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I have two student loans I would like to pay off:

A: $6000 - 6.5%

B: $3000 - 6.5%

I am receiving a tax refund of a bit over $3000. I am not sure whether to pay off B in one fell swoop to get it out of the way, or to halve the principal of A, reducing the total interest I pay over time.

I also have two additional loans of similar principal and half the interest rate for each. I am not sure how, if at all, they factor into this decision.

Thank you.

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  • Payout the loan B and close it off. Use the cash flow [i.e. payments you were making on loan B] and increase the monthly payments to loan A. Leave the other 2 loans on lower interest rate for now. Generally higher interest rate loans should be closed first.
    – Dheer
    Jan 28, 2016 at 3:20

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Since the interest rates are the same, from a financial point of view it doesn't make much difference.

If there is any chance that one of the loans may qualify for some sort of forgiveness, principal reduction, etc. keep that loan in place and pay off the other one.

Otherwise, for simplicity, it would be easiest to pay off one of the loans entirely and then just have to deal with a single payment in the future.

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    Yes if the same rate (and no penalties for paying off early) pay off the smaller one first, less payments required each month makes life that little bit easier and you are less likely to forget to pay one of the loans on time.
    – user9822
    Jan 27, 2016 at 21:27
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    Pay off the smaller, then apply that monthly payment to the next one instead of spending it.
    – AbraCadaver
    Jan 27, 2016 at 21:36

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