Which Student Loans Should I Pay Off First? A Simple Guide

If you have multiple student loans, figuring out which ones to pay off first can feel overwhelming. You might be asking yourself: Should I tackle the loan with the highest interest rate first? Or the smallest balance? What about federal vs. private loans?

The good news is, there’s no one-size-fits-all answer—it depends on your financial situation and goals. In this guide, we’ll break down the best strategies to help you decide which student loans to prioritize.

1. Understand Your Loans

Before deciding which loans to pay off first, you need to know what kinds of loans you have. Here’s a quick breakdown:

Federal Student Loans

• Direct Subsidized Loans – The government pays interest while you’re in school.
• Direct Unsubsidized Loans – Interest builds up while you’re in school.
• PLUS Loans (Parent or Grad) – Higher interest rates, often the most expensive.
• Perkins Loans – Older federal loans with fixed interest rates.

Private Student Loans

• Issued by banks or lenders (like Sallie Mae, Discover, etc.).
• Usually have higher interest rates than federal loans.
• Fewer repayment options (no income-driven plans or forgiveness).

Action Step: Make a list of all your loans, including:
✔ Lender name
✔ Interest rate
✔ Loan balance
✔ Type (federal or private)

2. Two Popular Payoff Strategies

There are two main ways to prioritize paying off debt:

A. The Avalanche Method (Save the Most Money)

• How it works: Focus on the loan with the highest interest rate first while making minimum payments on the others.
• Why? High-interest loans cost you more over time. Paying them off early saves money.
• Best for: People who want to minimize total interest paid.

Example:

• Loan A: $10,000 at 7% interest
• Loan B: $15,000 at 4% interest
• Loan C: $5,000 at 5% interest

You’d pay extra toward Loan A (7%) first, then Loan C (5%), then Loan B (4%).

B. The Snowball Method (Quick Wins for Motivation)

• How it works: Pay off the smallest balance first while making minimum payments on the rest.
• Why? Eliminating a loan completely can feel rewarding and keep you motivated.
• Best for: People who need quick wins to stay on track.

Example:

• Loan A: $3,000 at 6% interest
• Loan B: $8,000 at 5% interest
• Loan C: $12,000 at 4% interest

You’d pay extra toward **Loan A ($3,000)\ast \ast first,thenLoanB($8,000), then Loan C ($12,000).

3. Other Factors to Consider

A. Federal vs. Private Loans

• Federal loans have flexible repayment options (like income-driven plans) and forgiveness programs.
• Private loans usually have fewer protections and higher rates.

Tip: If you have both, consider paying off private loans first since they’re often more expensive and less flexible.

B. Variable vs. Fixed Interest Rates

• Variable rates can increase over time, making them riskier.
• Fixed rates stay the same.

Tip: If you have a variable-rate loan, paying it off sooner can protect you from future rate hikes.

C. Loan Forgiveness Eligibility

If you’re working toward Public Service Loan Forgiveness (PSLF) or another forgiveness program, you might not want to aggressively pay off federal loans. Instead, focus on private loans first.

4. Extra Tips to Pay Off Loans Faster

✔ Refinance high-interest loans (but only if you don’t need federal loan benefits).
✔ Make biweekly payments (half-payments every two weeks = one extra full payment per year).
✔ Use windfalls (tax refunds, bonuses) to make lump-sum payments.
✔ Ask about employer student loan assistance (some companies help pay off loans).

Final Answer: Which Loan Should You Pay Off First?

Bottom Line

There’s no “wrong” way to pay off student loans—the best method is the one that keeps you motivated and fits your budget. Whether you choose the avalanche or snowball method, the key is taking action and sticking with it.