The Moment
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.
The Strategy
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.
Run Your Numbers
Enter your private loan details.
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What to explore next
- →Where can I find the best private student loan refinance rates?
- →Should I consolidate private and federal loans together?
- →How do I prioritize private loans vs other debt?
Frequently Asked Questions
Can private student loans be discharged in bankruptcy?
It is extremely difficult but not impossible. The 2022 DOJ guidance made it somewhat easier to discharge private student loans in bankruptcy (compared to federal loans). You must prove 'undue hardship' — consult a bankruptcy attorney if your private loan debt is unmanageable.