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.

Need a student loan?

Here are our top student loan lenders of 2020!
LenderVariable APREligibility 
1.24% – 11.98%1Undergraduate, Graduate, and Parents

Visit College Ave

1.25% – 11.10%*,2Undergraduate and Graduate

Visit SallieMae

1.12% – 12.37%3Undergraduate and Graduate

Visit Discover

1.24% – 11.44%4Undergraduate, Graduate, and Parents

Visit Earnest

1.77% – 11.89%5Undergraduate and Graduate

Visit SoFi

2.69% – 12.98%6Undergraduate and Graduate

Visit Ascent

3.52% – 9.50%7Undergraduate and Graduate

Visit CommonBond

* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.

1 Important Disclosures for College Ave.

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. Rates shown are for the College Ave Undergraduate Loan product and include autopay 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. This informational repayment example uses typical loan terms for a first year graduate student 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 7.10% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $141.66 while in the repayment period, for a total amount of payments of $16,699.21. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 9/24/2020. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.


2 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

3 Important Disclosures for Discover.

Discover Disclosures

  1. Aggregate loan limits apply.
  2. 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.
  3. Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and Auto Debit Reward. The interest rate ranges represent the lowest and highest interest rates offered on Discover student loans, including undergraduate and graduate 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. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of October 1, 2020. Discover Student Loans may 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. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.
  4. Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for the Discover Private Consolidation Loan and include an Auto Debit Reward. 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. For variable interest rate loans, the 3-Month LIBOR is 0.250% as of October 1, 2020. Discover Student Loans may 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. Our lowest APR is only available to customers with the best credit and other factors. Your APR will be determined after you apply. It will be based on your credit history, which repayment option you choose and other factors, including your cosigner’s credit history (if applicable). Learn more about Discover Student Loans interest rates.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.

4 Important Disclosures for Earnest.

Earnest Disclosures

  1. Rates include 0.25% Auto Pay Discount
     
  2. Explanation of Rates “With Autopay” (APD)
    Rates shown include 0.25% APR discount when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

    Available Terms
    For Cosigned loans – 5, 7, 10, 12, 15 years. 
    Primary Only – 10, 12, 15 years

    In school deferred payment is not available in AL, AZ, CA, FL, MA, MD, MI, ND, NY, PA, and WA).


5 Important Disclosures for SoFi.

sofiDisclosures

UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.26% annual percentage rate (“APR”) (with autopay), variable rates from 1.87% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.37% APR (with autopay), variable rates from 1.77% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.52% APR (with autopay), variable rates from 1.94% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 10.76% APR (with autopay), variable rates from 1.87% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 10/20/2020. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).


6 Important Disclosures for Ascent.

Ascent Disclosures

Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.

  1. Competitive variable rates calculated monthly at the time of loan approval based on a margin plus the 1-Month London Interbank Offered Rate (LIBOR) rounded to the nearest 1/100th of a percent. The current LIBOR is 0.152%, which may adjust monthly. Your interest rate may increase or decrease, based on LIBOR monthly changes. Rates are effective as of 10/01/2020 and reflect an Automatic Payment Discount. Automatic Payment Discount is available if the borrower is enrolled in automatic payments from their personal checking account and the amount is successfully withdrawn from the authorized bank account each month.(See Automatic Payment Discount Terms & Conditions.)
    1. Undergraduate Loans: Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 2.69% and 12.98%. Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 3.53% and 14.50%. Rates reflect an Automatic Payment Discount of 0.25% on the lowest offered rate and a 2.00% discount on the highest offered rate. The following table shows a 48 month in-school period plus 9 months of grace prior to a full repayment term of either: 60-months (lowest fixed/variable rate), 144-months (highest fixed rate) or 180-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options.(See Undergraduate Loan repayment examples.)
    2. Graduate Loans (Graduate, MBA & Law): Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 3.65% and 12.40%. Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 4.56% and 13.42%. Rates reflect an Automatic Payment Discount of 0.25%. The following table shows a 36 month in-school period plus 9 months of grace prior to a full repayment term of either: 84-months (lowest fixed/variable rate), 144-months (highest fixed rate), or 180-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options. (See Graduate Loan repayment examples.)
    3. Medical: Your variable interest rate may increase or decrease, based on LIBOR monthly changes, resulting in an APR range between 3.67% and 12.42%. Fixed rate loans will not increase or decrease over the life of the loan and have an APR range between 4.57% and 13.44%. Rates reflect an Automatic Payment Discount of 0.25%. The following table shows a 48 month in-school period plus 36 months of grace prior to a full repayment term of either: 84-months (lowest fixed/variable rate), 144-months (highest fixed rate), or 240-months (highest variable rate) with examples of (i) Interest Only payments, (ii) $25 Minimum payments, and (iii) Deferred repayment options. (See Medical Loan repayment examples.)
  2. Payments may be deferred. Subject to lender discretion, forbearance and/or deferment options may be available for borrowers who are encountering financial distress.
  3. Making interest only or partial interest payments while in school will not reduce the principal balance of the loan. There are three (3) flexible in-school repayment options that include fully deferred, interest only and $25 minimum repayment. (See Undergraduate Loan repayment examples.)
  4. Flexible repayment plans may be offered up to a fifteen (15) year repayment term for a variable rate loan and ten (10) year repayment term for a fixed rate loan. Students must be enrolled at least half-time at an eligible school. Minimum loan amount is $2,000.
  5. Interest rate reduction of either 0.25% (for Credit-Based Loans) or 2.00% (for Undergraduate Future Income-Based Loans) applies only when the borrower and/or cosigner sign up for automatic payments and the payment amount is successfully deducted from the designated bank account each month. The amount of the discount is dependent upon the loan product and credit history of the borrower at the time of application. Interest rate reduction(s) will not apply during periods when no payment is due, including periods of in-school, deferment, grace or forbearance, unless a regular payment amount has been arranged with the servicer. If you have two (2) consecutive returned payments for Nonsufficient Funds, we may cancel your automatic debit enrollment and you will lose the interest rate reduction. You will then need to re-qualify and re-enroll in automatic debit payments to receive the interest rate reduction.(See Automatic Payment Discount Terms & Conditions.)
  6. All applicants (individual and cosigner) are required to complete a brief online financial literacy course as part of the application process to be eligible for funding.
  7. Eligibility, loan amount and other loan terms are dependent on several factors, which may include: loan product, other financial aid, creditworthiness, school, program, graduation date, major, cost of attendance and other factors. Aggregate loan limits may apply. The cost of attendance is determined and certified by the educational institution.
  8. The legal age for entering into contracts is eighteen (18) years of age in every state except Alabama where it is nineteen (19) years old, Nebraska where it is nineteen (19) years old (only for wards of the state), and Mississippi and Puerto Rico where it is twenty-one (21) years old.
  9. 1% Cash Back Graduation Reward subject to terms and conditions. Click here for details. In order to be eligible for the 1% Cash Back Graduation Reward, borrower must meet the following criteria after graduation:
    • The student borrower has graduated from the degree program that the loan was used to fund.
    • The student borrower may change majors and/or transfer to a different school, but must obtain the same level of degree (e.g. – undergraduate or graduate)
    • The graduation date is more than 90 days and less than five (5) years after the date of the loan’s first disbursement.
    • Any loan that the student has borrowed under the Ascent loan is not more than 30-days delinquent or in a default status as of the graduation date and until any Graduation Reward is paid.
  10. Students can apply to release their cosigner and continue with the loan in only their name after making the first 24 consecutive regularly scheduled full principal and interest payments on-time and meeting the other eligibility criteria to qualify for the loan without a cosigner.

* Application times vary depending on the applicant’s ability to supply the necessary information for submission.


7 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.17% effective Sep 1, 2020 and may increase after consummation.


Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.