Which Student Loan to Pay Off First?

Trish Sammer Updated on October 18, 2018

What’s the best way to tackle multiple student loan payments? Should you pay a little extra on every loan, every month? Or is it better to focus your attention on one loan at a time?

Paying down high-interest loans first can save you more money, but tackling low-balance loans first can provide a powerful mental boost. Of course, federal and private loans may have different loan terms that are worth considering. Let's take a look at how to parse out what's right for you.

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When you have student loan debt, you want to work smarter, not harder. It seems like it would make sense to focus on the loans with highest interest rates first because they cost the most. In general, that’s good advice … except if you have variable interest rate loans.

Even if the loan carries a lower interest rate now, it could balloon at any time. In fact, you should probably consider refinancing anything with a variable interest rate to avoid this situation.

Otherwise, order your loans into interest-rate order and start hacking away at the one with the highest interest rate.

Make strategic payments

There are two common routes to paying off student loan debt.

The debt avalanche method works by tackling the most intimidating figures first. When going the avalanche route, you would pay more toward the loan with the highest interest rate first while paying the minimum on the lower interest loans.

The debt snowball method takes a different approach. This method is all about making yourself feel good. With this strategy, you organize your loans from smallest balance to the largest and work on paying the lowest first.

The snowball method is awesome because it gives you a chance to see the process in action and feel more accomplished, knowing that you have reduced the number of loans you have left.  

Which method should you choose? They both work well, so select the one that you think will fit better with your personality.

Should you pay off federal or private student loans first?

Because private loans can be less flexible and lack the forgiveness and income-based repayment options of federal loans, it may make sense to tackle private loans first.

However, if your federal loans carry much-higher interest rates, you might want to go ahead and make those a priority. 

The fastest way to pay off student loan debt

If you qualify, refinancing may be the single-best thing you can do to get out of student loan debt faster.

Not only can you reduce your monthly payments, you can probably also get a much-lower interest rate—so you’ll be paying less every month, while making faster progress on chipping away at your debt.

You can refinance all of your debt, or just some of it. In any case, lower interest rates are going to save you a boatload of cash over the long run. (How much is a "boatload?" Our research tells us most people save close $16K over the life of their loans.)

One caution: refinancing federal loans may cause you to lose some benefits, so be sure to carefully weigh the pros and cons. 

Think of the future 

Student loans have the potential to affect more than how much school debt you carry.

Reducing your debt-to-income ratio by lowering the amount of your monthly student loan payments can help make you appear more creditworthy if you’re planning to get a mortgage or car loan.

Many people are able to lower their student loan payments by more than $200 per month through refinancing. See how much you might be able to save by checking out our Student Loan Refinancing Calculator.

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Published in: Refinance

About the Author
Trish Sammer

Trish Sammer is Comet's managing editor. Her work has appeared in Woman’s Day, Redbook, Huffington Post, TechCrunch, and Forbes. She has also written for various corporate clients, including the tech giant SAP, The Franklin Institute, and PSE&G. When Trish isn’t busy acting as a writing ninja for other people, you can find her … well, writing about other stuff, like divorce and blended family life. She lives outside of Philadelphia with her almost-husband, their combined brood, and the world’s laziest dog. Read more by Trish Sammer

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