Just an FYI to those that want to do interest free / no-written agreement loans to friends and family: The IRS really doesn't like you. You probably won't get caught for smallish loans, but charging zero interest does have tax implications.
sample article (though there are many if you want to go poike around)
http://online.wsj.com/news/articles/SB10001424052702303822204577464360987873678
We've offered to do this for a family member who's considering medical school. We'd effectively be the banker who issues the student loan at whatever AFR is force when they want the loan(s). It's a little better than long-term CD rates, but not necessarily a risk-adjusted return. They're taking the MCAT and applying to medical schools, and we'll revisit the question in a few months.
Complications include disasters like unemployment or lenders/borrowers divorcing or dying before the loan is paid back, and whether an unpaid loan should be included in probate or forgiven. We'd also have to issue some sort of 1098 for the interest. However it looks as if it can all be written up in a two-page agreement, and that's more for the benefit of the IRS than for the people swapping the money.
I think the biggest issue is how both sides perceive their lifestyles and their obligations during the loan repayment. It's all too easy for people to feel that they're being criticized or disrespected (irrespective of the actual situation), and that can lead to long-simmering resentments or outright disputes. My spouse and I have also had a few interesting conversations about our own attitudes toward family lending. We might not be quite as altruistic as we'd like to think we are, and we certainly have control issues.
While I'm willing to lend at 3% to a worthy family member who'd otherwise be trying to borrow at 6%, it might not be in their best interest to take my money. They were very grateful (and relieved) to get the offer, and that's what really counts.