Student Loan Repayment: Debt Snowball vs. Debt Avalanche

Updated January 28, 2021

By Kat Tretina

Kat Tretina is a freelance writer based in Orlando, Florida. Her work has been featured in publications like The Huffington Post, Entrepreneur, and more. She is focused on helping people pay down their debt and boost their income.

When you’re paying off student loans, it’s important to have a plan. Two common debt repayment strategies include the debt avalanche and the debt snowball.

While these two strategies take different approaches to student loan repayment, they’re both designed to help you make timely payments and become debt-free on or ahead of schedule. 

In this blog, we’ll explain the differences between the debt avalanche and the debt snowball repayment strategies so you can determine which may be right for you.

Debt Avalanche

The debt avalanche method is a student loan repayment strategy designed to help you eliminate your highest interest loans quickly. The less interest you have to pay, the more money you’ll save over the life of the loan.

With the debt avalanche method, you’ll continue to make your minimum student loan payment each month, and put any extra money toward your highest-interest loan. Once that loan is paid off, you’ll use those additional savings to pay down the loan with the next-highest interest rate.

For example, let’s say you had the following loans:

• $10,000 Private student loan at 7% interest
• $15,000 Private student loan at 6.5% interest
• $5,000 Direct Loan at 4.45% interest

In this scenario, you would make extra payments toward the private student loan at 7% interest first with the debt avalanche method. Once that loan was paid off, you’d make extra payments toward the private student loan at 6.5% interest, and then finally you’d tackle the Unsubsidized Direct Loan.

Pros and Cons of the Debt Avalanche Student Loan Repayment Strategy

The debt avalanche strategy has several benefits and drawbacks. Here are a couple of reasons it may be helpful to you:

• You save more in interest: By tackling the highest-interest debt first, you’ll save more money in interest charges over the length of your loan. Compared to the debt snowball method, using the debt avalanche method can help you save hundreds or even thousands of dollars.
• You’ll pay off the loans faster: Because you’re addressing the highest-interest debt first, there’s less time for interest to accrue on the loan. With less interest building, you can pay off your loans much earlier.

If you prefer instant gratification, however, the debt avalanche may not be quite as effective for you. Here’s why:

• You don’t see results as quickly: Because you’re tackling the debt with the highest interest rate rather than the smallest balance, it can take longer before you can pay off a loan.
• You may lose focus: It takes longer to pay off each loan, so it’s easier to lose motivation.

If you’re self-motivated and are more focused on long-term savings, then the debt avalanche student loan repayment strategy could be great for you. If you prefer to see the results of your work quickly, though, then you may consider exploring the debt snowball strategy.

Debt Snowball

The debt snowball method may be a better choice if you prefer quick wins. Rather than focusing on paying off your high-interest loans, the debt snowball method focuses on knocking out your smallest loans as quickly as possible.

With this approach, you’ll make the minimum monthly payment on your student loans, then put any extra money toward the loan with the smallest balance. Once it’s paid off, you’ll use those savings to pay down the loan with the next lowest balance. You’ll pay down loans one by one until you’re debt-free.

If you consider the above example, with the debt snowball method, you’d pay off the Direct Loan with the $5,000 balance first. Once that loan was paid off, you’d make extra payments toward the $10,000 private loan, and then you’d pay off the $15,000 private loan.

Pros and Cons of the Debt Snowball Student Loan Repayment Strategy

The debt snowball method is a fantastic student loan repayment strategy for some borrowers. Here’s why:

• You get results quickly: Since you’re targeting the loan with the lowest balance first, you’ll pay off individual loans more quickly than with the debt avalanche method.
• Frees up money to pay down the next loan: You’ll be able to pay off loans quickly and roll the payments toward the next loan, helping you stay focused on your goals.

On the other hand, if you’re looking to get the most for your money, then this may not be your ideal strategy. Here are a few drawbacks to the debt snowball method:

• You’ll pay more in interest fees: By paying extra toward the loan with the smallest balance rather than the highest interest rate, you’ll pay more in interest than you would if you followed the debt avalanche method.
• It could take longer to pay off your debt: Because you aren’t targeting the loans with the highest interest rate, more interest can accrue over the life of the loan. The additional interest could lengthen your debt repayment process.

If the instant gratification of paying off individual loans quickly will motivate you, then this may be the right strategy to choose. It can be especially rewarding if you find small ways to celebrate paying off each loan. On the other hand, if you prefer the most efficient strategy and are willing to wait for the results, then the debt avalanche could be ideal for you.

Debt Snowball vs Debt Avalanche: Which One Is Best For Student Loans?

So which strategy is best for paying off student loans: the debt avalanche or the debt snowball? Ultimately, it depends on which best fits your goals and financial situation.

If your goals are to save as much money as possible and pay off your loans as quickly as you can, then the debt avalanche method often makes the most financial sense. While it may be slightly slower going at first, if you can stick with it, then it will help you accomplish your objectives.

On the other hand, psychologically, the debt snowball may have the advantage. According to a study from the Harvard Business Review, the debt snowball method is the most effective approach over the long-term, as the small wins often help borrowers stick to their repayment strategies. Mathematically, however, it may not be quite as efficient as the debt avalanche.

One way to choose a strategy is to do the math using your own loan balances and interest rates. If one repayment method offers significant savings over the other, it may help you to decide. Otherwise, if the savings are similar, then consider which strategy will help you to remain motivated over the course of your student loan repayment period.

Managing your student loan debt

In addition to choosing the right student loan repayment strategy, you can explore other ways to pay down debts quickly. Here are a few options to consider:

• Make extra student loan payments toward your principal balance
• Refinance your student loans
• Explore Public Service Loan Forgiveness (PSLF)

Often, student loan refinancing can help you earn a better interest rate and choose a repayment term that better fits your financial goals. If you’re working toward a federal benefit like Public Service Loan Forgiveness (PSLF), however, then refinancing your federal student loans may not always be the best choice. Consider all of your options, including PSLF vs refinancing, and try ELFI’s Find My Rate tool to get a rate quote without affecting your credit score.*