Mdthbs

I'm hoping for some advice on which loans I should focus on paying off first.

I'm 28 and just got my first 'real' job about 2 years ago after 8 years of schooling. I've paid off all my credit card debt and can now focus on these loans.

Debt/Loans:
Unsubsidized Student Loans ($9,000)

US $3100 @ 6.55%

US $2200 @ 6.55%

US $2100 @ 6.55%

US $1600 @ 6.55%

Subsidized Student Loans ($12,300)

US $3000 @ 4.25%

US $4600 @ 3.15%

US $4700 @ 3.15%

Auto Loan

US $24,500 @ 5.99%

Income information:
Gross: US $4600/mo
Net Income after retirement, insurances etc.: US $2,930/month

Rent: $675/mo

I'm not looking at a big promotion potential, so working with my income, I know I'll be able to pay these off in the next 5-7 years (as long as I don't decide to have kids anytime soon)- I'm just wondering if someone has some advice on the strategy I should take toward paying these off.

Should I focus on the Auto loan since it's "Bad debt"? or should I focus on the smaller more accomplish-able unsub. student loans one at a time since they have a slightly higher interest rate? Should I save and drop a big chunk of money on student loans or auto loan at one time (e.g. at the end of the year)?

To me this feels like A LOT of debt, perspective would be great - is this actually a LOT of debt or have I just been living the grad student life for too long and everyone else has this much debt too? #millennialdebt

The best approach by the numbers is to pay minimums on everything and put all extra towards the debt with the highest interest rate. So, that would be the unsubsidized loans in any order, then the auto loan, then the subdsidized from high interest rate to low. However, with student loans the interest is deductible. Since the top of your income will likely fall around the 22% bracket (assuming filing single) then your student loans actually cost you less in interest than your car loan. So the car loan should be first to go. There's an income phase-out for this student loan interest deduction but based on the provided details you're currently below the threshold.

What you define as 'all extra' here might also need to change, if you can cut spending you can pay this debt down faster and save a nice chunk of interest. Similarly, retirement investing is great, but with the interest rates you're paying it might make sense to cut back on that for a while. Don't forego an employer 401k match, but any extra you're investing currently might be better spent on debt repayment.

That said, some people prefer to start with the lowest balance debt first. It's not efficient, but for some people it helps psychologically to get something off their books quickly.

One big key to taking this debt repayment and turning it into a healthy financial life in the long-term is to continue to live below your means as your income rises. The temptation many face is increasing spending with every promotion. The car loan is a good example of this, many people buy an expensive new car when they get a job out of school, you might need a car and you might need a car loan to get it, but a less expensive car can save a lot of money in the long-run. As @Pete B. suggests, getting out of that car loan by trading down might be worthwhile.

Edit: Regarding how much debt this really is, it's undoubtedly substantial, but with your income it should be manageable. Learn to love living lean and you'll be out of the woods and piling up money for your future in not much time at all. The best part is that you don't have $25k of credit card debt at 18% interest, your rates and balances are manageable. FWIW I piled up ~$75k in debt from my college years just for a bachelor's due to being wildly irresponsible, it's a distant memory now.

The good news is that your student loans are lowish and you have low interest rates. The bad news is that your car loans is massive compared to your income. Can you get out of the loan and get something more reasonable?

There are two schools of thought when it comes to paying off debt: debt avalanche and debt snowball. I advocate the latter, but in this case both would agree initially. You should focus on the unsub'd student loans first, smallest to largest. Focus on one loan and make minimum payments on the rest.

You should get on a written budget each and every month in order to maximize your debt repayment. I'd advocate working a side hustle as well bringing in an extra 1K per month greatly reduces the time you have these loans.

Its very doable, and the sooner you get this done the more free you will be. No more debt other than a house. If you are married work together with your spouse.

I would also put retirement savings on pause while you were paying these off. My goal, with your income and a side hustle would be to be done in 18 months. $2100/month gets it done in 22 months, but it will go quicker than that once you start finding efficiencies.

My first thought is to reduce your car expense. I would sell the car for whatever you can get and replace it with a cheap used car so you can focus on your student loans. Unsubsidized first, smallest to largest, then subsidized.

Once you're debt-free you can start saving for a nicer like-new car.

If you can't increase your income from your day job, could you take on a second job part-time?