Free Student Loans: College is expensive, and paying for it can be overwhelming. Several different costs go above the expected expenses, such as room and board and tuition.
Loan borrowers who completed college in 2019 left with an average balance of $29,900. The amount is already intimidating enough, let alone the interest rate charges on it. When you add the interest, you can be paying thousands or tens of thousands more in education debt.
Fortunately, you can opt for interest-free student loans. These loans don’t accumulate over time, so the amount you borrowed is what you’ll repay. Of course, it’s not simple to find these particular loans, but it’s worth searching for.
This guide will show you how to get interest-free loans for students, including the benefits. Let’s begin.
Benefits Of interest-Free Student Loans
Keep in mind that you still have to repay interest-free loans, just like federal or private student loans. However, the APRs for private student loans can start from 3.34% to as high as 12.99%. Such high rates can cause your student loans to shoot up, so interest-free loans can help you save thousands of dollars.
Let’s take an example. Let’s say you had student loans of $30,000 on a 10-year repayment plan at an APR of 12.99%. Your payment every month would be $448, and by the time you’re done with the repayments, you would’ve paid a total of $53,731. Your interest alone would be $23,731.
However, if you had $30,000 in no-interest student loans and paid back over ten years, your monthly payment would be just $250. What’s better, you get to pay only the amount you borrowed.
How To Find Interest-Free Student Loans
Like grants and scholarships, student loans with no interest are usually offered by non-profit organizations, including private companies and government agencies. The best way to find interest-free student loans is to check the below sources:
- State education departments
- Local non-profits
- Local chambers of commerce
- Rotary clubs
- Fraternities or sororities
- College financial aid offices
- Religious organizations
- High school guidance counselors
Please Note: that many of the interest-free loans are limited to people living in specific geographic regions. And that’s why it’s best to begin your search in your locality. But if you don’t find any or don’t qualify, others are opened to U.S. citizens. You can start your search from the following places.
Foundations That Offer Interest-Free Student Loans
Bill Raskob Foundation
Are you a U.S. citizen enrolled at a certified school, particularly for the upcoming year? Then, you can acquire a student loan with no interest from the Bill Raskob Foundation. However, you don’t qualify if you’re an undergraduate in your freshman year.
Abe and Annie Seibel Foundation
You can get interest-free student loans if you’re a student and a U.S. citizen. However, you have to meet the following requirements first:
- You must be a Texas resident who completed a high school in the state
- You must have enrolled full-time at a certified Texas college while working for your first bachelor’s degree.
- Graduated with an SAT score of at least 1,100 or at least 23 of an ACT score. Or part of the top 10% of your class.
- It would help if you had a college GPA of at least 3.0.
The Scholarship Foundation of St. Louis
This scholarship foundation offers student loans with no interest for students:
- Attending an approved, non-profit post-secondary institution
- Majoring in anything excluding ministry
- From the St. Louis metropolitan region
Your Financial Aid Office
Numerous foundations help students even at the local level. In addition, you can check your institution’s financial aid office to see what opportunities are available for you.
For instance, the Sinclair Community College in Dayton offers interest-free loans for students through the Charles E. Schell Foundation Student Loan Program. In addition, you can find other programs at both four-year colleges and communities throughout the country.
How To Be Eligible For Interest-Free Student Loans
Remember that every student loan that comes with no interest has its unique set of requirements. But, on a general scale, you should be able to meet the following qualifications:
- FAFSA completion
- Financial need
- A resident of a particular state
- U.S. citizenship
- Enrolled full-time at an approved in-state school
- A particular field of study
- Good academic records such as class rank, GPA, and test scores
- Personal interview
- Submission of essay
- A loan cosigner
Please note: there are minimal funds for interest-free student loans, so it’s better to apply sooner.
FAFSA Plays A Vital Role In Interest-Free Loans
Funds for interest-free student loans are so limited. So the organizations that offer such loans ensure you’ve already done everything possible to pay off your student loans in other ways. The FAFSA plays an essential role in that process.
The role of the FAFSA is not for you to assess student loans alone. It also gives you numerous financing alternatives to choose from, such as Pell grants, scholarships, and work-study programs.
The deadline for the FAFSA varies depending on the state you live in. So You have to make sure you submit it on time to avoid disqualification.
Remember that your local government can also ask you to file a state-specific financial aid application. So if you live in Oregon, you should also complete the application for Oregon Student Aid or ORSAA.
Downsides Of Interest-Free Student Loans
It sounds great to pay off your student loans without any interest. However, we recommend that you weigh the disadvantages with the benefits before you proceed. Here are some drawbacks to interest-free loans.
When you have federal student loans, you start making payments after graduation. However, with interest-free loans, you’re required to start your payments while you’re still enrolled. Aside from that, student loans with no interest offer no federal protection.
Federal student loans give you options such as income-driven repayments, deferment, and forbearance. You can use these plans to manage your payments or take a break and get your funds together before proceeding again. But with interest-free loans, you get no such options.
Final Thoughts
Interest-free student loans are the only type of education debt that’s free of any interest. And that’s because your interest won’t increase from the time you borrowed until you finish your payment.
But before you proceed, we recommend that you talk to an expert. They will help you make an informed decision; something don’t won’t cost you much for years to come.