student loans

All that hard work, all those nights cramming for tests, finally paid off. You got your sheepskin, which can never be taken away. You bloody earned that degree. 

Now, we hate to be the one to remind you, but you have that little matter of student loan repayment hanging over your head. You ever wonder in what order you should repay your student loans? Well, if you’re deliberate about paying down your debt, you can save money and reap the benefits some of your loans offer. Let’s look at how you can achieve this.

What are Student Loans?

Let’s start there. Student loans are kinds of loans meant to help students finance their post-secondary education and related fees. In addition to tuition, those expenses can include books and other supplies, plus living costs.

Hit Those High-Interest Loans 

Paying off high-interest loans first can save you the most money over time, so that generally means tackling your private student loans first. You can achieve this by:

  • Paying the minimum on federal loans. If you have a little extra to put on your loan repayments each month, prioritize your private loans while keeping up with your government loans with the minimum amounts allowed.
  • Refinance to save cash. Student loan refinance is a popular way to save cash and streamline bill payments. What is refinancing? It’s getting a new loan at a lower rate to pay for existing loans. There’s no real downside to doing so.

You’ll need a strategy for paying off high-interest loans first, be they government or private loans, The debt avalanche approach has you paying off loans in order of the highest rate. Let’s say the plan is to pay off a $10,000 loan with a 4.53% rate in five years instead of the standard 10 years. That can let you pocket some $1,259 in interest, which is awesome. However, if you clear a $10,000 loan that carries 7% interest in five years – not 10 – will save you $2,050.

Erase Small Loans First

We concede that it can be motivating for some to see a loan balance go poof! If you’re one of those people, you’ll like the debt snowball approach. Here, instead of paying off the loan with the highest interest rate first, you’ll focus on your smallest loan. After you pay off your first loan, target the next smallest balance next to keep the momentum going.

Pay Off Loans with Variable Interest Rates

If you have a loan with a variable interest rate, meaning the interest rate changes over time, depending on a benchmark rate or index, you’re at risk of being saddled with a high interest rate. What does that mean for you? Likely, you’ll have to pay more. So, you may want to focus on these loans.

Hang in There

Before you begin wrestling with student loan payoffs, be sure that you have a little cushion in case of emergencies, Aim for a couple of months’ expenses, at least. You should also establish a plan to get rid of credit card balances, which have the highest interest rates, period.

In what order should you repay your student loans? Now you know that to save the most cash at length, you should go after the loans with the highest interest rate first, with the caveat that, at day’s end, the best approach is the one that keeps you on track. That may mean erasing your small balances one by one. And remember: if you need to refinance your loans to save money, Juno can help.