- Between my undergrad and my masters program, I borrowed $81,000 in student loans.
- When I got serious about paying down my student loan debt after graduation, I considered two popular repayment strategies: the debt snowball and the debt avalanche.
- The snowball, which prioritizes your smallest debts first, is considered to be motivational. The avalanche, which prioritizes highest-interest rate debts first, is considered to be more efficient — it should save you more money over the life of your loan.
- I chose the avalanche because my debt was accruing $11 of interest a day, and I was furious. I wanted to pay off my loans as quickly as possible, and for as little extra money as I could.
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Interest on my student loans accrued daily, and when I calculated the interest, it came out to $11 per day. I was basically lighting $11 per day on fire just to maintain my loans. When I thought of all the things I could buy with that money, I started to get angry.
That could pay for a round-trip flight from New York City to Los Angeles. It could be several very nice meals. It could be a few concerts. At the time, going out wasn’t an option as I paid off debt. Travel was on hold, too. So much of my life was pushed to the side as I paid off my debt, and to think about all the things this money could buy made me mad.
But I didn’t let myself stew in anger, I let it motivate me to pay off my debt. I considered two different repayment strategies — the debt snowball and the debt avalanche— and chose the avalanche method to start aggressively paying down my Grad PLUS loans (interest rate of 7.9%). Slowly, over time, I was able to see that more and more of my payment was actually hitting the principal and not just feeding the beast of interest.
Here’s why I chose the avalanche, and why it worked for me.
The debt snowball is motivating, but the debt avalanche is efficient
The debt snowball is all about attacking the smallest loan first, while continuing to make minimum payments on the rest of your loans. You pay off the smallest loan, then move on to the next smallest loan, etc. until all of your debt is paid off. This method has been popularized by debt guru Dave Ramsey.
Using this strategy, you start to see wins quicker, which can offer you a boost of motivation. Though going this route can be motivating as you start to pay off each small loan, it could cost you more in interest over the long term.
The debt avalanche method focuses on high-interest debt first, while continuing to make minimum payments on the rest of your loans. So if you have various types of debt, your highest interest debt may be from credit cards. In that case, you’d put as much money as possible to paying that off first. Once that is paid off, then you go to the next-highest interest debt and so on.
Because it focuses on the highest interest rate (which determines how expensive your debt is), the debt avalanche should save you more money on interest, and therefore save you money over the life of your loans.
Avalanche might be right for me, but snowball could be right for you
So while many people promote the debt snowball method as more motivating than the avalanche, that wasn’t true for me. I wanted something that made mathematical sense and would save me money in the long run. Seeing how much interest accrued each day was just what I needed to get started with the debt avalanche method and pay off debt.
However, I also know some people who swear by the debt snowball method. There’s a lot of talk about which one is “better” but in reality the best debt repayment strategy is the one you can commit to.
Consistency is key when paying off debt, so choose a strategy that motivates you and that you can keep up. Whether it’s focusing on the smallest balance with the debt snowball or the highest interest debt with the debt avalanche, choose an option that best suits your needs.
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