Do no-interest student loans exist?

No-interest student loans exist, but they’re extremely rare. If you’re searching for ways to lower your borrowing costs, it’s more realistic to aim for low-interest student loans like federal loans, and fill in any funding gaps with private student loans. 

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

• What are no-interest student loans and how do they work?
• Where to find no-interest student loans
• Where to find low-interest student loans

What are no-interest student loans and how do they work?

No-interest student loans don’t accrue interest — the amount you borrow is the amount you’ll repay. This type of student loan could save you a lot of money compared with one that accrues interest.

For example, say you have a 10-year, $10,000 no-interest loan. In that case, you’d only repay $10,000. By contrast, if you took out a 10-year, $10,000 student loan with 5% interest, you’d pay a total of $12,727 over the life of the loan.

No-interest loans work the same 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 no-interest student loans

Although interest-free student loans are rare, here are some places you may be able to find them:

• Private companies
• Nonprofit organizations
• Religious organizations
• Fraternities and sororities

Below are some organizations that offer no-interest student loans:

Abe and Annie Seibel Foundation

If you’re a U.S. citizen and Texas high school graduate enrolled full-time at an accredited Texas college or university, you might qualify for a no-interest student loan from the Abe and Annie Seibel Foundation.

Here are the requirements for this program:

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

Applications are accepted from Jan. 1 through Feb. 23 of each year.

Bill Raskob Foundation

The Bill Raskob Foundation offers no-interest student loans to U.S. citizens. You can submit an application if you’re at least a second-year student enrolled at an accredited school for the upcoming year.

Evalee C. Schwarz Charitable Trust for Education

You may qualify for a no-interest student loan from Evalee C. Schwarz Charitable Trust for Education if you meet these requirements:

• You’re a U.S. citizen
• You attend a school where you live
• You have a test score that ranks in the top 15% nationwide
• You qualify for federal grants
• You’re not seeking a law degree

Military Officers Association of America

If you have a parent who’s eligible for the Miltary Officers Association of America or has served in a branch of the military, you may qualify for a no-interest loan. Here are the requirements:

• Must be younger than 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’re not attending an academy prep school or military academy
• Parent has paid their MOAA membership

Where to find low-interest student loans

If you can’t find a no-interest student loan, look into federal and private student loans. Federal student loans come with low, fixed rates and most don’t require credit checks. Private student loan interest rates, on the other hand, are based on your credit history.

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

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

• Direct Subsidized 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 U.S. Department of Education pays the interest on the loan.
• Direct Unsubsidized Loans — All undergraduate and graduate students can qualify for this type of federal loan — you’re not required to demonstrate financial need. Unlike a Direct Subsidized Loan, you’re responsible for paying the interest that accrues on the loan while you’re in school.

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