they are enrolled at an accredited school for the upcoming academic year.
- Abe and Annie Seibel Foundation, open to US citizens who graduated from a Texas high school and enroll at a Texas college.
- The Scholarship Foundation of St. Louis, open to students from the St. Louis metropolitan region.
- Military Officers Association of American, open to military personnel or children of military parents.
- Jewish Free Loan Association (Southern California), open to students of all faiths in the Greater Los Angeles area.
- Hebrew Free Loan Association, open to Jewish students in Northern California.
- Evalee C. Schwarz Charitable Trust for Education, open to any US citizen provided they are attending school in their home state.
- Occidental College, open to US citizens who are graduates of California high schools.
- Claremont McKenna College, open to US citizens who are graduates of California high schools.
State education departments
- Massachusetts No Interest Loan Program, open to US citizens who are residents of Massachusetts.
How to qualify
Every no interest student loan comes with its own unique set of qualifications, but generally, you could be expected to meet the following requirements:
- Financial need
- Completion of FAFSA
- US citizenship
- Resident of a specific state
- High school graduate of a specific state
- Full-time enrollment at an accredited in-state school
- Specific field of study
- Solid academic record (e.g., GPA, class rank, test scores)
- Essay submission
- Personal interview
- Cosigner on the loan
Note that funds are very limited for no interest student loans, so the sooner you apply the better.
The FAFSA imperative
With funds so limited, the organizations that offer no interest student loans want to see that you have already done everything possible to pay for school in other ways. FAFSA is an essential part of that process.
The Free Application for Federal Student Aid not only assesses your need for student loans, but also funds for which you never have to pay back a dime, including scholarships, Pell Grants, and work-study programs.
Check out our Ultimate Guide to Filling Out and Filing Your FAFSA by the Deadline. Since you want to apply for no interest student loans as soon as possible, it’s important to do the same with your FAFSA, as you need to get that done first.
Drawbacks of interest free student loans
As amazing as it sounds to pay no interest on a student loan, the benefit of saving money should be weighed against what you could be giving up.
Payments may be required before you graduate
When you have a federal student loan, you don’t have to start making payments until after you graduate. On the other hand, some no interest student loans require that you start making payments while you’re still in school.
No federal protections
No interest student loans don’t come with the same protections you’ll get with a federal student loan. Ideally, you want to stay on the 10-year repayment plan, but if there comes a time when you just can’t make the monthly payment, the federal government gives you options.
Those options include income-driven repayment plans, as well as forbearance and deferment that allows you to take a break from payments while you get your finances in order. You’ll miss out on all of that with a no interest student loan.
Why shouldn’t it be you?
When you weigh the limited funds available against all the work that goes into finding and applying for interest free student loans, it may seem like a long shot not worth pursuing. But somebody has to receive that funding. Provided you’ve considered the pros and cons, why shouldn’t it be you?
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