GradReady Practice Test

When deciding which loan to pay off fastest, the main idea is the cost of carrying the debt, which comes from interest rates and available protections. Private loans usually carry higher interest rates and fewer borrower protections than federal loans, so the amount you owe grows more quickly if you don’t pay them down. Federal loans, while still debt, generally offer lower rates and built-in options like income-driven repayment, forbearance, and forgiveness that can reduce long-term costs. Because accelerating payments on the higher-cost private loan typically saves you more money over time, you should aim to repay that debt faster first. Once that private loan is paid off, you can then apply extra payments to federal loans, making use of their more flexible repayment features.