Paying for college can be overwhelming. There’s a lot of different costs that go beyond the expected expenses like tuition and room and board. If you take out a loan, you may be asking yourself, are there such things as interest free student loans out there?
Low interest rate student loans & no interest student loans
Student loans can be a reasonable and common way to finance college tuition, books, supplies, room and board, and other costs associated with making education a reality. According to a recent study, more than half of families borrow to pay for college (though it covers the smallest portion of college costs when compared to other funding sources, like scholarships). Borrowing for college can be an expected part of the paying for college process – about 6 in 10 families who took out loans say it was always a part of their plan.
So, families often borrow to pay for college. But with what kind of loans? And with what interest rate? And, are there loans out there that are low, or even no, interest?
Here’s the answer: Unlike unicorns, but almost as rare, there are low interest and no interest student loans available. Usually offered by nonprofit organizations and private companies, they’re sometimes lumped in with college scholarships and college grants, and they can be highly regionalized by state or locality. Talk with your parents about organizations they may belong to, like religious groups or their college fraternity or sorority, and research each of them online for more information about your specific profile and need. Some of these might be of interest:
Types of interest free student loans
Before you begin, know this: there can be drawbacks to private corporation interest free loans: You might be trading the lack of interest for a very specific type of repayment schedule timeline or terms. Some loans require you to start repaying the loan while you’re still a student, negating the no-interest-student-loans-until-graduation dream. If a company is giving you a loan (basically for free), be very careful about what you’re agreeing to. If you find a no-interest loan that perfectly suits your needs, read the fine print carefully, and have an extra set of eyes, like your parents, look at it too. The sweetness of the “free” loan might actually be difficult to manage.
Slightly easier: the low interest student loan
On the other hand, low interest student loans are more readily available, depending on your eligibility and/or credit. Federal student loans for the 2019-2020 school year are at 5.045% for undergraduate loans, and 4.529% for unsubsidized graduate loans.
Remember, a subsidized student loan, that you could be eligible for through your FAFSA (Free Application for Federal Student Aid) application, means you do not pay on the interest of the loan while you are still in school. The government subsidizes, or takes care of that money, while you’re a student. Yes, you will accrue interest on the loan, but you’ll only be responsible for that interest after graduation.
Not eligible for a subsidized student loan? Private loans are also available, but the interest rate will be determined by your credit. There are a variety of banks and lenders, with both variable and fixed rate student loans. Again, do your homework and research carefully.
Zero interest graduate student loans
Are you a graduate student looking to further your education with no or low interest student loans? Interest free loans for graduate students can be harder to come by. Start online, talk to your professors, and visit your university’s financial aid department. If you’re looking to attend law or medical school, there are specific programs for those fields. Graduate scholarships and grants, teaching assistantships, and other in-program financial help is available, but it’ll take work to find it.
Education is important, and so is your post-college life, which can be impacted by some big choices you make now. Don’t take your financial responsibility lightly. Research all of the student loans available to you, and decide what products work best for you and your family.