Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government, student loan lenders and others. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.
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If you’re juggling several different college loans, it can be difficult to decide which student loan to pay off first. The key is to craft a plan to manage your debt.
Let’s take a look at your options and try to figure out the best way to pay off multiple student loans for you.
Is there a ‘best way’ to pay off multiple student loans?
While there’s no one-size-fits-all solution that will work for every borrower, these strategies will help you figure out how to pay off multiple student loans in a way that works for you:
1. Start by taking inventory
2. Make repaying private student loans a priority
3. Focus on federal student loans next
4. Check about refinancing for better interest rates
5. Consider the debt avalanche or debt snowball method
● Plus: Figuring out how to pay off multiple student loans takes time
Before getting into the nitty-gritty of how to pay off multiple student loans, you first need to clear up any confusion around your debt.
Start by writing down all your loans and lenders. Include your balance, interest rate, repayment plan and monthly payment. Make a note of whether each loan is federal or private.
Also, make sure you have the login information for all your online accounts, so you can easily check your statements and, if you choose, make extra payments to pay down your balance faster.
Taking inventory of your student loans is an important first step if you’re dealing with multiple debts. It will help you see exactly what you’re working with, and from there, you can devise a plan for managing your loans.
If you’re thinking about which student loans to pay off first, the most obvious first step is to deal with any loans in danger of falling into default. Missing payments is a surefire way to mess up your credit for years to come.
But assuming you’re keeping up with the minimum payments on all your loans, you can then go on to prioritize some loans over others. “Prioritizing” here means deciding which debt receives any extra payments you might make on your loans.
The best way to pay off multiple student loans can vary by borrower. But one smart approach is to focus on repaying private student loans before federal ones. While federal loans come with perks, such as income-driven repayment and deferment, private lenders aren’t usually so flexible.
And if you miss two or three months of payments on your private loans, they can go into default and get reported to the credit bureaus, as opposed to about nine months for federal loans. You should make sure you’re keeping up with your private student loans to avoid this financial nightmare.
What’s more, private student loans typically have higher interest rates than federal ones, and you might be sharing your private loan with a cosigner. If you can swing extra payments on your private loans, you could get out of debt faster, save money on interest and make your cosigner happy, too.
Prioritizing your private loans doesn’t mean you should neglect your federal loans — it simply means you need a strategy on which federal loans should receive any extra payments you can afford (after you’ve paid off your private loans, of course).
You might target unsubsidized federal student loans first, since these accrue interest right from the date of disbursement. If you have subsidized loans, which don’t accrue interest until repayment starts, these could be your next priority.
If you’re feeling overwhelmed by the number of loans in your name, you might consider combining them into a single direct consolidation loan. While consolidating won’t save you money on interest, it could make repayment simpler.
Either way, make sure to carefully choose a repayment plan for your federal student loans. A standard 10-year repayment plan usually allows the fastest repayment of student loans. But if you’re struggling to pay off your debt, then you could consider opting for income-driven repayment or extended repayment.
It’s definitely worth taking advantage of the flexibility and options that come with federal loans when you need to. At the same time, avoid a plan with a longer time frame or a lower repayment scheme if you can afford to pay off more, since it will cost you a lot more in interest over the years. Remember, the goal is to get rid of your debt — the sooner, the better.
If you have both federal and private student loans, then you may be dealing with high interest rates and multiple lenders, both of which can feel like major obstacles. However, there is a way to get better rates and simplify your debt: student loan refinancing.
Through refinancing, you could qualify for a more competitive interest rate on your federal and private student loans. Plus, you’ll get the chance to choose new repayment terms with adjusted monthly payments.
Refinancing multiple loans also lets you combine several loans into one — much like the direct consolidation loan mentioned above, except that private loans are also eligible. Instead of tracking several bills and due dates, you could be paying back a single monthly bill with a single rate — which can make the entire process a lot easier.
That said, you want to make sure you’re not accidentally raising the rate on any of your loans. If one of your loans already has a low interest rate, for example, you probably shouldn’t refinance it with the others.
It’s also important to note that refinancing federal loans turns them private, meaning you lose access to federal repayment plans and forgiveness programs. If you need those federal protections, avoid refinancing your federal debt with a private lender.
Finally, the perks of refinancing aren’t available for everyone. You’ll need decent credit and income to qualify, or you could apply with a creditworthy cosigner. Before changing your debt through refinancing, understand the pros and cons of the process.
If you ultimately decide it’s right for you, it could be a way to save on interest and make debt repayment a whole lot simpler. And if you are in the process of collecting refinancing rate quotes and want to see how much you might save, try this refinancing calculator:
Student Loan Refinancing Calculator
While the information above can help you decide which types of loans to try to pay off first, how do you prioritize among loans of the same type? For example, if you have several private loans, which student loan should you pay off first?
Here, there are two main approaches for picking the best way to pay off multiple student loans for you:
- The debt avalanche method involves paying off your loan with the highest interest first, while paying the minimum amount on the others. With the debt avalanche method, you can save money on interest.
- The debt snowball method involves paying off the loan with the smallest balance first and paying the minimum amount on the rest. If you have loans of $2,000, $8,000 and $13,000, then focus on the $2,000 loan first. This method doesn’t usually save the most money, but it can give you psychological wins. Paying off the smallest balance helps you build momentum, which can be highly motivating.
While the avalanche method comes down to math, the snowball method inspires motivation. Consider which one would be the better fit for you as you begin chipping away at your debt in earnest.
Although student loan debt can be a beast to manage, it’s always easier with a plan. First, make sure you’re keeping up with the minimum payments on all your loans so you don’t go into default.
If you can afford extra payments, consider paying off your loans in this order:
- Focus on private loans first.
- Continue to make minimum payments toward your federal loans and choose a repayment term that works for you.
- Consider refinancing for better rates and more streamlined debt repayment.
- Use the debt snowball or debt avalanche methods to get out of debt faster.
Remember, a goal without a plan is just a wish, so create a plan that works for you and get started. Debt freedom, here you come!
Rebecca Safier contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|2.25% – 6.39%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.74% APR to 6.74% APR (with autopay). Variable rates from 2.25% APR to 6.39% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.