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Should I pay off my student loans or medical bills first?

Focus on the debt with the least flexible repayment options and strongest impact on your credit.

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In most circumstances, student loans should take priority over medical bills. There are fewer interest-free options to pay it off. And a missed loan repayment is more damaging to your credit than a late medical bill. But that’s not always the case. Compare the long-term cost and how it’ll affect your credit score before you decide which to prioritize

COVID-19 relief for student loans and medical bills

You might be eligible for payment relief programs if you’re struggling with expenses during the coronavirus outbreak. The government automatically paused all federal student loan repayments until the end of September — without interest. And private lenders are offering deferment and forbearance options.

Many hospitals and nonprofits have also widened their medical bill payment programs. And some states have temporarily stopped providers from sending medical debts to collections. Read about your coronavirus financial assistance options to get help with your bills.

When should I pay off my medical bills first?

Deciding to focus on your medical bills over your student loan debt might make sense in the following situations.

Your medical bills are in collections

If your medical debt has moved from your healthcare provider to a debt collector, your credit has likely taken a hit. Getting the debt resolved as quickly as possible can help you avoid damaging your credit even further.

You have the option to settle the balance

You may be able to negotiate your medical bills to a lower balance with the provider or debt collector if you agree to pay a lump sum or make a few large monthly payments.

Your student loans have more flexible repayments

Many federal student loans have the option of income-based repayments that could work out to as little as $0 a month depending on your income and family size. If your medical bill repayments are less forgiving, it might make sense to focus on paying that debt off first.

You need a personal loan to afford your medical payments

If the only way you can afford your medical bill payments is by taking out a personal loan, you might want to prioritize paying off that personal loan first. That’s because these tend to come with higher interest rates, shorter repayment terms and less-flexible repayments than student loans.

You’re pursuing student loan forgiveness

If you’re eligible for student loan forgiveness, making the lowest monthly repayments possible will ensure you get the maximum amount forgiven. This will also allow you to put extra money toward paying off your medical bills.

When should I pay off my student loans first?

You might want to prioritize your student loans over your medical debt if any of the following circumstances apply to you.

You qualify for financial assistance on your medical bills

Some medical providers offer interest-free repayment plans, extended terms or deferment — especially if you’ve hit a financial rough patch. If your private student loans don’t come with the same benefits, you might want to work on paying off your student debt first.

Your student loan interest rate is higher

Depending on the type of student loans you have, your interest rate could be higher than the rate on the line of credit or personal loan you took out to pay for your medical bills. In this case, paying off your student loans first will help you save on interest in the long run.

You have a cosigner on your student loans

If you’re getting pressure from your cosigner to pay off your student debt so they can qualify for other forms of credit, you might want to make it a priority.

Credit impact: Student loans vs. medical bills

Student loan repayments show up as a late much sooner than an unpaid medical bill. And they’re a lot harder to remove.

If you miss a federal student loan repayment, it shows up as delinquent on your credit report after 90 days. With private loans, it can show up as delinquent in as little as 30 days. But it takes 180 days for an unpaid medical bill to appear.

Credit scoring companies don’t weigh medical debt as much as loans, so it won’t have as much of an impact on your score. And once you pay off the medical bill, it can be wiped from your report. It can take as long as seven years to recover from a late student loan repayment.

4 tips to figure out which to pay off first

If you’re still unsure which type of debt you should tackle first, here are a few pointers to help you decide:

  • Compare terms and interest rates. Paying off the debt with the higher interest rate first can help you save money in the long run. And getting your short-term debt paid off first can give you motivation to tackle your larger, long-term loans.
  • Consider your different repayment options. If you can negotiate a smaller balance or receive an extended payment plan — take it. Then focus on the debt that has less-flexible options.
  • Review any perks you can take advantage of. Are your student loans eligible for a forgiveness program? If so, just making the minimum monthly repayments and focusing on your medical bills instead can ensure you get the maximum amount forgiven.
  • Make sure your health insurance provider paid up. It can take a long time for insurance companies to determine what they’re going to pay — and they can make mistakes. You might want to focus on your student loans while you wait to make sure all of your insurance payments have been made on your medical bills.

I’m ready to pay off my medical bills. How do I get started?

If you decide that it’s in your best interest to pay off your medical bills first, here are a few steps for getting started:

  • Switch repayment plans. If you have federal student loans, switching to an income-driven repayment plan or one with an extended loan term can free up money you can then use to pay off your medical bills.
  • Claim your student loan interest on your taxes. Under current tax laws, you can deduct up to $2,500 per year in student loan interest you paid from your federal taxes.
  • Consider refinancing your private student loans. Refinancing your student loans for a lower interest rate or longer loan term can also help you secure lower monthly repayments.

How else can I save on my student loans?

If you decide to focus on the medical bills, you can review options for saving on your student loan and maximize the medical payments. This might include:

  • Switch repayment plans. If you have federal student loans, switching to an income-driven repayment plan or one with an extended loan term can free up money you can then use to pay off your medical bills.
  • Claim your student loan interest on your taxes. Under current tax laws, you can deduct up to $2,500 per year in student loan interest you paid from your federal taxes.
  • Consider refinancing your private student loans. Refinancing your student loans for a lower interest rate or longer loan term can also help you secure lower monthly repayments.

Compare student loan refinancing offers

Data indicated here is updated regularly
Name Product Min. Credit Score Max. Loan Amount APR
Discover Private Consolidation Loan
Good to excellent credit
$150,000
2.80% to 12.49%
Splash Financial Student Loan Refinancing
660
None
Starting at 1.89%
Save on your student loans with this market-leading newcomer.
Credible Student Loan Refinancing
Good to excellent credit
None
1.99% to 9.24%
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
650
$500,000
1.99% to 5.64%
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
2.25% to 6.09%
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.
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Compare up to 4 providers

Bottom line

When you’re trying to decide between paying off your student loans or medical bills first, focusing on the debt with the highest interest rate or least flexible repayment option might be the way to go. Learn more about how to handle medical debt and refinance your student loans with our guides.

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