Do Interest Free Student Loans Exist?

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In 2018, college graduates who left with student loans owed an average of $29,800. Paying that back is intimidating enough before adding in the growing interest over 10 years.

When you add interest, borrowers are on the hook for thousands — or tens of thousands — more in student loan debt. Fortunately, interest-free student loans do exist. They’re not easy to find — or simple to get — but they are absolutely worth a look.

Here’s what you need to know:
Benefits of interest-free student loans
How to find no-interest student loans
What to expect from interest-free student loans
How to qualify for interest-free student loans
The FAFSA imperative
Drawbacks of no-interest student loans

Benefits of interest-free student loans

No-interest student loans have to be repaid just like traditional federal or private student loans. However, the APRs in Student Loan Hero’s private loan marketplace as of May 24, 2019, go as high as 13.99%. Such a high rate could cause your loan balance to balloon, so interest-free student loans could help you save thousands.

For example, assume you had $29,800 in student loans on a 10-year repayment term at an APR of 13.99%. Your monthly payment would be $463. By the time you repaid the loan in full, you’d repay a total of $55,502. Thanks to your interest rate, you’d pay $25,702 in interest alone.

By contrast, if you had $29,800 in no-interest student loans and repaid them over 10 years, your monthly payment would be just $248.33. Even better, you’d pay only what you borrowed.

How to find no-interest student loans

Like scholarships and grants, no-interest student loans are typically offered by nonprofit organizations, government agencies and private companies. The best way to discover no-interest student loans is to check with the following:

  • High school guidance counselors
  • College financial aid offices
  • Local chambers of commerce
  • Rotary clubs
  • Local nonprofits
  • State education departments
  • Fraternities or sororities
  • Religious organizations

What to expect from interest-free student loans

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 U.S. citizen). Here are some places to start your search.

Foundations offering interest-free loans for students

Bill Raskob Foundation

You can get a no-interest student loan from the Bill Raskob Foundation if you are a U.S. citizen enrolled at an accredited school for the upcoming year. Undergraduates in their freshman year are not eligible.

Abe and Annie Seibel Foundation

Interest-free student loans are available from the Abe and Annie Seibel Foundation to students who are U.S. citizens and meet the following requirements:

  • Texas resident who graduated from a high school in the state
  • Enrolled full time at an accredited Texas college while working toward your first bachelor’s degree
  • Graduated in the top 10% of their class or with an SAT score of at least 1,100 or an ACT score of at least 23
  • Must have a college GPA of at least 3.0

The Scholarship Foundation of St. Louis

The Scholarship Foundation of St. Louis provides interest-free loans for students who are:

  • From the St. Louis metropolitan region
  • Attending an accredited, nonprofit postsecondary institution
  • Majoring in anything except ministry

Your financial aid office

Many foundations exist to assist students at a local level. Stop by your school’s financial aid office to see what opportunities may be available to you.

For example, at Sinclair Community College in Dayton, Ohio, you can access interest-free student loans through the Charles E. Schell Foundation Student Loan Program. Other programs can be found at both community and four-year colleges across the country.

Associations offering interest-free loans for students

Military Officers Association of America

To qualify for a no-interest loan from the Military Officers Association of America (MOAA), you must be the child of an active duty, former or retired military officer eligible for MOAA membership or a child of active duty, Reserve, National Guard or retired enlisted military personnel.

Other requirements include:

  • You are younger than 24. The maximum age is higher — up to five years — if you served in the military before completing college
  • You have a high school GPA of at least 3.0
  • You are not attending a U.S. military academy or academy prep school
  • Your parent is a current, dues-paying MOAA member or enrolled and up to date with dues for MOAA’s Voices program if they were enlisted
  • You are registered or promise to register for the Selective Service System if you are male

International Association of Jewish Free Loans

The International Association of Jewish Free Loans (IAJFL) is a collaboration between the Jewish Free Loan Association and the Hebrew Free Loan Association. These associations issue interest-free loans for a variety of purposes, including higher education.

Each branch serves its local geographical area and has its own underwriting requirements. These are no-interest student loans that are issued regardless of religion at about one-third of IAJFL branches in the U.S.

Organizations offering interest-free loans for students

Leo S. Rowe Pan American Fund

The Leo S. Rowe Pan American Fund, offered through the Organization of American States, serves a demographic that isn’t usually eligible for interest-free student loans in the U.S.: Citizens of Latin America and the Caribbean. Besides this requirement, students must also meet the following:

  • Possess a student visa
  • Study at an accredited postsecondary institution in the U.S.
  • Plan on finishing their program of study within two years

Charitable trusts offering interest-free loans for students

Evalee C. Schwarz Charitable Trust for Education

To obtain an interest-free student loan from the Evalee C. Schwarz Charitable Trust for Education, you must meet the following requirements:

  • Be a U.S. citizen
  • Attend a school in your home state
  • Have test scores among the top 15% in the nation
  • Qualify for grants via the Free Application for Federal Student Aid (FAFSA)
  • Not seek a law degree

Colleges offering interest-free loans for students

Occidental College

If you are attending Occidental College, you may be offered an interest-free student loan from the school as part of your financial aid package.

Claremont McKenna College

Claremont McKenna College also issues interest-free student loans to students who qualify via its Office of Financial Aid.

State-specific programs offering interest-free loans for students

Massachusetts No Interest Loan Program

U.S. citizens or non-eligible citizens under Title IV who are residents of Massachusetts may qualify for the Massachusetts No Interest Loan Program if they meet the following requirements, among other things:

  • Have filed their FAFSA
  • Are seeking a certificate, associate degree or their first bachelor’s degree
  • Register with the selective service if you’re a male student
  • Demonstrate financial need

Central Scholarship (Maryland)

Central Scholarship is a Maryland-based nonprofit offering scholarships and interest-free student loans to students who meet the following requirements:

  • Are a U.S. citizen or permanent resident
  • Are a Maryland resident or live within 200 miles of Baltimore
  • Plan to attend an accredited U.S. college, community college or career school during the upcoming school year
  • Have a GPA above 2.0

How to qualify for interest-free student loans

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
  • U.S. 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 interest-free 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. The FAFSA is an essential part of that process.

The FAFSA not only assesses your need for student loans — it also identifies financing options for you, including scholarships, Pell Grants and work-study programs.

FAFSA deadlines vary by state, so make sure you submit it on time to get all the aid you’re eligible to receive.

Drawbacks of no-interest 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 have 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 allow you to take a break from payments while you get your finances in order. You’ll miss out on all of that with an interest-free student loan.

Despite these minor drawbacks, interest-free student loans can help you save thousands over the length of your debt repayment. It’s a good idea to exhaust all your interest-free student loan, scholarship and grant opportunities to reduce how much you need to borrow.

Meredith Simonds and Kat Tretina contributed to this article.

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CollegeAve Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

(1)All rates shown include the auto-pay discount.  The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.

Information advertised valid as of 11/4/2019. Variable interest rates may increase after consummation.


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Discover Disclosures

  1. Students who get at least a 3.0 GPA (or equivalent) qualify for a one-time cash reward on each new Discover undergraduate and graduate student loan. Reward redemption period is limited. Please visit DiscoverStudentLoans.com/Reward for any applicable reward terms and conditions.
  2. View Auto Reward Debit Reward Terms and Conditions at DiscoverStudentLoans.com/AutoDebitReward.
  3. Aggregate loan limits apply.
  4. Lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments. The interest rate ranges represent the lowest interest rate offered on the Discover Undergraduate Loan and highest interest rates offered on Discover student loans, including Undergraduate, Graduate, Health Professions, Law and MBA Loans. The fixed interest rate is set at the time of application and does not change during the life of the loan. The variable interest rate is calculated based on the 3-Month LIBOR index plus the applicable Margin percentage. The margin is based on your credit evaluation at the time of application and does not change. For variable interest rate loans, the 3-Month LIBOR is 2.00% as of January 1, 2020. Discover Student Loans will adjust the rate quarterly on each January 1, April 1, July 1 and October 1 (the “interest rate change date”), based on the 3-Month LIBOR Index, published in the Money Rates section of the Wall Street Journal 15 days prior to the interest rate change date, rounded up to the nearest one-eighth of one percent (0.125% or 0.00125). This may cause the monthly payments to increase, the number of payments to increase or both. Please visit discover.com/student-loans/interest-rates for more information about interest rates.
Discover's lowest rates shown are for the undergraduate loan and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

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Undergraduate Rate Disclosure: Variable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of December 1, 2019, the one-month LIBOR rate is 1.70%. Variable interest rates range from 2.80% – 11.06% (2.80% – 10.91% APR) and will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. Fixed interest rates range from 4.72% – 12.19% (4.72% – 12.04% APR) based on applicable terms, level of degree earned and presence of a co-signer. Lowest rates shown requires application with a co-signer, are for eligible applicants, require a 5-year repayment term, borrower making scheduled payments while in school and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of the loan.

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