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If you live in South Dakota, you may not have been able to pay for college entirely out of pocket. Seventy-two percent of students in the Class of 2018 graduated with South Dakota student loans, with an average of $31,895 in student loan debt, according to The Institute for College Access & Success (TICAS).
If you’re not sure how to pay for higher education, or if you have existing student debt you want to save money on, let’s look at your options for both new and refinanced student loans in South Dakota.
How to get South Dakota student loans
Let’s first take a look at how to get student loans if you’re currently attending a school in South Dakota. Of course, you’ll want to apply first for as many scholarships and grants as possible (since those almost never need to be repaid). But after that, here are some places to turn to pay for college:
Federal student loans
The federal government offers student loans that you can use to pay for school at any qualified college, including those in South Dakota. You can borrow between $5,500 and $12,500 per year as an undergraduate, depending on your year and dependency status.
There are two main types of federal student loans: subsidized and unsubsidized. The government covers interest on subsidized loans during periods of deferment, whereas you’re responsible for all the interest that accrues on unsubsidized loans.
Any U.S. citizen or qualifying resident at an eligible school can get federal student loans, regardless of their credit situation or income. Loan interest rates are set by Congress each year, and the current rate is 2.75% on undergraduate loans disbursed until June 30, 2021.
In order to borrow federal student loans, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). The information is sent to your preferred schools, and the amount you can borrow is presented as part of your financial aid package.
These federal student loans should usually be the first place you turn after exhausting your possibilities for scholarships and grants. This is because federal loans offer special protections and programs that other sources generally don’t.
Federal parent PLUS loans
It’s also possible for a parent to help you by getting a federal parent PLUS loan. Rather than you having to repay this student loan, your parent takes on that responsibility.
To borrow a parent PLUS loan, your parent will have to fill out the FAFSA, as well. Unlike other federal student loans, however, PLUS loans come with credit requirements. They also have a higher interest rate — currently 5.3%.
While you might not have your parent cover the entire cost of your college with a parent PLUS loan, this loan can help if they’re willing and able to borrow it.
Private South Dakota student loans
The federal government isn’t the only place to turn to for South Dakota student loans. Private lenders can provide extra funding when federal loans won’t get the job done.
However, the lowest listed interest rates on private student loans aren’t available to everyone. Each lender has its own requirements, terms and interest rates, so the requirements aren’t uniform the way they are for federal loans.
Depending on your credit, though, it might be possible to get a lower interest rate with private student loans. If you don’t have the credit or income to qualify for private student loans on your own, you’ll need to bring a cosigner with good credit into the mix.
Finally, as noted above, remember that private student loans don’t offer the same repayment options and protections as federal student loans. With federal loans, you can likely sign up for income-driven repayment to cap your monthly obligation at 10% of your income and possibly lead to loan forgiveness.
While some private lenders, including Earnest, have hardship programs, they aren’t guaranteed — plus, you might have to begin repaying private student loans while you’re still in school.
Since private loan terms and rates vary, it’s a good idea to shop around with a few different lenders to find your best deal.
Interest-free South Dakota school loans
Some schools in South Dakota offer small, interest-free loans to students who need help with paying for supplies. For example, the University of South Dakota offers a loan of up to $500 to full-time undergraduates at its Vermillion campus. This money can be used to buy textbooks and supplies at the campus bookstore.
Check with the college you plan to attend to find out if it offers similar loans — a small amount can go a long way when you aren’t required to pay interest.
Refinancing your South Dakota student loans
Once you finish school and enter repayment, it’s time to figure out if you can afford each month’s obligation.
In some cases, if your income is low or if you can’t find a job, going on an income-driven repayment plan makes sense. Your payments are capped so they’re feasible, and you can consolidate your federal student loans so you have a longer term and lower, more manageable payments.
However, this strategy for handling your student debt can mean more money will be paid in interest charges over the life of the loan. Refinancing to a lower interest rate, on the other hand, can mean thousands of dollars in interest savings over the life of your loan.
As stated earlier, according to TICAS, South Dakota graduates have an average debt of $31,895 at the end of a four-year program. Let’s say you owed that amount at a 5.05% rate. If you were able to refinance to a 3.05% rate, you could save $3,643 over 10 years of repayment.
Our student loan refinancing calculator reveals exactly how much you could save by lowering your interest rate. But note that although refinancing can lead to savings, it’s unfortunately not available to everyone.
You’ll need to meet a lender’s underwriting requirements for credit and income, or apply with the help of a cosigner. Another potential downside is that when you refinance to a private loan, you lose federal protections, such as income-driven repayment plans or Public Service Loan Forgiveness.
Before refinancing, make sure you’re comfortable sacrificing federal benefits and have the income to make consistent, on-time payments on your student loan.
Reduce your need for South Dakota student loans
Even though there’s a good chance you’ll need some student loans to finish school, there’s no reason to immediately turn to debt. Here are some of the steps you can take to reduce your need for South Dakota student loans and still pay for college:
- Fill out the FAFSA to see if you qualify for federal and school grants, as well as work-study programs.
- Apply for scholarships while in high school and keep applying for scholarships during college.
- Find a part-time job or get a side hustle during school to help pay for costs.
- Consider a less-expensive school with a lower bill, including starting at a community college.
- If possible, live at home for part of your college years to save money on living costs.
College can be expensive, but you don’t have to come out drowning in debt. Do what you can to reduce the initial cost, and then borrow only what you have to for higher education.
Rebecca Safier contributed to this report.
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