There’s a lot of advice out there on how to pay off student loans. The truth is, there is no one way that works best for everybody. You have to take time to understand the options available and choose one that is best suited to your short-term financial circumstances and your long-term financial goals.
High Interest vs Low-Interest Loans
If you’ve taken multiple loans over your college term and each of these loans would have different rates of interest. One of the many decisions you need to make is the order in which to pay off the loans.
The advice regarding this is unanimous—you should pay off the loans with the highest interest rates first. By paying off your high-interest loans first, you will significantly reduce the total interest that accrues over the term of your loans.
Private vs Federal Student Loans
When you compare your loans and the interest rates on each, you will see you’re your private student loans have the highest rates of interest, in addition to which they have less repayment flexibility. It makes the most financial sense then to pay off your private student loans first and then deal with your federal student loans.