Student Loans and Interest

[toh627]

Great, thank you all so much. Especially skydivingchick. That really showed me what I needed to know.

[skydivingchic]

If you want to save the most money, paying debts from highest interest to lowest interest is always the best method, no matter the balances. Right now you are paying a larger dollar amount of interest on loans 2 and 3 because they have a higher balance than loan 1, but you are still paying a lower rate on the money. If you concentrate on paying down the balance of loan 2 or 3, you will be effectively raising your overall interest rate and thus will end up paying more money in the end. Here is a good calculator that will let you order debts however you want for pay off. I used your balances and interest rates listed as well as your minimum payments. I added an extra $180 per month for a total payment of $700 per month toward the debts. If you order them from highest interest to lowest interest, that yields a pay off of October 2015 with a total of $5,575.26 paid in interest. If you order them from highest balance to lowest balance (thus attempting to even out the raw dollar amount of interest paid), you get a pay off of November 2015 with a total of $5,843.77 in interest. So over $300 more toward interest. Not a huge difference over that time span, but a difference none the less. The math will always favor paying the highest interest rate first.

[Hector]

I would try to pay off loan A

[bjl584]

From a practicality standpoint I would say to completely pay off loan A before moving on. Diverting money to B and C will only lengthen the time it takes to pay off A. Any interest you save by moving money to B and C would be lost by extending the term on A.

[toh627]

I currently have 3 student loans:

Loan A: $7,000 @ 8.5%; monthly payment of $195.

Loan B: $10,000 @ 7.9%; monthly payment of $150.

Loan C: $15,000 @ 6.8%; monthly payment of $175.

My question is this. I have worked to pay down the highest interest loan (Loan A) for a while now, only paying the minimums on loans B&C. However, now that I have paid off so much of loan A, I am paying around $55 in interest on it whereas the other loans I am paying $80+ on each one. So what I would like to know know is should I switch to paying down loans B&C so that I'm equal to paying around $55 in interest on all of them before I continue paying off loan A, or should I just continue paying down loan A? I know that all the financial websites say to pay off the highest interest rate debt first, but I just feel like I am wasting money on interest on the other loans.