Should I pay off my student loans or credit cards first?

Focusing on the debt with the highest interest rate first can help you save in the long run.

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If you’re struggling to manage credit card debt with paying off your student loans, take the time to compare interest rates and your repayment options. If you’re able to qualify for a balance transfer credit card with a 0% intro APR period, then that might free up some extra cash to focus on your student loan repayments. But if your credit card debt has been sold to a collection agency, you might want to prioritize paying that off as quickly as possible to avoid further hits to your credit score.

When should I pay off my credit cards first?

In over your head in both credit card and student loan debt? Here are a few times it might make sense to focus on paying off your credit cards first:

Your credit card interest rates are high

The interest rates on credit cards are usually very high, especially when compared to federal student loans rates. Focusing on paying off your credit cards first can help you save on interest.

Your credit card debt was sold to a collection agency

If you haven’t been able to make consistent payments on your credit cards, the debt may have been sold to a collection agency. To avoid your credit score taking an even bigger hit, you might want to get this debt resolved as soon as possible.

You have multiple credit cards with large debts

Juggling several different credit cards — all with different interest rates — can become overwhelming. Focusing on paying off your card with the highest APR first can help you save money in the long run.

You qualify for student loan forgiveness

Do you qualify for loan forgiveness because of the industry you work in or the federal repayment plan you signed up for? Then it makes sense to make only the minimum possible payments on your student loans until the rest is forgiven. This also frees up cash to put toward your credit card debt.

When should I pay off my student loans first?

Alternatively, there may be times when it makes sense to focus on paying off your student loans, rather than your credit card debt first:

You qualify for a balance transfer credit card

Most balance transfer credit cards offer a 0% APR intro period — sometimes for as long as 21 months. This allows you to transfer the balance of your high-interest cards to the 0% APR card, so you’re no longer accruing interest on your credit card debt. This will then free up extra money each month so you can focus on paying off your student loan debt.

However, you’ll need to continue making high enough payments on your balance transfer credit card so that it’s paid off before the promotional period ends. Otherwise, you could end up with an even higher interest rate than you originally had on your credit cards.

You’re close to defaulting on your student loans

If you haven’t been making your student loan payments, they’ll eventually go into default status. If you have federal student loans, the government can garnish your wages or withhold government funds, like your tax return. Unlike other creditors, the government doesn’t have to receive a court judgment by suing you in order to garnish your wages.

Instead of worrying about making extra repayments on your credit card debt, it makes more sense to get your student loans back on track so you can avoid having your paycheck garnished and further damaging your credit.

You want to take advantage of student loan interest tax deduction

Under current tax laws, you can claim up to $2,500 on your federal taxes from the interest paid on your student loans. If you’re on the cusp of a tax bracket, it could be beneficial to pay more on your student loans than your credit card debt to maximize that deduction and lower the amount you’re taxed. Find out how to calculate and claim your student loan interest deduction with our guide.

You have a cosigner on your student loans

If you have Graduate PLUS Loans or private student loans, you might have been required to apply with a cosigner. Since they’re equally responsible for paying off your debt, your student loans have likely increased their debt-to-income (DTI) ratio — a main factor lenders look at when determining your creditworthiness.

This makes it harder for them to qualify for additional forms of credit, such as a car loan or personal loan, at competitive rates. If this is the case, you might want to prioritize paying off your student loans over your credit card debt to relieve your cosigner of the responsibility as soon as possible.

4 steps to figure out which to pay off first

If you’re still trying to decide which debt to pay off first, following these steps may be able to help:

  1. Compare interest rates. Usually the interest rate on your credit cards will be higher than your student loans, unless you can get approved for a balance transfer credit card with a 0% APR intro period.
  2. Review the status of the debt. Getting behind on your student loan or credit card payments can have negative effects on your credit report. Before you decide which debt to focus on, check the status of both and make sure they’re in good standing. If you’re close to default on one or the other, you might want to take steps to get that back on track first.
  3. Determine if you qualify for loan forgiveness. If you’re working a public service job or on a federal repayment plan that qualifies for loan forgiveness, it makes sense to only make the minimum payments on your student loans and focus on your credit card debt instead.
  4. Look for ways to save on interest. Review both debts and see if you qualify for refinancing or taking out a balance transfer card to lower your interest rate. Then you can focus on the debt with the less-flexible repayment option or higher interest rates.

I’m ready to pay off my credit cards. How do I get started?

If you decide that you are ready to start paying off your credit cards, here are some tips for getting started:

  • Apply for a balance transfer credit card. If you can transfer all of your credit card debt under one card with a 0% APR promotional period, you can use the money you would have been paying on interest to pay down the principal balance faster.
  • Focus on the card with the highest interest rate. If you don’t have the credit to qualify for a balance transfer card, determine which card has the highest interest rate and start making extra payments toward that one first to save in the long run.
  • Pay off the smallest balance first. Alternatively, if you’re more motivated by easy wins, you might want to focus on paying off the card with the lowest balance first. Once that card is paid off, you can then put that monthly repayment toward the card with the next lowest balance. And so on until all of your cards are paid off.
  • Stop making purchases. While you’re actively trying to pay off your credit card debt, try to use your cards as little as possible to avoid adding to it.

Other ways to save on your student loans

Regardless of whether you want to pay off your credit cards or student loans first, there are still ways to save on your monthly loan repayments:

  • Check out alternative repayment plans. Federal student loans typically have flexible repayment plans that are based on your income — and many offer forgiveness at the end of the term.
  • Sign up for automatic payments. Many student loan servicers offer an interest rate discount if you sign up for autopay. This will also help you avoid any late fees if you forget to make a repayment.
  • Review your refinancing options. If you have private student loans, you may be able to refinance for a lower interest rate. This can save you a lot of money over the life of the loan.

Compare offers for paying off your debt

Updated December 11th, 2019
Name Product Min. Credit Score Max. Loan Amount APR
Figure Student Loan Refinancing
680
$250,000
3.49% to 6.99%
Enjoy no fees, low rates and flexible terms — but only for borrowers with good credit.
Splash Financial Student Loan Refinancing
660
None
Starting at 1.99%
Save on your student loans with this market-leading newcomer.
Credible Student Loan Refinancing
Good to excellent credit
None
Starting at 2.21%
Get prequalified offers from top student loan refinancing providers in one place.
Education Loan Finance Student Loan Refinancing
680
None
2.39% to 6.01%
Lower your student debt costs with manageable payments, affordable rates and flexible terms.
Earnest Student Loan Refinancing Variable Rate (w/ autopay)
650
None
1.81% to 6.89%
Get a tailored interest rate and repayment plan with no hidden fees.
SoFi Student Loan Refinancing Variable Rate (with Autopay)
650
Full balance of your qualified education loans
1.81% to 7.36%
A leader in student loan refinancing, SoFi can help you refinance your loans and pay them off sooner.
Purefy Student Loan Refinancing (Variable Rate)
620
$300,000
2.27% to 7.49%
Refinance all types of student loans — including federal and parent PLUS loans.

Compare up to 4 providers

%
Name Product Amount saved Balance transfer APR Balance transfer fee Recommended minimum credit score Filter values
Blue Cash Everyday® Card from American Express
0% intro for the first 15 months (then 14.49% to 25.49% variable)
$5 or 3% of the transaction, whichever is greater
680
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & fees
Capital One® Quicksilver® Cash Rewards Credit Card
0% intro for the first 15 months (then 15.74%, 21.74% or 25.74% variable)
3%
670
Earn unlimited 1.5% cash back on every purchase, every day.
Chase Freedom Unlimited®
0% intro for the first 15 months (then 16.49% to 25.24% variable)
$5 or 5% of the transaction, whichever is greater
670
Earn a $150 signup bonus after spending $500 in the first 3 months from account opening.
American Express Cash Magnet® Card
0% intro for the first 15 months (then 14.49% to 25.49% variable)
$5 or 3% of the transaction, whichever is greater
680
Unlimited 1.5% cash back. Rates & fees
CardMatch™ from creditcards.com
See issuer's website
300
Can't decide on a card? Get personalized credit card offers with CardMatch™.

Compare up to 4 providers

Bottom line

Deciding whether to tackle your credit cards or student loans first might come down to which has the highest interest rate or is close to default. Whichever you decide, applying for a balance transfer credit card or refinancing your student loans may be able to help you save on interest in the long run.

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