Student Loans That Don’t Require Payment While in School

Navigating the world of student loans can be daunting, especially considering the various repayment options available. Many students need student loans that require no payments while in school. This allows them to focus on their studies without worrying about monthly loan payments. 

We’ll explore federal and private options for loans with in-school deferment, their pros and cons, and how to apply for these loans.

Are you eligible to defer payments while in school?

Whether you’re eligible for deferment—meaning you don’t make payments while in school—might depend on your enrollment status. Here are the most common options:

• Full-time enrollment: Often requires 12 or more credit hours per semester. Usually eligible for in-school deferment.
• Half-time enrollment: Generally involves six to 11 credit hours. Eligible for in-school deferment with many loan programs.
• Part-time enrollment: Fewer than six credit hours. Eligibility for deferment varies by lender.

Enrollment status can affect whether you must make payments during your school years. Student loans with no in-school payments can offer relief for those who need financial aid, allowing them to pursue their education without the immediate financial burden. 

Make sure you understand the impact of not making any payments during school: It will most likely increase your future monthly payments and what you repay, but that may be the best option.

Erin Kinkade

CFP®

Types of student loans with no payments while in school

The two main categories of student loans are federal and private. In many cases, both allow you to forgo monthly payments while you’re in school.

Federal student loans

The two most common types of federal student loans are Subsidized and Unsubsidized. Both allow deferred in-school payments for students enrolled at least half-time.

Here are the similarities and differences at a glance:

	Subsidized student loans	Unsubsidized student loans
Are undergraduate students eligible for the loan?	✔️	✔️
Are graduate students eligible for the loan?	❌	✔️
Requires a demonstrated financial need to take out the loan?	✔️	❌
Minimum enrollment requirements to take out the loan	At least half-time	At least half-time
Undergraduate student annual loan limits	$3,500 in year 1 $4,500 in year 2 $5,500 in year 3 and beyond	$9,500 in year 1 $10,500 in year 2 $12,500 in year 3 and beyond
Graduate student annual loan limits	Not applicable	$20,500
Origination fee required?	✔️	✔️
Government pays interest while in school?	✔️ (if enrolled at least half-time)	❌
Current interest rates (as of August 2023)	5.50%	5.50% for undergraduates 7.05% for graduate students

Subsidized loans

Subsidized federal student loans benefit undergraduate students with financial need. 

While you’re enrolled at least half-time, the government pays the interest on these loans, offering a significant advantage. The grace period extends this benefit for six months after you leave school, so interest doesn’t accrue during this time either.

• Full-time students: No in-school payments required
• Half-time students: No in-school payments required
• Part-time students: In-school payments are required if enrolled less than half-time

Note: Subsidized loans aren’t available to graduate students.

Unsubsidized loans

Unsubsidized federal student loans are available to undergraduate and graduate students. 

Unlike Subsidized loans, interest accrues on these loans while you’re in school. It’s up to you whether to pay the interest or let it capitalize, adding to the total loan balance.

• Full-time students: No mandatory in-school payments
• Half-time students: No mandatory in-school payments
• Part-time students: In-school payments are required if enrolled less than half-time

The rules remain the same for graduate and undergraduate students.

Private student loans

Private lenders also offer student loans with no payments while in school, often with options to suit different needs. 

Here’s an overview of some private lenders that allow students to defer payments while they’re enrolled.

Lender	Enrollment requirement	Grace period	Deferred in-school repayment option?
College Ave (best overall private student loan)	Must be enrolled at least half-time	6 months	Yes
Sallie Mae (best private student loan for cosigners)	May be enrolled full-time, half-time, or less	6 months	Yes
Ascent (best private student loan for eligibility)	Must be enrolled at least half-time	9 months	Yes

Compared to federal student loans, many private loans offer different interest rates (including variable rates) and repayment options. 

Federal loans include certain protections private loans don’t, including income-driven repayment plans and loan forgiveness programs. It’s crucial to understand these differences and review the terms and conditions of each loan to make the best decision for your educational needs.

We always recommend exhausting available federal student loans before you apply for private loans.

Pros and cons of in-school deferment

In-school deferment is necessary for many students, but before you defer your loans, consider the following pros and cons.

Pros

• No financial stress while studying

  By deferring payments, you can focus on your education without the burden of immediate repayment.

• Focus on academics rather than part-time jobs

  With no payments due, you may be able to dedicate more time to your studies instead of working part-time to make loan payments.

• Potential no-interest options

  The U.S. government pays the accrued interest on Subsidized federal student loans during in-school deferment.

Cons

• Accruing interest during school (if applicable)

  Unsubsidized federal and most private student loans may accumulate interest while you’re in school, leading to a larger balance.

• Potential for larger debt at graduation

  The deferred payments and accrued interest might lead to a larger debt once you graduate, affecting your financial future. (See example below.)

• Different terms and conditions based on the type of loan

  The details of deferment can vary, so it’s essential to understand the specific terms of your loan to avoid unexpected issues.

Ask the expert

Erin Kinkade

CFP®

A common mistake student borrowers make when deferring payments while in school is understanding the impact of interest accruing. To remedy the pitfalls, take the time to evaluate your current financial condition and options to fund education—and research each option—to understand how the student loan works. Don’t forget to speak with a trusted and knowledgeable advisor.

The table below shows an example of interest accrual on a $10,000 student loan with a 6% fixed APR:

Year in school	Interest accrued	Total loan balance
1	$600	$10,600
2	$636	$11,236
3	$674	$11,910
4	$715	$12,625

The above table illustrates how interest can accrue during your time in school, leading to a larger loan balance at graduation. Consider this when evaluating the pros and cons of in-school deferment.

How to apply for these student loans

Navigating the application process for student loans can be challenging, especially if you’re considering federal and private loans. Here’s what you need to know:

Eligibility criteria

Understanding the eligibility requirements is the first step to securing the right student loan for you.

• Federal loans: Often based on financial need, academic standing, and enrollment in an eligible institution.
• Private loans: Typically require creditworthiness, often through a cosigner, and enrollment in a recognized school.

Application process

Applying for federal and private loans involves distinct steps.

• Federal loans:
  • Complete the Free Application for Federal Student Aid (FAFSA) by the deadline.
  • Review your Student Aid Report (SAR). This might be paper or electronic, and it will include your estimated eligibility for Federal Pell Grants (which you don’t need to repay) and federal student loans.
  • Accept the aid package from your school.

• Private loans:
  • Research several private lenders to find the best fit, and be sure to confirm they allow deferred in-school repayment.
  • Complete the lender’s application, often online. (Prequalify if possible: You can do this without a hard credit pull to get an idea of rates and terms you might qualify for.)
  • Provide necessary documentation, such as proof of income or credit history.
  • Accept the loan from your selected lender, and choose the deferred repayment option.

Documentation required

When applying for student loans, you might need the following:

• Federal loans:
  • Social Security number
  • Tax records
  • Information about income and assets
    • Be prepared to provide the information above for your family if you’re a dependent student.

• Private loans:
  • Credit report
  • Proof of income
  • Cosigner details, if applicable

Understand federal and private loan processes to ensure you find the right financial support for your education journey.

Tips to choose the right student loan with no in-school payments

Choosing the right student loan can be a critical decision that affects your financial future. It involves comparing options, including federal and private loans. Here’s what to consider:

Compare federal and private loans

• Federal loans: Our first choice—they often provide lower interest rates and more flexible repayment options, especially for those with financial need.
• Private loans: Cover the difference between the funds needed and federal loans you’re eligible for—they can offer various terms and interest rates, potentially requiring a credit check or cosigner.

Considerations when choosing a loan

When evaluating student loans, consider the following:

• Interest rates: Lower rates can save you money over the life of the loan. Federal loans typically offer fixed interest, and private loans may offer both fixed and variable rates.
• Loan terms: Understanding the repayment timeline and options for deferment can help align the loan with your financial plans.
• In-school payment options: If you’re looking to defer payments while in school, ensure this option is available, and understand how interest might accrue.
• Lender reputation: Especially for private loans, research the lender’s reputation, customer service, and reviews to ensure a positive experience.
• Eligibility and application process: Consider the requirements and ease of application to make an informed choice.

Tip

Financial planner Erin Kinkade, CFP®, advises: “I recommend students prioritize federal student loans. If they max out federal loans and still need funds for their education, they might consider private student loans.”

Selecting a student loan requires careful consideration of the terms, interest rates, and unique features of your federal and private options. Investing time in research and understanding your needs will lead to a decision that supports your educational and financial goals.

FAQ about in-school student loan payments

What are the eligibility criteria for federal student loans with no payments while in school?

You must meet certain qualifications for federal student loans with no in-school payments, including:

• Be enrolled at least half-time in an eligible degree or certificate program.
• Demonstrate financial need (for Subsidized loans).
• Maintain satisfactory academic progress.
• Have a valid Social Security number (exceptions apply for some students).
• Be a U.S. citizen or eligible non-citizen.

If you’re seeking student loans for less than half-time enrollment, consider Sallie Mae private student loans.

How does the interest work on these loans if I’m not paying while in school?

Interest accrual varies between Subsidized and Unsubsidized federal loans as well as private loans:

• Subsidized loans: The government covers interest while you’re enrolled at least half-time, during grace periods, and deferment periods.
• Unsubsidized federal and private loans: Interest accrues during all periods, including while you’re in school. If not paid, it’s added to the total loan balance, leading to a larger overall debt.

Can I make voluntary payments on these loans while still in school?

Yes, you can make voluntary payments on federal and private student loans even if they aren’t required while in school. This can reduce your overall interest and decrease the total loan cost. Most lenders and loan servicers don’t assess a penalty for early payments.

Are any private lenders known for offering student loans without payments while in school?

Many private lenders offer this feature, including College Ave, Sallie Mae, and Ascent. Each lender has unique terms and conditions.

What happens if my financial situation changes while I’m in school?

Changes in financial situations can affect your eligibility for Subsidized loans. Notify your school’s financial aid office to re-evaluate your financial need. Changes may result in adjustments to your loan amount or type.

If you have private student loans, we recommend contacting your lender as soon as you experience any changes in your financial situation. Many lenders will work with you to ensure your account stays current.

Can I switch payment plans while I’m still in school?

Most federal student loans allow you to change repayment plans. Contact your loan servicer for assistance and to understand available options. Private lenders may also have flexibility, but terms can vary.