My loans are just kind of hanging out while we all figure out what we're supposed to do next. So while I'm not obligated to pay anything at the moment, I want to work on reducing what I can.
Budget-wise I've allocated around $120 each month to use toward my loans, but I'm not sure if I should pay off by group, pay off the interest of each one first, target the higher interest rate ones, let me know what y'all think.
| Loan Name | Total Balance | Interest Rate | Unpaid Accrued Interest |
|---|---|---|---|
| 1 | $3,388.47 | 4.45% | $388.47 |
| 2 | $2,698.54 | 4.45% | $298.54 |
| 3 | $4,293.67 | 5.05% | $15.97 |
| 4 | $3,419.89 | 5.05% | $198.89 |
| 5 | $2,633.93 | 4.53% | $68.64 |
| 6 | $4,616.21 | 4.53% | $182.21 |
| 7 | $2,509.77 | 2.75% | $39.24 |
| 8 | $2,012.85 | 2.75% | $31.47 |
Help me figure out the best way to tackle my student loans (NELNET)
byu/Wise_Tie4261 inStudentLoans
Posted by Wise_Tie4261
3 Comments
Targeting the loan with the highest interest rate first and lowering that principal will save you money overall
The “avalanche method” is the financially optimal debt repayment strategy. You should apply any extra funds to the loan with the highest APR first, then when it’s gone, move to new highest interest loan.
The snowball method would have you pay off the loans with the smallest balance first, but that ends up with you spending more money than you have to. The only recent to use this method is if the psychological benefit to having one less loan is worth paying extra money for.
If your loans were larger I would say to only make minimum payments on the 2.75% loans, since you would get more if you had the extra funds invested, even in a conservative high-yield savings account giving 3.5%… but given the comparatively low balance, it may make more sense to just pay them off. Although from a purely financial perspective you would have more money at the end of the day investing it.
Edit: changed “principle” to “APR” in the second sentence – I had a brain fart and didn’t realize I used principle.
I’d start with loan 3, as it’s accruing the most interest.