An interest-free student loan can help you break up the cost of school without having to pay extra to borrow money. While it’s not free like a scholarship or grant, it’s still less expensive than even a federal student loan. However, applications can be competitive and tend to go to students with the most financial need — not everyone can qualify.
What is an interest-free student loan?
An interest-free student loan is a loan to pay for education expenses with a 0% interest rate — and often no fees. You can usually borrow between $5,000 and $10,000 per academic year, depending on need. Terms typically last 10 years — with either fixed repayments or repayments that increase over time.
How do interest-free student loans work?
Interest-free student loans work like a cross between a scholarship or grant and a student loan. You have to repay the money you receive in monthly installments, as you would any other loan.
However, the application process is closer to what you’d find with a scholarship. You usually need to provide a short essay, letters of recommendation, academic transcripts and test scores rather than pass a credit and income check. Some applications also require an interview.
Eligibility is often based on financial need and academic merit, so larger loans tend to go to lower-earning families and high-achieving students.
Department of Education cuts rates to 0%: Here’s what it means for your student loans
Starting March 13, 2020, the Department of Education lowered the interest rate on all federal student loans to 0% in response to the coronavirus outbreak. The federal government also passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, which automatically paused repayments on all federal student loans until October 2020. Since it’s not charging interest, this means your balance will stay the same during this time.
Compare 8 interest-free student loan programs
|The Bill Raskob Foundation||Varies by financial need||May 15th|
|The Abe and Annie Seibel Foundation||$8,000 per year||February 28th|
|The Scholarship Foundation of St. Louis||$11,000 per year||April 15th|
|Military Officers Association of America (MOAA)||$7,000 per year||March 1|
|Evalee C. Schwarz Charitable Trust for Education||$5,000 to $15,000 per year — with a lifetime cap of $60,000||April 10th|
|Central Scholarship||Varies||April 1st|
|Massachusetts No-Interest Loan Program||$1,000 to $4,000 per year — with a lifetime limit of $20,000||Not stated|
|Leo S. Rowe Pan American Fund||$15,000 lifetime limit||No deadline|
1. The Bill Raskob Foundation
This interest-free student loan is available to any US citizen enrolled in a degree-granting program — excluding medical students. It’s a need-based loan, so how much you receive depends on your family’s finances. The average loan is around $5,000.
Repayments generally start six months after leaving school, and the foundation determines your loan term after reviewing your application. You can apply by filling out and mailing in the application, which includes financial statements, transcripts, an essay, references and other information about your school.
2. The Abe and Annie Seibel Foundation
This need- and merit-based loan is available to Texas undergraduates attending college in their home state. Graduating high school seniors must be in the top 10% of their class to qualify and have at least an 1100 SAT score or a 23 ACT score. College applicants must have a minimum 3.0 GPA to qualify.
While the application is due at the end of February, you might have better luck qualifying if you apply as soon as applications open on January 1st. If accepted, repayments start right away at a minimum of $50 per month while you’re in school and during the six-month grace period. Once the grace period is up, full repayments kick in for a nine-year term.
3. The Scholarship Foundation of St. Louis
Each year, 500 residents of the St. Louis metropolitan area receive this need-based loan. It’s designed for students with exceptional financial need, so families expected to contribute more than $15,000 after completing the FAFSA might have trouble qualifying.
While this loan is primarily for undergraduates, you can also use it for a graduate program if you’ve previously received funding from the foundation. All academic fields are eligible except ministry. You can apply online through Scholarship Central. Repayments begin after a one-year grace period following graduation, and terms run for five years.
This need- and merit-based scholarship is available to children of military families pursuing their first undergraduate degree. MOAA reviews applications based on your academic record, extracurriculars and financial need.
If you qualify, you can renew the loan for up to five years, as long as you’re registered as a full-time student. Unlike some other interest-free loan programs, you can apply and repay your loan online. Renewal also doesn’t require a full application — you just need to upload your transcript and submit a renewal form online.
5. Evalee C. Schwarz Charitable Trust for Education
This merit- and need-based loan is one of the few available to both undergraduate and graduate students. But eligibility requirements can be hard to meet: You must have a high class ranking and be in the top 15% of nationwide standardized tests. Your family also can’t be expected to contribute more than $5,486 after completing the FAFSA — meaning you must complete the FAFSA before you can apply for this loan.
You can download the application from the Evalee C. Schwarz Trust for Education website. In addition to completing and mailing in the form, applicants must write a personal essay and submit three letters of recommendation. All loans come with a 10-year graduated repayment plan with monthly repayments that increase each year.
6. Central Scholarship
This need-based loan is available to low-income students in Maryland or the Baltimore area. You can use it pay for an undergraduate, graduate or professional degree. How much you receive varies by need, though most borrowers get $4,000 per year. Central Scholarship has a strict cosigner requirement, so skip this one if you don’t have anyone to share the responsibility of repaying the loan.
The application is available online and spots are limited — you’re more likely to qualify if you get it in earlier. Like the Schwarz Trust loan, this option comes with a graduated 10-year repayment plan.
7. Massachusetts No-Interest Loan Program
Massachusetts residents can find no-interest funding through this need-based, state-funded loan program. The application heavily relies on the FAFSA, so you might want to apply for federal student aid first. Only undergraduates pursuing a certificate, associate or bachelor’s degree are eligible — and you can’t use it for a second degree.
Reach out to your school’s financial aid office for more details on deadlines and how it works. Loans come with a 10-year repayment plan.
8. Leo S. Rowe Pan American Fund
This loan program is available to Latin American and Caribbean citizens studying in the US. It’s one of the few interest-free options for international students, though you must have a US citizen or permanent resident guarantee your loan — similar to a cosigner. You can use this loan to pay for an undergraduate, graduate or professional degree, as well as technical training or academic research. For a non-degree program, you must complete one semester of your program before you become eligible.
Unlike the other interest-free loans on this list, there’s no deadline to apply. Funding comes from the OAS and goes directly to the student, rather than the school.
Where can I find other interest-free student loans?
Generally, interest-free student loans are available through nonprofits, foundations and government-sponsored organizations. Some schools like Occidental College and Claremont McKenna College offer interest-free student loans as part of their financial aid package.
The best place to get started on your student loan search is to reach out to your school’s financial aid office. Many of these loan programs are available based on your state of residency and where you attend school. Some are also based on academic performance and interests. Your school’s financial aid office can recommend specific programs you might qualify for.
How do I apply?
It varies by program, though you generally need to follow these steps:
- Fill out the FAFSA. Since many programs are based on need, you typically need to submit the FAFSA to figure out if you’re even eligible.
- Read the application checklist. Interest-free loans tend to require lots of documents and additional forms on top of the standard application.
- Ask for recommendations. Generally, you need to provide up to three recommendations from teachers, former employers or anyone else who’s worked with you in an academic or professional capacity.
- Find a cosigner — or two. While they might not check your credit, many interest-free student loan programs require you to apply with someone who agrees to share the responsibility of repaying the loan.
- Write your personal statement. Most applications require you to submit a short essay about a past experience or your future goals — similar to the one you had to write when applying to college.
- Gather your documents. These might include your family’s tax returns along with your financial aid award letter, transcripts and standardized test scores.
- Fill out and submit the application form. Some organizations offer paper applications, which you can download on their website and mail in. Others have an online application.
What happens after I submit the application?
What happens next depends on the organization offering the loan. Often, applicants go through multiple rounds of qualification. If you make it past the first or second cut, you might be asked to come in for an interview. Typically, you find out if you qualify for the loan in late spring or early summer.
Funds usually go directly to your school, though in some cases you might receive the check yourself. After tuition and fees are covered, you can pick up your student loan refund check from your school’s bursar office to cover personal expenses.
More ways to fund your degree without paying interest
Having trouble qualifying for interest-free student loans? Consider one of these options instead:
- Tuition payment plans. Many schools allow you to break up tuition and fees into monthly installments — usually for a small fee. Payments are typically due in the months leading up to the semester or after it begins.
- Scholarships and grants. Typically based on academic merit or financial need, these tend to come in small amounts and have a similar application to interest-free student loans — but you don’t have to pay them back.
- Income share agreements (ISAs). Some schools like Purdue offer ISAs, where students agree to pay a percentage of their future income for a set number of years instead of standard tuition.
- Work-study programs. The Federal Work-Study program allows you to work a part-time campus job in exchange for partial tuition payment.
Interest-free student loans might be the next best deal after scholarships, grants and work-study programs. But the application typically requires a lot of time and effort. In some cases, it might be worth spending that energy applying for aid that you don’t need to repay.
You can learn more about your financial aid options by checking out our guide to student loans.
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