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This is the best way to pay off student loans according to math

Student loans

Researchers at the University of Colorado Boulder have determined the best way to pay off student loans is through a mathematical model.

The best way to pay off student loans

Here is what the researchers found about the best way to pay off student loans. According to their research:

  • If you have a small student loan balance, traditional advice says to pay off student loans as quickly as possible;
  • If you have a large student loan balance, traditional advice says to pay off student loans through an income-driven repayment plan;
  • However, the best strategy to pay off student loans is to combine the two methods;
  • Pay off as much of your student loans in the early years as possible, and then enroll in an income-driven repayment plan;
  • With an income-driven repayment plan, you can get student loan forgiveness after 20 years (undergraduate student loans) to 25 years (graduate student loans);
  • You should switch to an income-driven repayment plan once you hit the “critical horizon,” which the researchers define as “the time at which the benefits of forgiveness match the costs of compounding”; and
  • Then pay the minimum student loan payment each month until you get student loan forgiveness.
  • The goal, according to researchers, is to minimize compounding interests costs and maximize student loan forgiveness.

Pay off student loans: Considerations and limitations

There are important considerations regarding this strategy for student loan repayment.

  1. Federal Student Loans: First, this model only applies to federal student loans. Why? There are no income-driven repayment plans offered through the federal government for student loans that are private.
  2. Income-Driven Repayment Plans: Second, there may be variances among different income-driven repayment plans such as IBR, PAYE, REPAYE and ICR. Your personal financial information may impact the optimal repayment plan.
  3. Student Loan Refinancing: This student loan repayment plan only applies to income-driven repayment plans and doesn’t include student loan refinancing. If you can refinance student loans, you may be able to save more money and pay off student loans faster. Student loan refinancing rates currently are at an all-time low.

Researchers also need to account for specific circumstances unique to each borrower. The borrowers could refine their model in the future to incorporate inputs such as a borrower’s expected income and living expenses and whether they’re married or have children. This could change a borrower’s ability or motivation to pay off student loans at a certain pace, for example, which could impact the mathematical model.

Student loans: Final thoughts

What’s the best way to pay off student loans? It depends. Some borrowers are waiting for student loan cancellation. (President Joe Biden already has canceled $3 billion of student loans). However, many are growing concerned that student loan cancellation is over. Other student loan borrowers are being proactive by making extra student loan payments, while others are refinancing. The bottom line is this mathematical model is only one model for student loan repayment. Most student loan borrowers can’t afford to pay off a big chunk of their student loans after they graduate college. There are also other variables such as your income, family size, career, monthly cash flow, life circumstances, for example, that may affect student loan repayment. While it may be based on “math,” it’s important to remember that your student loans are unique to you. Do what’s right for your personal financial situation. Here are some popular options to consider:

  • Student loan refinancing 
  • Income-driven repayment plans 
  • Public service loan forgiveness 


This article was written by Zack Friedman from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to

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