Interest Free Student Loans
College has never been more critical and never more expensive. Tuition, room and board, books, and other educational expenses continue to skyrocket. As U.S. News points out, private universities today can cost as much as $50,000 a year, and while public universities may be less expensive, particularly for in-state residents, the cost is still significant. In short, college has become a necessary but difficult investment. One of the ways to circumvent the problem is by pursuing student loans. Student loans can be obtained either from the government or from third party agencies such as corporations and financial institutions.
What should I know?
Student loans come at a price. Universities that offer loans will often disburse a limited amount of money then try to take a realistic view of what students will be able to repay over time. The standard is to obtain a university loan of about $4,000 a year. But the best part of university issued loans is that they tend to be interest free student loans, meaning the amount to be repaid does not increase with time. Unfortunately, these loans are becoming increasingly rare, however, as CNN details, they do exist. In contrast, most of the loans that you obtain from the government and financing agencies will tend to come with a certain interest rate. This means that it is a greater challenge to repay your debt in a timely manner.
How can I pursue interest free loans?
When you apply for university based financial aid, you are generally expected to submit your bank statement, tax returns, and the FAFSA (Free Application for Federal Student Aid). Based on your income and assets, universities may award you a certain amount of interest free student loan. Interest free student loans are relatively uncommon, though, so do not expect to receive one. Special interest groups and private organizations with a mandate may be interested in providing interest free loans to students with specific backgrounds and aspirations.
What are the characteristics of interest-free loans?
The major characteristic of an interest-free loan, as the name suggests, is that students only have to repay the amount borrowed. In other words, they only pay the principal. There is no interest rate. However, it’s important to remember that there is a difference between subsidized and interest-free loans. Subsidized loans are not interest-free loans since they carry an interest rate. This interest rate is just lower than other loans because it’s subsidized (usually by the federal government).
My search for free student loans mentioned federal aid options. How can I apply for these?
Students can apply for federal aid options by filling out the FAFSA (Free Application for Federal Student Aid) application, which is available online and can be submitted at fafsa.ed.gov. With the help of this application, students can apply for loans, grants, and federal work-study. Students should estimate the cost of their attendance before applying for federal aid.
Are there any college loans that are interest free?
There are many different types of student loans available, and they all carry interest rates that are added onto the principal amount. For federal loans such as the Stafford and the Perkins, the federal government has subsidized interests rates in order to keep loan payments low and affordable. Notably, there are no loans that come without an interest rate. Furthermore, private loans carry higher interest rates, which vary according to the market.