Student Loan Payment Methods: Which Loans Should You Pay Off First?

5 min read

Posted on April 14, 2022

woman drinking coffee figuring out which student loans to pay off first

There are all sorts of different repayment options out there. For this reason, figuring out a successful repayment plan for your student loans can seem extremely challenging. These different plans beg the question: which loans to pay off first?

While there is no one correct way to pay off your student loan debt, there are factors to consider in order to make the best decision based on your personal finances. In the months after graduation and beyond, borrowers like you should choose the method that will:

  • save you the most money.
  • cause you less stress.
  • help you pay your debt sooner.

Let’s discuss how to make this decision below.

Determining Which Student Loans You Should Pay Off First

When deciding which loans to pay off first, there are a few key things you should take into consideration: What type of student loans do you have? What are your student loans with the highest interest rate? What are your current monthly payments?

Some of the repayment strategies could include:

  • pay off high-interest debt first.
  • pay off smallest student loans first.
  • pay off private student loans first.

We’ll go into more detail on these loan repayment strategies to help you figure out which method is best for your financial situation.

Pay Off High-Interest Debt First

One strategy you could use for loan repayment is to pay off the higher-interest rate loans first. This is also commonly referred to as the debt avalanche method.

The avalanche method involves making large monthly payments to your loans with the highest interest rate, then making minimum payments on the rest. After your first loan is paid off, you can start making extra payments toward the loan with the next highest interest rate, and so on. You repeat this until you’ve reached the end of your list of loans.

This method is a great way to help you save on the total amount of interest you spend over the life of the loan. It might save you even more money in the long run because of the way you tackled the higher interest loans first.

Pay Off Your Smallest Loans First

Another method that you could use to pay off your student loans is to prioritize the loans with the smallest balances first. This is known as the debt snowball method. Paying off the smallest loan balances first may not save you a ton of money in the long run, but it could help relieve stress and raise your credit score.

Lenders like to see debt payoff on your credit report because it shows that you have the capacity to pay off your loans. So, if you make minimum monthly payments on your larger loans and bigger payments on your smallest debt, you may be able to positively impact your credit score by paying off a portion of your student loan debt sooner. Beyond this, paying off your lowest balance could also help you stay motivated to continually pay down the balances on the rest of your loans.

Pay Off Your Private Student Loans First

Alternatively, you could also focus on paying off your private student loans first as opposed to your federal student loans. This can often be helpful to borrowers in the long run because of the various federal student loan programs available. In some cases, if you make a certain number of qualifying monthly payments over a long period of time, you might even qualify for a portion of your federal student loans to be fully forgiven by the federal government. What’s more, federal student loans also tend to have a lower interest rate and shorter loan terms compared to private ones.

For this reason, your private student loans will not qualify for any income-driven repayment plans or forgiveness programs offered by the federal government. This means that they will continue to grow in interest over time. If you’re a borrower with more private than federal loans, consider putting any extra money you have toward your private student loan payments over your federal ones.

Other Student Loan Repayment Options

It’s one thing to ask which student loans to pay off first, but what if these above payment options don’t work for you? After all, not everyone has extra money to put toward student loan payments every single month. There are alternative repayment options that could help you take control of your student loans.

These repayment options include:

  • debt consolidation.
  • student loan refinance.

Both of these methods could reduce your monthly payments, make your payments less stressful or save you money in interest.

Consolidating Your Debt

Debt consolidation is the process of taking all of your student loan debt and combining it into a single loan with a single monthly payment. This process works for all types of loans, including personal loans, credit card debt, student loans and even car loans.

With this repayment option, you can consolidate your debt into a single monthly payment, so you do not have to worry about making multiple payments to multiple lenders. You may even be able to consolidate at lower interest rates, so you can save money in the long term.

Refinancing Your Loans

Many lenders offer the ability to refinance student loans to get new loan terms and a new interest rate. Sometimes referred to as a “refi,” refinancing your student loans involves replacing the existing loan(s) with a new loan that can have a different interest rate, payment amount and/or loan term. If you qualify for refinance, this could help you save on interest and monthly payments. You could consider refinancing at any point during the life of your loan. As noted earlier, when you refinance federal loans into private loans, you lose access to various federal programs, such as income-driven payment and forgiveness.

Frequently Asked Questions About Which Loans to Pay Off First

What is the best method for student loan repayment?

There is no best way to pay off your student loans. You can start by prioritizing whatever loans you feel most comfortable paying off first. It’s important to pay off your debt in whatever way is easiest for you and your personal finances. This can include paying off high-interest debt first, paying off your smallest loans first, paying off your private student loans first, debt consolidation or student loan refinancing.

Should I pay off my subsidized or unsubsidized loans first?

Unsubsidized federal loans will generally have a higher interest rate, so it may be better to focus on paying those down first. However, it is still important to make your minimum monthly payments on all of your loans on time — regardless of whether they’re subsidized or unsubsidized.

Will student loan debt affect my credit score?

Your student loan balance does affect your credit score. While student loans will not automatically hurt your credit if you are making on-time payments, you may see an improvement as you pay off more loans.

Check Out Your Student Loan Repayment Options

No matter which student loan repayment option you choose, it is important to stay up to date with your student loan payments. You may also want to pay them down as quickly as you can to get debt-free.

Explore our student loan refinancing options from multiple lenders and check out today’s refinancing rates for more information.


The information provided in this blog post is not intended to provide legal, financial or tax advice. We recommend consulting with a financial adviser before making a major financial decision.

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