Are there interest-free student loans?

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Interest-free student loans exist, but they are extremely rare. Check them out and learn about some low interest student loan options. (Shutterstock)

Interest-free student loans exist, but they are extremely rare. If you’re looking for ways to lower your borrowing costs, it’s more realistic to aim for low-interest student loans like federal loans and fill funding gaps with private student loans.

If you are looking for a private student loan, Credible allows you compare private student loan rates from multiple lenders, all in one place.

What are interest-free student loans and how do they work?

Interest-free student loans do not earn interest — the amount you borrow is the amount you will repay. This type of student loan could save you a lot of money compared to one that pays interest.

For example, let’s say you have a $10,000 interest-free loan for 10 years. In this case, you would only repay $10,000. On the other hand, if you took out a student loan of $10,000 over 10 years with 5% interest, you would pay a total of $12,727 over the life of the loan.

Interest-free loans work the same way as other types of student loans. The lender gives you a lump sum of money and then you repay the loan in monthly installments over a set period of time.

Where to find interest-free student loans

Although interest-free student loans are rare, here are a few places you might be able to find them:

  • Private companies
  • Non-profit organizations
  • Religious organizations
  • Fraternities and sororities

Here are some organizations that offer interest-free student loans:

Abe and Annie Seibel Foundation

If you are a U.S. citizen and graduated from Texas and are enrolled full-time in an accredited Texas college or university, you may qualify for an interest-free student loan from Abe and Annie Seibel Foundation.

Here are the requirements for this program:

  • Rank in the top 10% of your class if you are a high school student or have at least an ACT score of 23 or an SAT score of 1100
  • Maintain a 3.0 GPA as a student

Applications are accepted from January 1 to February 23 each year.

Bill Raskob Foundation

The Bill Raskob Foundation offers interest-free student loans to US citizens. You can submit an application if you are at least a sophomore enrolled in an accredited school for the upcoming year.

Evalee C. Schwarz Charitable Trust for Education

You may qualify for an interest-free student loan of Evalee C. Schwarz Charitable Trust for education if you meet these conditions:

  • You are a US citizen
  • You attend a school where you live
  • You have a test score that ranks in the top 15% nationally
  • You qualify for federal grants
  • You’re not looking for a law degree

Association of Military Officers of America

If you have a relative who is eligible for Association of Military Officers of America or served in a branch of the military, you may qualify for an interest-free loan. Here are the requirements:

  • Must be under 24 (or up to 29 if you served in the military before college)
  • Your high school GPA is at least 3.0
  • Male applicants must register for Selective Service
  • You are not attending an academy preparatory school or military academy
  • The parent has paid for their MOAA membership

If you need private student loans, visit Credible for compare private student loan rates from various lenders in minutes.

Where to find low interest student loans

If you can’t find an interest-free student loan, check with the federal and private governments. student loans. Federal student loans come with low fixed rates and most don’t require a credit check. Private student loan interest rates, on the other hand, are based on your credit history.

You must first exhaust your federal loan options before considering private student loans. Federal student loans come with benefits that private lenders don’t offer, such as access to income-contingent repayment (IDR) plans and student loan forgiveness programs.

The best low interest student loans are subsidized and unsubsidized federal student loans.

  • Subsidized direct loans — These loans are available to undergraduate students who have demonstrated financial need on their Free Application for Federal Student Aid (FASFA). While you’re in school and for six months after you graduate, the US Department of Education pays interest on the loan.
  • Unsubsidized Direct Loans — All undergraduate and graduate students can qualify for this type of federal loan – you are not required to demonstrate financial need. Unlike a direct subsidized loan, you are responsible for paying interest accrued on the loan while you are in school.

For the 2022-23 school year, the interest rate for undergraduate students is 4.99% and 6.54% for graduate students. But it’s important to note that the interest rate on most federal student loans has been lowered to 0% until August 31, 2022.

With Credible, you can compare private student loan rates without affecting your credit.

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