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How to decide which student loans to pay off first

Save or get out of debt faster with strategic repayments using these 8 repayment tips.

Paying off your student loans early can potentially save you thousands on interest — especially if you have long loan terms. It’s important to be strategic while making those extra repayments so you can save even more and get out of debt faster.

Which student loans should I pay off first?

It depends on your situation. Generally, you can save the most by paying off your high-interest loans first. This usually means beginning with private loans, which tend to have higher rates than federal or provincial funding.

You also might want to consider the size of your loans. A small loan with a high interest rate might not be worth paying off first before a larger low-interest loan.

How to decide which student loans to pay off first

Follow some — or all — of these 8 tips to figure out which loans to repay first.

1. Figure out which loans are the most expensive

Before you get started, take a look at all of your student loans. Make a list of which have the highest rates, highest balances, highest monthly repayments and highest total cost.

Also, consider benefits like deferment and forgiveness — you might want to hold off on making extra repayments on loans with these options if you’re planning on going back to school.

Where do I get information about my loans?

You can find most of this information on your student loan servicer’s website — that’s the company you repay your loans through.

Or you can use our monthly loan payment calculator to find out how much interest you’ll pay in the long run and your monthly cost for each loan.

2. Start with private loans

Chances are your private student loans have higher interest rates than any of your federal loans. Beyond this, private student loans typically have fewer options for deferment and forgiveness.

Do you have multiple private loans? If they’re roughly the same size, start with the loan with the highest rate first. If one is smaller than the other, crunch some numbers to figure out how much you could save by shortening your loan term.

3. Pay off unsubsidized loans before subsidized loans

As a full-time student, your government loans are subsidized – which basically means that the government pays the interest on your loans while you’re in school or in deferment. If you’re a part-time student, you may be responsible for paying the interest yourself. So it makes sense to pay off any unsubsidized loans before starting on any subsidized loans.

4. Make sure repayments go toward the principal first

It won’t matter which loans you repay first if your repayments only cover unpaid interest. That’s because interest is a percentage of your loan balance — the lower the balance, the less interest you’ll pay.

In most cases, simply making an extra repayment to your servicer is not enough. Often, this will put you in “paid ahead” status, meaning you’ll simply owe a reduced amount the next month. Other times, your repayment will automatically go toward any unpaid interest before the principal.

Reach out to your servicer to arrange how you’d like your repayments to be applied. Most have a specific procedure for this.

5. Look into refinancing

Trading your student loan for a better deal can save you money. It can also buy you some time to focus on higher-interest loans. You might want to consider it if you have strong credit, a high-paying job and multiple high-interest loans.

But the right choice is different for everyone. You can learn more about how you can benefit by reading our guide to student loan refinancing.

Compare personal loans for refinancing

Before applying for a personal loan, contact the lender to see if they allow you to refinance the specific type of student loan that you have (federal, provincial and/or private).

Name Product Interest Rate Loan Amount Loan Term Requirements Link
Spring Financial Personal Loan
Finder Rating: 4 / 5: ★★★★★
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Requirements: min. income $1,800/month, 3+ months employed, min. credit score 500
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If you're not eligible for an unsecured loan, you may be offered a credit builder loan to help improve your credit score.
LoanConnect Personal Loan
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Requirements: currents debts total less than 60% of income, min. credit score 300
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Fill out one application with this broker and get pre-approved by different lenders in 5 minutes.
Mogo Personal Loan
Finder Rating: 4.5 / 5: ★★★★★
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Requirements: min. income $13,000/year, min. credit score 500
100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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Get a free quote without affecting your credit score and get a loan on the same day. Track your credit score for free.
goPeer Personal Loan
Finder Rating: 3.6 / 5: ★★★★★
goPeer Personal Loan
8.00% - 33.92%
$1,000 - $25,000
36 - 60 months
Requirements: recommended income $40,000/year, no payday loan debt, min. credit score 600
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Connects creditworthy Canadians looking for a loan with Canadians looking to invest. Apply in minutes and get a response within 24 hours.
SkyCap Financial Personal Loan
Finder Rating: 4.1 / 5: ★★★★★
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Requirements: min. income $1,200/month, stable employment, min. credit score 550
Go to site
More Info
Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
Fairstone Unsecured Personal Loan
Finder Rating: 3.9 / 5: ★★★★★
Fairstone Unsecured Personal Loan
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Requirements: able to make monthly repayments, min. credit score 560
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Get a free quote without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
ConsumerCapital Personal Loan
Finder Rating: 3.2 / 5: ★★★★★
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Requirements: min. income $1,900/month, 6+ months employed, no payday loan debt, min. credit score 600
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More Info
Complete an application in less than 10 minutes and get a decision within 24 hours.
Loans Canada Personal Loan
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
Requirements: min. credit score 300
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More Info
A broker with the largest lender network in Canada. Fill out one application and get matched for free with lenders.
FlexMoney Personal Loan
Finder Rating: 4 / 5: ★★★★★
FlexMoney Personal Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Requirements: min. income $2,000/month, 3+ months employed, min. credit score 500
Go to site
More Info
Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan any time without penalty.
Loan Away Personal Loan
Finder Rating: 3.6 / 5: ★★★★★
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
Requirements: min. credit score 300
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More Info
A lender that approves loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
Fairstone Secured Personal Loan
Finder Rating: 3.7 / 5: ★★★★★
SECURED
Fairstone Secured Personal Loan
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Requirements: must be a homeowner, min. credit score 560
Go to site
More Info
Use your home equity to get a secured loan with flexible repayment options. Get a free quote without impacting your credit score.
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Compare up to 4 providers

6. Pay attention to variable rates

When the economy is doing well, variable interest rates often increase — making both your monthly repayments and total loan cost more expensive.

If you have both fixed- and variable-rate private student loans, consider whether the Bank of Canada has plans to increase rates. If so, you might want to pay off your variable-rate loans first.

7. Find a debt repayment strategy

Short on time to sit down and really crunch the numbers? You might want to use a debt repayment strategy instead, such as one of these popular methods:

  • Debt avalanche. This method involves paying off your high-interest loans first. It might save you the most and get you out of debt faster if your loans are around the same size.
  • Debt snowball. This method involves paying off your smallest loans first. It gives you quick wins and can make your debt more manageable, though you might save less.

Not sure which option to choose? Read our article on debt avalanche vs debt snowball methods to help you decide — or opt for a combination of the two.

8. Consider your cosigner

While paying off loans with a cosigner first might not save you the most money, you still might want to give them extra attention. If your cosigner is thinking about taking on debt of their own — whether applying for a mortgage, car loan or new credit card — lessening their debt load can help them qualify for more competitive rates. You can also look into applying for cosigner release if it’s an option.

Is paying off my student loans early the right choice for me?

Getting out of debt ahead of schedule might seem like a no-brainer. But there are situations where it might not be the best decision:

  • You’re planning on applying for forgiveness. Paying off your student loans ahead of schedule when you’re set to apply for forgiveness might actually mean you’ll pay more.
  • You’re struggling with credit card debt. Credit cards generally have much higher interest rates than student loans. If you have a choice between the two, consider focusing on your credit cards first.
  • You don’t have an emergency fund. Financial experts recommend having three to six months saved up to cover personal expenses in the event that you lose your job, get into an accident or have another emergency. You might want to save for an emergency fund first, then focus on making extra repayments on your student loans.
  • You don’t have a retirement plan. As a millennial carrying student debt, it might feel like you’ll never save enough for retirement by the time you finish paying off your loans. So it’s worth considering starting to save for retirement now instead of making extra payments on your student loans.

Bottom line

Repaying your student loans ahead of time can help you save big on interest and shorten the path to debt freedom. But you can save even more if you have a well thought-out plan. Even if you’re struggling with repayments, paying it off strategically can save you in the long run.

Want to learn more about how repayments work? Read our guide to student loans.

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