Yes, it is generally recommended to pay off the highest interest rate student loan first as it will save you the most money in the long run.
Detailed response
Yes, it is generally recommended to pay off the highest interest rate student loan first as it will save you the most money in the long run. Suze Orman, a well-known financial expert, advises prioritizing debt repayment by focusing on the balance with the highest interest rate.
Here are some interesting facts related to student loan repayment:
- According to the Institute for College Access and Success, the average student loan debt for college graduates in the US is $28,950.
- Student loan debt is the second largest category of consumer debt in the US, behind only mortgage debt.
- Federal student loans typically have lower interest rates than private loans, so it can be beneficial to pay off private loans first if they have higher interest rates.
- Making extra payments towards your student loan can save you money in the long term by reducing the amount of interest that accrues over time. In some cases, making extra payments can also help you pay off your loan faster.
To help determine which loan to prioritize, it can be helpful to create a table or spreadsheet with the following information:
| Loan Name | Outstanding Balance | Interest Rate | Minimum Payment |
|---|---|---|---|
| Loan A | $10,000 | 8% | $100 |
| Loan B | $5,000 | 6% | $50 |
| Loan C | $12,000 | 5% | $120 |
Based on this example, focusing on paying off Loan A first would make the most sense as it has both the highest outstanding balance and highest interest rate. However, it’s important to also meet the minimum payment on each loan to avoid defaulting or falling behind on payments.
In this video, you may find the answer to “Should I pay off my highest student loan first?”
The question of whether to pay off student loans or invest is discussed by Brian and Beau in this video. Brian expresses concern about the significant problem of student debt, and advises that if the student loan rate is below six percent, investing and prioritizing financial operations could be a better option. He advises maximizing paying down high-interest debts and emergency reserves, followed by prioritizing Roth IRA and employer match. However, once you’re over 25 and have a higher interest rate, student loan payments should take priority, especially with interest rates currently going up.
Further responses to your query
It usually makes the most sense to pay off the student loan with the highest interest rate first. This will save you the most money over time. However, if getting rid of small balances one by one motivates you more, go that route regardless of interest rate. The best strategy for you can also vary based on the type of student loans you have and how much student loan debt you have in total.
Pay off the student loan with the highest interest rate first. That will save you the most money over time. But if getting rid of small balances one by one motivates you more, go that route 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.
It usually makes the most sense to pay off the loan with the highest interest rate first. That means paying off your private student loans first and the federal student loans later. Of course, you will still need to make the minimum payment on your federal student loans. You cannot simply renege on that.
If you work to pay off the loan with the highest interest rate first, you won’t immediately reduce the number of loans you have, but you may end up benefiting anyway. There are two major benefits to starting with your highest interest rate loan. First, you pay less interest over time, so it saves you money in the long run.
Which student loan you pay off first is up to you, but the best choice is usually the one with the highest rate or the fewest consumer protections. The best strategy for you can also vary based on the type of student loans you have and how much student loan debt you have in total.