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When you’re counting up the costs of attending college, don’t forget about interest. If you have to borrow to pay for your tuition or living expenses, you’ll need to eventually pay back every penny you borrowed, plus interest.
Federal student loans have interest rates between 5.50% and 8.05% for the 2023-24 school year, depending on the type of loan. Private student loans can come with even higher rates.
But you may have options for lower-interest loans, or even a loan with no interest at all.
Here’s where to look for interest-free student loans:
- Where to find interest-free student loans
- Who is eligible for an interest-free loan?
- FAFSA and federal student loans
- Additional options for college expenses
Where to find interest-free student loans
Interest-free student loans are rare, but can be found from some nonprofit organizations, charitable foundations, or religious institutions. Since you’re not paying any interest, these loans can save you thousands of dollars over the life of your loan and reduce your monthly payment.
A student loan calculator can show you just how powerful these programs are. A $20,000 student loan paid back over 10 years at a 5% interest rate will require you to pay $212/month, and pay nearly $5,500 in interest over the life of the loan. At a 0% interest rate, your monthly payment is just $167 and you would avoid interest altogether.
Eligibility for these loans varies, and some are location specific. Each interest-free student loan program also has maximum amounts you may be able to borrow.
Just like scholarships and grants, interest-free student loan programs are extremely competitive. Programs open to students across the United States include:
- Bill Raskob Foundation
- Evalee C. Schwarz Charitable Trust for Education
- International Association of Jewish Free Loans
Who is eligible for an interest-free loan?
Every interest-free loan program has its own criteria for who qualifies. Some are based primarily on merit, while others are based heavily on financial need.
Since each program is so different, it’s hard to determine any hard-and-fast rules. Read the qualification criteria carefully before applying for an interest-free loan program. But you can expect to encounter a few of the following requirements to be considered:
- U.S. citizenship
- Residency in a particular U.S. state or city
- Strong academic credentials on a high school or college transcript
- Financial need, as determined by completing the FAFSA
- Plans to study a particular subject
- Essay composition
- In-person interview
Many programs are limited to students in one particular geographic area, such as a state or metropolitan area. For example:
- Central Scholarship offers interest-free loans to students in Maryland with at least a 2.8 GPA.
- The Abe and Annie Seibel Foundation has an interest-free student loan program open to applicants in Texas.
- The Scholarship Foundation of St. Louis offers interest- and fee-free loans to students from the St. Louis metropolitan area.
Others are based on particular interest groups. For example, the Military Officers Association of America offers an interest-free student loan program for children of active-duty or retired military officers.
Again, your guidance counselor or financial aid office may be the best resource for finding interest-free loan programs you may qualify for.
FAFSA and federal student loans
To qualify for an interest-free student loan, you’ll need to fill out the Free Application for Federal Student Aid, (FAFSA). This form can also make you eligible for a wealth of education financing options from the federal government.
Some of these are free. Many universities use the FAFSA to offer scholarships and grants for students with financial need. The federal government also offers Pell Grants to students with significant financial need. These grants are currently about $7,400/year, and do not need to be repaid.
You may qualify for other types of federal student aid, as well. One example is federal work-study, where you take a part-time job at your university or a local nonprofit. You’ll receive a paycheck just like any other employee, with the money helping you meet your higher education expenses. Work-study jobs have a host of protections, including a prohibition on being required to work during your class time.
Federal student loans are not interest-free. You’ll generally need to pay a fixed interest rate that’s set at the time you take out your loan. The rate varies based on the type of loan you choose. Currently, federal student loan interest rates are:
- 5.50% for undergraduate students taking out Direct Subsidized Loans or Direct Unsubsidized Loans.
- 7.05% for graduate or professional students with Direct Unsubsidized Loans.
- 8.05% for graduate or professional students or parents of undergraduate students taking out Direct PLUS Loans.
While you do pay interest, federal student loans have a number of benefits you won’t find in other loan programs. Generally, you’re not required to start repaying your federal student loans until you graduate or leave school. You also may qualify for an income-driven repayment plan, where your monthly payment is capped at a certain percentage of your disposable income. And with subsidized loans, the government pays the interest accrued while you’re enrolled in school or in forbearance.
Additional options for college expenses
Paying for higher education can feel overwhelming, plenty of options do exist. If you aren’t able to qualify for an interest-free student loan, you may consider one of these two common ways to finance your college or university expenses.
Private student loans
Private student loans are available from banks and other lenders, and often used to cover gaps in higher education expenses not covered by federal student loans or other financial aid. These loans can have fixed or variable interest rates, set based on your credit score. If you have a limited credit history, you may be required to have a parent or family member cosign the loan, agreeing to be equally responsible for paying it back.
Private student loans generally do not have income-driven repayment plans, and you’ll be responsible for paying interest as soon as the loan is disbursed. But they can come with a couple of benefits: many private lenders allow you to defer loan payments until after you graduate. And you may qualify for a lower interest rate than on federal student loans if you have excellent credit.
The companies in the table below are Credible’s approved partner lenders. Whether you’re the borrower or cosigner, Credible makes it easy to compare rates from multiple private student loan providers without affecting your credit score.
|Fixed Rates From (APR)
|Variable Rates From (APR)
|4.50%9 - 15.49%9
|6.37%9 - 16.70%9
Lowest APRs reflect autopay, loyalty, and interest-only repayment discounts where available. Prequalified rates are not an offer of credit. | 10Ascent Disclosures | 1Citizens Bank Disclosures | 2,3College Ave Disclosures | 11Custom Choice Disclosures | 7EDvestinU Disclosures | 8INvestEd Disclosures | 9Sallie Mae Disclosures
Learn More: How to Qualify for Financial Aid
Personal loans are a flexible form of financing that can help you make ends meet while you’re enrolled in college. These loans are typically borrowed as a lump sum and paid back at fixed interest rates and paid back over a period of three to seven years. You won’t need to put up any collateral since you qualify for a personal loan based strictly on your credit history.
You can use a personal loan for most types of expenses, though many personal lenders restrict you from using your loan money for tuition. But you may be able to use personal loans to help pay for living expenses, transportation, and other costs you incur while in school.