I have a massive amount of student loans (master's degree overseas, basically traded the extra money for about 2-3 years of my life due to differing lengths of education). Now that I have a job and can estimate my finances better, I'm a bit overwhelmed as to what I should be prioritizing as far as loans.

Two loans have higher interest rates than the others - the largest loan, and a private loan (so I can't consolidate it with the rest, which are government loans) with a variable interest rate whose minimum is higher than the rest. Four of the six individual loans are less than $6k, while the largest is over $20k. Some ideas I had:

1) Consolidate everything but the smallest, pay that off first

2) Consolidate everything but the largest, pay more than minimum on that, because it has a pretty high interest rate

3) Consolidate everything but the private loan, focus on paying that off first, since it's variable interest at a fairly high rate (I had a bit of an emergency and had very little choice)

4) Consolidate everything over a certain interest rate (the rates range from 5.6% to 7.9% to variable 7% min, with a mode of 6.8%)

I've estimated my payments (still in deferment) and doubt I can afford to make all six payments every month, it's basically 25% of my take-home pay and I have car payments and rent on top of that. Should I consolidate using a federal consolidation loan? A private one?

Basically, I need some guidelines to follow so I can make decisions without shooting myself in the foot.

(Note: These are US-based student loans)

  • 1
    Rules for student loans vary by jurisdiction. On the one hand, your profile says you're in the United Kingdom, but you're talking dollars here. Are you in the United States? Oct 14, 2011 at 16:40
  • @Chris oh, I forgot to update that when I moved back to the US Oct 14, 2011 at 16:53

3 Answers 3


Strictly from a fastest payback standpoint, the rule is to make all minimum payments and send any extra funds to the highest interest loan next.

This will result in the lowest interest paid each year.

The decision to consolidate depends on the impact it will have to both your payment and overall payoff schedule. It sounds like your priority might need to be cash flow and not overall savings. e.g. taking a 4% loan that has a high payment, but stretching it over more time can lower the payment, even at a bit higher rate. You just need to be aware of the cost and decide based on what you can live with. I hope you are in a good field that would see improvements to your income over these next few years.

  • I am :) But my lack of work history is the number one determenant of employment for me right now, so I'm doing some contract work to shore up that side of my resume Oct 14, 2011 at 17:00

I elected to use an income-based repayment plan, which reduced most payments to $0 so I can focus on them one at a time.


A tip I tend to put in here that doesn't directly relate to student loan payments, but does matter: Don't focus so much on student loan payments that you find yourself needing to tap short-term credit sources to make ends meet.

Making a $100 payment on a 6% interest student loan and then needing to charge a $100 car repair on your 19% interest credit card is not a sound financial move.

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