Updated on 9/20/2010: An earlier version of this story omitted an organization that make interest-free student loans.
Although the federal government will make millions of subsidized Stafford student loans at the bargain interest rate of 4.6 percent this academic year, a few thousand lucky students will get even better deals—loans that charge no interest at all.
A handful of charities and colleges make student loans that only require the borrowers to repay the amount they borrowed—saving students thousands of dollars.
[Read about the pros and cons of interest-free loans.]
The organizations listed below offer interest-free loans to people of all faiths. While all students like to save money, observant Muslim students often feel extra pressure to find interest-free loans because Sharia prohibits the paying of interest. A few of the organizations, such as the Bill Raskob Foundation, make loans to students from across the nation. Most of the listed charities only make loans to people in their geographic areas, however.
Students seeking additional interest-free educational loans can also check with religious organizations such as the International Association of Hebrew Free Loans, ethnic societies and local community foundations. It also pays to ask your college's financial aid officers and department chairs, since some colleges, such as Chapman University, and some college departments, such as Ohio State's Civil Engineering program, offer a few interest-free loans.
Abe and Annie Seibel Foundation offers loans of up to $6,000 to about 800 Texas residents attending Texas colleges. The application deadline is February 28. The foundation has no website, but can be reached at (409) 770-5665.
Bill Raskob Foundation offers loans of up to $8,000 (but most range from $3,000 to $5,000) to about 60 sophomores, juniors, or seniors. The application deadline is April 1.
Central Scholarship Bureau of Maryland offers loans of up to $10,000 to about 150 Marylanders. The bureau requires each borrower to find an adult to cosign, or commit to repay, the loan. The application deadline is May 10.
Evalee C. Schwarz Charitable Trust for Education awards loans of up to $15,000 to students who have grades and scores in the top 10 percent, have Expected Family Contributions below $4,600, attend in-state schools and are not seeking law degrees. The application deadline is April 10.
Jewish Free Loan Association offers loans of up to $3,500 (although some specialized programs, such as nursing, have higher limits) to about 650 Los Angeles area residents of any faith. The association accepts applications throughout the year.
Leo S. Rowe Pan American Fund offers loans of up to $7,500 to about 70 upperclassmen who are citizens of Latin American or Carribean nations who want to study in the United States and return to their home countries. The fund accepts applications throughout the year.
Massachusetts No Interest Loan makes loans of up to $5,000 a year to undergraduates who are permanent residents of Massachusetts and attend Massachusetts colleges.
Military Officers Association of America Scholarship Fund offers loans of up to $5,500 to about 1,500 children of active or retired military who have a grade point average of at least 3.0. The application deadline is March 1.
Scholarship Foundation of St. Louis makes loans of up to $5,000 a year to about 600 low-income students in the St. Louis area. Deadlines are November 15 and April 15.
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