How much of a priority should paying student loans be?
I have a lot of debt, including student loans. I can't pay them back all at once. Should I concentrate on my student loans first, or should I worry about my other debt?
- answers
Rating 0 That's a really good question. In general, you should pay at least the minimums each month on all your debt; otherwise you could be in serious trouble. But paying your minimums may not get you much closer to paying off the debt entirely. Most people pick one or two loans to pay off aggressively, putting as much money into it as they can each month, while maintaining the other, less high-priority loans at minimum payments. This may be the right strategy for you as well.
Whether your student loans should be high-priority or not depends on the types of student loans and other debt you have. Most of the time, you should worry about credit card debt first as credit cards have variable interest rates and some have very high interests. But private student loans have variable rates too, and they can be almost as high.
Instead of judging priority on the type of loans, look at the amount of interest you pay--and whether your loan is variable-rate or not. If you have a high-interest private student loan, that's a high priority loan--pay that off as soon as you can. If you have fixed-rate, subsidized government loans, those are lower in priority--if you have credit card or other high-interest debt, it may be a good strategy to focus on paying that off first.
The best strategy for most people involves focusing aggressively on the highest-interest loans first, as they cost you more to keep around. Keep an eye on variable-rate loans too; they're likely to go up over time. If you have two loans of the same interest rate but one is variable and one is fixed, it may be a good idea to concentrate on the variable-rate one first.
If you haven't consolidated your loans, you should look into it. I recommend talking to a financial advisor or representative at your bank for more information as well.
Here are some articles on this site that might give you more insight into student loan issues:
Article on loan conslidation:
http://www.distance-education.org/Articles/Student-Loan-Consolidation--Frequently-Asked-Questions-29.html
Information on student loans:
http://www.distance-education.org/Articles/Navigating-the-College-Student-Loan-Minefield-9.html
Paying off student debt:
http://www.distance-education.org/Articles/5-Steps-to-Killing-Your-College-Debt-20.html
Best of luck!
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