Repaying student loans

[IntheDraft6]

I have a question about paying off student loans. Let's put aside the arguments about interest rates and investing the money. I have multiple loans, both private and federal. I want to start putting some extra money towards them. What would be the best option?

Option 1: Taking a set amount (say $500 for this argument) and spreading it across each loan (say $50/month extra for each loan).

Option 2: Take that $500 and apply towards one loan and paying it off quickly, then taking that $500+the monthly payment for the loan that was paid off and applying it to the next loan. Repeating the process as each one is paid off.

Thanks.

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[southerndoc]

You shouldn't put aside the interest rates. Paying off higher rate loans is a wise practice.

There is also a psychological effect of having a loan paid off. One less payment per month is gratifying. It's worthwhile to concentrate on one loan for this effect alone.

 

[IntheDraft6]

I know not to dismiss interest rates, but I'm trying to just focus on the allocation of the money. I don't want to bore everyone here with the details of my interest rates. I agree with you that the psychological impact of paying off a loan, even a small one, would be a great feeling. Thanks for the input.

 

[Stroganoff]

Option 2 all the way. Minimum payments on all student loans, then concentrating on one loan "target" and destroying it with the most firepower of that extra $500/month. I'm personally targeting my private loans first (8%) then will attack my 6.8% unsubsidized Staffords, then the rest.

Mathematically and psychologically, attacking one loan at a time is most effective.

 

[dpmd]

Option 2 is the strategy I used. Even if the loans all have the same interest rates, it will be better to target one first (I would shoot for the smallest one first, unless there is a reason to do otherwise).. I have now shifted that strategy to my other debt (working on paying off my mortgage in the next few years). The best part about it is if I run into any financial trouble, I can stop the extra payments without any credit issues. If I hadn't paid stuff off I would still have minimum payments (I tend to think about worst case scenarios even if it is highly unlikely-plus leaving my job for private practice would lead to a period of time without income, this way I can do that if I wanted to)