A 2016 study from the Federal Reserve found that 30 percent of adults have borrowed money to pay for education expenses, and the average student loan debt has reached $32,000. That’s a lot of money, and the debt burden is making it more difficult for young adults to buy their first home and start saving for retirement.

There are several schools of thought when it comes to paying off student loans. Should you pay off higher interest, higher balance or maybe something else? It really depends on you and your situation. Of course, you should always consistently make payments towards loan balances in order to stay current. However, if you have extra income and would like to pay more than the minimum balance, these are your student loan repayment strategies to consider:

Strategy One: Start With Your Smallest Loan

This method works well for graduates who are feeling overwhelmed and discouraged by the number of loans they have. Knocking out your smallest loans allows you to feel like you are making progress toward your overall goal. 

For example, If you can pay off a $500 loan and then a $2,000 loan, you’ll feel much more confident about tackling your $10,000 loan. Many refer to this technique as “the snowball method” because the process allows you to gain momentum like a snowball rolling down a hill. As you pay off more your loans, you’ll become more encouraged as you begin to see the light at the end of the tunnel.

Strategy Two: Start With Your Highest Interest Rate Loan

Understanding and comparing interest rates is very beneficial. If you work to pay off the loan with the highest interest rate first, you won’t reduce the number of loans you have immediately but you may end of benefiting anyway.

There are two major benefits, starting with your highest interest rate. First, you pay less interest over time, so it saves you money overall. Second, because you’re paying less interest, you’ll be able to allocate these funds towards paying off another loan or putting these funds towards long-term savings.

Strategy Three: Start With Your Unsubsidized Loans

A subsidized loan doesn’t start gathering interest until you’ve graduated and you’re out of deferment. Unsubsidized loans, on the other hand, start gathering interest as soon as you borrow them. It makes sense, then, to work on paying off the loans that are accruing interest (the unsubsidized loans) first, instead of the loans that are not accruing interest yet.

In other words, the type of loan doesn’t matter once the deferment period ends. However, if you’re a current student who is getting an early start on loan repayment (way to go!), you’ll want to start paying your unsubsidized loans first so you can save yourself in interest payments in the long run.

Strategy Four: Don’t Start With Student Loans

It may not be the answer you were expecting, but sometimes it’s best to make minimum payments on all your student loans. You may want to focus on other outstanding debts with higher interest rates or larger amounts (like credit cards or medical bills) before you focus on paying off student loans.

In addition, you may want to consider student loan consolidation. In this case, you’ll end up with a single loan. This advice comes with a few caveats. First, you should only consolidate your loans if it will end up lowering your overall interest rate. For example, if you have multiple private loans with interest rates above 10 percent, you may want to explore consolidation options. Second, some consolidation programs lower your interest rates and monthly payment, but they extend the payback period. If you’re not careful, you could end up paying more. Make sure you save a significant amount of money in the long run. Third, and finally, consolidation doesn’t eliminate debt, it just helps you lower your interest rate. Remember that you still need to focus on repayment. Stay determined and don’t take your eye off the ball!

When it comes to paying off student loans the best strategy depends on your situation. Using these tips, you can make progress and eliminate debt. Once you’re free of student loans, you’ll have more money to achieve your financial goals, like purchasing a home, saving for your children’s education, and investing in retirement. No matter what stage of life you are in, your Farm Bureau agent is here to help with insurance and investment tools to create a sound future.