When deciding which student loan to pay off first, consider what motivates you.
If you’re determined to save as much money as possible, tackle the loans with the highest interest first. If you need some momentum, knock out small balances first, regardless of interest rate.
When your goal is to pay off student loans fast, the best strategy is the one that keeps you on track. Whichever you choose, remember to always pay the minimum on all your student loans — even if it's not the one you're trying to pay down.
3 ways to prioritize student loan payments
Whether you have private loans, federal loans or both, consider these strategies:
Pay off high-interest loans first
Getting rid of loans in order of the highest to lowest interest rate is called the debt avalanche, and it will save you the most money. Paying off a loan with a 4.53% interest rate, for example, lets you keep 4.53% of the balance each year you would have been in repayment.
Here’s an example with two $10,000 loans and two different interest rates.
- Say your $10,000 loan has a low 4.53% interest. If you pay it off in five years — rather than the standard 10-year repayment timeline — you will save about $1,259 in interest.
- Say your other $10,000 loan has a 7% interest rate. If you prioritize that loan over the 4.53% loan and pay it off in five years rather than 10 years, you will save more: $2,052.
As you pay off each loan, roll over your payment to the next highest interest rate.
Pay off small loans first
Some borrowers like watching their loans disappear, which encourages them to continue focusing on debt payoff. If that sounds like you, use the debt snowball method. You’ll pay off the smallest student loan first, rather than the one with the highest interest rate.
As you pay off each loan, roll over your payment to the next smallest balance.
Combine strategies
You can also opt for a combination method. Rank your loans by interest rate, and if several have the same or similar rates, pay off the smallest one first. You’ll still get some savings from choosing the debt avalanche strategy, but you’ll enjoy early, quick wins, too.
🤓Nerdy Tip
When determining which loans to prioritize, also consider whether a loan is federal or private. Private loans have fewer repayment options and opportunities for forgiveness than federal loans, as well as a higher interest rate. So you’ll likely want to pay those sooner.Pay attention to the big picture
Not everyone should pay off student loans early. First, aim to:
- Saved at least a month of expenses for emergencies.
- Started saving automatically for retirement, either by getting the company match on a 401(k) or putting money in a Roth IRA.
- Made a plan to pay off credit card balances, which often have the highest interest rates of all.
If you're not quite ready to aggressively repay student debt, some strategies can still help you chip away at your balance. For example:
- Making biweekly loan payments will shrink your repayment term.
- Refinancing private student loans can often lower your interest rate and has no fees.
» MORE: NerdWallet's editorial team's picks for the best private student loans
