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Knowledge Hub / What Is a No-Interest Student Loan?
What Is a No-Interest Student Loan?

What Is a No-Interest Student Loan?

Paying for College
ELFI | October 20, 2021
What Is a No-Interest Student Loan?

They might seem too good to be true, but student loans with no interest do exist. And we’re not talking about student loans with no interest until graduation. Rather, you don’t have to worry about paying interest while you’re in school or after you’ve left to build your career. But loans with no interest for college students aren’t as common as low-interest student loans. Here’s what you need to know about how no-interest student loans work and some alternatives to consider.

Where Can I Find a No-Interest Student Loan?

Student loans with no interest are typically offered by non-profit organizations, private companies, religious organizations, state governments and other such institutions. In some cases, these loans may be lumped together with scholarships and grants, but that’s not always the case. While you’ll still have to pay back the money you receive in the form of a no-interest student loan, all of your payments go directly to the principal balance because there’s no interest that accrues.  Note that this is different from Subsidized Direct Loans, which are offered by the federal government. These loans are technically no-interest student loans until after graduation because the government pays the interest that accrues while you’re in school and during future deferment periods. But if you want loans with no interest for college students both before and after graduation, no-interest student loans are your best bet.

How to Get Student Loans With No Interest

While no-interest student loans are available, they’re not nearly as common as other student loan options. Start by searching for loans with no interest for college students in your area. While most of your options are localized, there are also organizations that provide no-interest loans on a national level. Some examples include the Bill Raskob Foundation, the Evalee C. Schwarz Charitable Trust and the Military Officers Association of America.  If you find multiple interest-free loan programs in your area, consider applying for as many as possible to increase your chances of getting at least one loan. Once you’ve found some potential options, review the eligibility criteria to determine your chances of qualifying. Keep in mind that funds will be limited, so unless you meet all the criteria and have a strong application, you may not get approved.  You’ll also want to note the deadline for loan applications. In some cases, you might also need to fill out the Free Application for Federal Student Aid (FAFSA), though that’s a wise thing to do anyway because it opens up other financial aid opportunities.

Alternatives to Loans With No Interest for College Students

While getting a no-interest student loan can be nice, they aren’t always easy to get, especially if there’s a lot of competition from other college students. In order to avoid putting all of your eggs in one basket, it’s important to research alternatives in addition to applying for no-interest loans, especially if those alternatives are more readily available. Options include:

The Bottom Line

No-interest student loans are available, but most programs are localized and fairly competitive. While it’s a good idea to research and apply for multiple no-interest student loan programs, it’s also important to consider alternatives in the event that you don’t get approved or don’t get enough cash to cover all of your costs for the upcoming term. The important thing is that you are proactive about finding the best options for you to help you get through school as inexpensively as possible.