Medical debt vs. student debt: Which to pay off first?

By Sasha Bulatskaya | Published on November 19, 2025

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As of 2024, 20 million Americans carry medical debt, and almost 43 million owe federal student loan debt. That means nearly 19 percent of the U.S. population is paying off either medical debt, student debt or a combination of both. Both medical and student debt are sources of significant stress, keeping people from taking important financial steps, such as saving for retirement.

If you’re one of the millions of Americans juggling these bills, you may be wondering which one you should tackle first. In this guide, we’ll go over the state of medical and student debt forgiveness, repayment strategies, and ways to get relief.

How to decide which debt to pay off first? A quick checklist.

Student loans usually have more favorable repayment terms and lower interest rates than medical debt. However, it all depends on how much you owe on each and your interest rates. You can prioritize them like this:

1. Review the interest rates: Compare the interest rates on your bills. To minimize the overall interest you’ll pay, focus on paying off the ones with the highest rate first.

2. Explore payment options: Research payment options. For student loans, consider income-driven repayment plans, deferment, forbearance, or refinancing. For medical debt, see if your medical provider will negotiate a payment plan.

3. Assess your financial strain: Determine which debt is causing the most financial worry. If your student loan debt is manageable, but medical debt is overwhelming, prioritize the medical debt to alleviate stress.

Step 1: Find out which debt has a higher interest rate

If you’re juggling multiple types of debt, a good rule of thumb is to prioritize paying off the debt with the highest interest rate. A high interest rate makes your debt grow faster, and it can keep you in debt longer. This happens because of a concept known as accrued interest.

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Accrued interest is the amount of interest collected on your loan (or any other bill) over time. Once interest is added to your bill, you’re stuck paying interest on the new, higher loan amount, resulting in a more expensive loan.

A good starting point would be to sit down with all of your medical and student loan bills. Write down the monthly payments and interest rates. If your student loans have a significantly higher interest rate than your medical debt, or vice versa, focus on paying those off first while making minimum payments on your other debt.

Step 2: Find ways to lower your student loan rate or payment

Student loans, especially federal student loans, have a number of repayment and relief options that can give you breathing room while you focus on paying off medical debt.

Federal student loans offer the following options:

• Income-driven repayment plans: You can adjust your monthly payments based on your income, and lower your payments if you don’t have a high income.

• Student loan deferment: You can defer payments due to financial hardships, sickness, military service, and other reasons.

• Student loan forbearance: You can pause payments using forbearance but unlike deferment, you can use it for a limited time. It’s best to save forbearance for when you really need it.

If you have private student loans in addition to federal, you have two options:

Refinancing your student loan debt

Refinancing ¹ is the process of taking out a new loan to repay your old one. Your new loan should have a lower interest rate and a lower payment, allowing you to pay off your loan faster².

How to refinance

• Research different lenders and check your rate to find out which one will give you the lowest interest rate.

• Find out what their customers say about them on Trustpilot and if they have a good reputation.

• Research their customer service team to make sure you won’t be stuck on hold for hours if you need help.

• Check their payment terms. The right lender should allow you to customize your payment and terms to make payments easier for you.

At Earnest, you can check your interest rate in minutes without any credit impact. If approved, you’ll be able to pick your term, interest rate, and payment. We answer client calls in less than 2 minutes and over 90% of our customers give our Client Happiness team a good review. We’ve also been named one of the World’s Top Fintech’s in 2024 by CNBC.

You also have the option of refinancing federal student loans, but that would convert them into private loans. As a result, you’ll lose access to federal relief programs. Still, some people refinance their federal loans because it makes sense for their financial situation.

Student loan forbearance

Some private lenders will allow you to temporarily pause payments if you’re struggling. Contact your lender’s customer service team to learn more about their forbearance programs.

If you’re an Earnest client, you can get in touch with our care team and explore your options for forbearance. You can also use the Skip a Payment ³ feature to skip one payment every year without any penalties.

One drawback of both forbearance and deferment is that interest will continue to accrue on your loans, extending your payment timeline.

Step 3: Negotiate payments with your medical provider

If you’re facing medical debt, it’s important to know that you have the right to negotiate your medical debt and repayment terms. There are also organizations that can help you negotiate with your doctor’s office such as Dollar For and the Health Consumer Alliance. Working with them could help you understand your rights, make sense of your medical bills, and potentially save you a lot of money.

If you choose to negotiate on your own, here’s how to do it:

1. Review your bill to make sure everyone is correct. Check for the services you were charged and pay attention to CPT codes ( Current Procedural Terminology. Make sure that the services you received match the bill. It’s common for hospitals to make mistakes.

2. Find out if your hospital or practice is a nonprofit. These providers are required to offer affordable care.

3. Call your provider and outline any billing mistakes (if you see them). If your bill is correct, be honest about your financial hardships. Ask about payment plans or any other assistance they can offer you.

NPR recommends that you don’t give up. Keep trying if you don’t get the assistance you need right away.

The status of forgiveness for student loans vs. medical debt

The government is exploring relief options for both medical and student debt. Here’s where these programs and initiatives currently stand:

Student loan forgiveness has been expanded

Student debt is so stressful that 92 percent of college grads reported they would have done college differently if they had known the amount of debt they would be carrying. The federal government has expanded many student loan programs, including forgiveness. The following programs are available for student loan forgiveness:

Public Service Loan Forgiveness (PSLF)

This program is for folks in public service jobs, such as nonprofit employees, government employees, and public school teachers. After making 120 qualifying payments, the remaining balance can be forgiven tax-free if you meet the eligibility requirements.

Teacher Loan forgiveness

Teacher forgiveness was specifically designed for teachers working in low-income schools. If you meet the qualifying criteria, you can receive forgiveness of up to $17,500 on Direct Subsidized and Unsubsidized Loans.

Income-Driven Repayment (IDR) Plan forgiveness

IDR relief is available to those on income-driven plans like IBR, PAYE, or SAVE (Federal Court issued a stay order for SAVE. Please visit studentaid.gov/announcements-events/save-court-actions for information). After 20-25 years of payments, any remaining balance may be forgiven.

Perkins Loan cancellation

This program was created for teachers, nurses, or other professionals in high-need areas. It offers forgiveness of Perkins Loans based on years of service with a 15% cancellation on the first and second years of service, 20% for the third and fourth years, and 30% for the fifth year.

Remember, each forgiveness program has its own rules. Before signing up, check all of the requirements carefully to ensure you meet them.

Medical debt forgiveness

There have been several proposals to help those struggling with medical debt. Nonprofit organizations like RIP Medical Debt purchase and forgive medical debt, offering a lifeline to those burdened by hefty medical bills. If you turn to one of these organizations, be aware that you’ll likely have to pay taxes on the forgiven debt.

Various groups and advocates are also pushing for policy changes to make medical debt forgiveness more accessible and widespread. Keep an eye on new policy changes and court decisions. Knowing these could help you negotiate better terms and lower your bills.

Know your options and your rights

If you’re facing medical and student loan debt, take things one step at a time. Explore relief options for student debt and medical debt and create a plan for how you plan to tackle it. Use all of the help available to you, such as medical debt nonprofits and free tools that can help you sign up for income-driven repayment plans. By being strategic, you can take charge of your debt and not let it rule your life.

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About the Author

Sasha Bulatskaya

Sasha is the Senior Manager of Brand and Content at Earnest. She has been writing for ten years and has been focused on educational finance and financial aid for over three. Her passion for mission-driven companies brought her to Earnest in 2020, and she's been helping make student finance more accessible ever since. She strives to demystify personal finance and student loans to help borrowers make the best decisions for their financial situation.

Disclaimer

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.