You Have Private Student Loans. What Should Your Strategy Be?

You have private student loans — from Sallie Mae, Discover, SoFi, or another private lender. Unlike federal loans, private loans offer no income-driven repayment, no PSLF, no deferment beyond a short grace period, and no forgiveness.

Private student loans are standard consumer debt with one advantage: rates are typically lower than credit cards (5-12% vs 22%). The strategy is straightforward: minimize the rate, maximize the payment, eliminate the debt.

Step 1 — Refinance if your credit has improved. If your credit score is 700+ and you have stable income, refinance to the lowest rate available. SoFi, Earnest, Splash, and credit unions all compete for refinance business. Rate shopping within 14-45 days counts as a single credit inquiry.

Refinancing from 8% to 4.5% on a $50,000 balance saves $8,000-$12,000 in total interest.

Step 2 — Pay aggressively. Once at the lowest possible rate, direct every extra dollar to the highest-rate loan (avalanche method). Build a payoff timeline and track monthly progress.

Step 3 — Do NOT refinance federal loans into private. If you have both federal and private loans, keep them separate. Refinancing federal loans into a private loan permanently eliminates IDR, PSLF, deferment, and forbearance options. Only refinance private loans.

Step 4 — Emergency fund first (but small). A $1,000-$2,000 starter emergency fund prevents new debt while paying off loans. Then attack the loans. Full emergency fund (3-6 months) comes after high-rate loans are eliminated.

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