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How to Find Interest-Free Student Loans

Kathryn Morstad
How to Find Interest-Free Student Loans
How to Find Interest-Free Student Loans

Interest-free student loans.

You may have heard of them.

You may have thought they were an urban myth.

But guess what? They do exist!

Funding a college education can feel like a full-time job. From filling out FAFSAs and applying for grants to interviewing with scholarship committees, there’s a lot that goes into securing enough money to pay for tuition, fees, books, and living expenses.

But for those that are resourceful, there may be interest-free student loans available to help pay for college.

What Is an Interest-Free Loan?

Student loan interest rates are going up, and that means college is going to become more expensive for borrowers.

Once you max out your savings, scholarships, grants, and other merit-based funds, you may need to access student loans to bridge any gaps. Federal or private student loans are possibilities, but what about interest-free student loans?

Sometimes referred to as ‘no interest loans’ or ‘scholarship loans’, these loans can help pay for college, and they never accrue interest. Let’s take a look in more detail.

Overview of Interest-Free Student Loans

They may be elusive, but interest-free student loans are out there – they just might take some detective work to find. Each will have different requirements, and many are specific to a state, city, or location. Because they are usually offered as rewards for academic achievement to those with a demonstrated financial need, they typically aren’t offered to first year undergraduate students. Still, it never hurts to look – especially when there are serious savings involved.

Once you find organizations and state agencies that offer interest-free student loans, you’ll want to research the requirements. Don’t hesitate to reach out to the organization directly with questions. After researching, if it sounds like you qualify, then it’s time apply. Be sure to have your FAFSA completed – most organizations will require it.

While full (interest free!) repayment is usually required, some organizations that offer interest-free student loans also offer alternative ways to repay the loan. Some repayment plans may require public or community service, rather than just repaying the borrowed funds. As with any student loan, you’ll want to make sure you understand all the repayment details before signing on the dotted line.

Interest-Free vs. Subsidized

Interest-free student loans are not the same as a federal Subsidized Loan, one of the types of Direct Loans available to undergraduate students. Unlike no interest loans, these loans have the interest paid by the government while the student is in school and during the six-month grace period following graduation. Following the deferment period, you begin paying the principal and interest together.

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What Are the Benefits 

The major benefits of interest-free student loans are the cost savings, which can make a huge difference in both your monthly payment and the lifetime cost of your loan. With no interest accruing, your monthly budget can benefit from a smaller, simple monthly payment. 


For example: 

Loan Type 

Total Loan Amount 


Interest Rate 

Monthly Payment 

Standard Federal Loan 


10 years 





10 years 




Those smaller monthly payments, combined with no interest accrual, will mean big savings over the life of the loan.   

For example: 

Loan Type 

Total Loan Amount 


Interest Rate 

Total Interest Paid 

Standard Federal Loan 


10 years 





10 years 




So, while you’ll need to do your research and it may take a little effort, you could save a lot by taking the time to search for an interest-free student loan. 

What Is the Difference Between Interest-Free Student Loans and the Current Student Loan Freeze 

Federal student loans are scheduled to resume payments at the beginning of January 2023. Once that deferment is lifted on federal loans, they will once again be due with full interest and principal. An interest-free student loan is structured with no interest, so only the principal is due throughout the life of the loan. 

How to Get an Interest-Free Loan 

First, you have to find them — then you have to have a great academic history. Next, it’s just a matter of following their requirements. 

Expect there to be a more rigorous application process since there are limited funds available and most interest-free student loans are awarded to exceptional students. 

Where to Look for Interest-Free Loans 

A great place to start your search is non-profits, philanthropic ventures, private companies, universities, and government agencies. In addition, you can get information from the following organizations: 

  • College financial aid offices 
  • High school guidance offices 
  • Service organizations, like rotary clubs and chambers of commerce 
  • Fraternities, sororities, and alumni offices (having familial ties can help) 
  • Charitable trusts 
  • Religious organizations 

Here is a brief list of foundations offering interest-free loans with a variety of requirements (this list is by no means exhaustive): 

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How To Apply for Interest-Free Student Loans 

Applying for an interest-free student loan is much like applying for scholarships or grants. While there may be some credit requirements, organizations that supply no interest student loans focus on their defined criteria, e.g., state of residence, academic record, etc. 

Many interest-free loans require an application, an essay submission, and a personal interview before the funds are awarded. 

In most cases, you will still need a completed FAFSA, which helps the loan program determine financial need. You will also need documentation about the school you attend and your personal information, like address of residence, social security number, and other identifying information. 

What Does It Take to Qualify 

So, what does it take to qualify for an interest-free student loan? Unfortunately, there is no set list of universal criteria, which means you’ll need to do a bit of research. Each organization is independent and has set up their own parameters. Here are some of the criteria you might encounter: 

  • Demonstrated financial need 
  • US citizenship
  • Residency or high school diploma from a specific state
  • Completion of the FAFSA, which details available federal loans, grants, and work-study programs
  • Record of GPA and test scores
  • Full-time enrollment in an accredited school 

Drawbacks to Interest-Free Student Loans 

While there are many obvious benefits of no interest student loans, there are some potential drawbacks that you’ll want to consider before taking advantage of this money saving alternative, including: 

  • You may have to start the payback process while still in school. Not all private interest-free student loans are deferred until graduation which means that your repayment period could start as soon as you take out the loan. 
  • Higher payments may be required. Your monthly payment may be higher than what the federal or private student loans are if you simply subtract the interest. Be sure to check the loan terms when negotiating your new student loan. 
  • No federal protections. With federal student loans, you get several protections and payback options that are not available with other private or no interest loans, such as income-driven repayment plans that extend payments up to 20 years, forbearance and deferment, and loan forgiveness plans, like the Public Service Loan Forgiveness Program.


If you’re ineligible for interest-free student loans, you may want to go the more traditional route and can always consider one of these options: 

  1. Scholarships and Grants — Like interest-free student loans, there are tons of scholarships and grants available to students. In fact, some of the organizations listed above help in finding student funding through scholarship and grant programs. 
  2. Federal Loans — The Department of Education’s federal student loan program offers Direct Subsidized and Unsubsidized loans, PLUS loans for graduate students, and Parent PLUS loans for parents of college students looking for school loans. 
  3. Private Student Loans — Once you have exhausted the first two options or met annual limits, private student loans are available. Private lenders offer great interest for student loans and flexible term options.  

If you want to explore private student loans, try Purefy’s rate comparison tool. You’ll just answer a few questions about yourself to see if you prequalify for rates from top lenders. 


Interest-free student loans are another option when looking for ways to pay for college. While they do require some legwork and can have lengthy application requirements, the money saved over the long term can be more than worthwhile. 

Although there are potentially some drawbacks and you’ll want to make sure you read the fine print, it’s worth looking into. 

 If you are considering private loans, contact Purefy to learn more about your options or schedule a 1-on-1 with one of our Student Loan Advisors. 

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Earnest Rate Disclosure

Rates displayed include the 0.25% Auto Pay discount. You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.24% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 3.83% APR to 12.53% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.

Responsible borrowing tip: Explore all scholarship, grant and federal options before applying for a private loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

ELFI Rate Disclosure

Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 10-24-2022. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

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College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
Minimum loan amount $1,000, as certified by your school and less any other financial aid you might receive.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
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Ascent Student Loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentStudentLoans.com/Ts&Cs.

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