Which Debt Elimination Strategy Works Best for Student Loans?

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There’s been a lot of discussion in Washington lately about the cancellation of student loans, and it’s true that some have been forgiven. But for millions of other student loan borrowers, cancellation may not be an option. This is particularly true if you have private student loans, rather than government-issued ones. If you’re looking for the best way to tackle your student loan debt, there are two main options — the debt snowball and the debt avalanche. Here’s a look at how these two debt-elimination strategies work to help you decide which one might be best for you.

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Debt Snowball

The debt snowball method is more of a psychological attack on your debts. The process begins by putting all the money you can towards your smallest debt first, while still making the minimum payments on all of your other debts. This way, your smallest debt will get paid off rapidly, which can give you a huge psychological boost. From there, you tackle your next-smallest debt, slowly moving up the ladder until you have paid off all of your debt.  

Who It’s Best For

For some people, the idea of tackling debt can be overwhelming, to the point of inaction. This can be particularly true if you have multiple debts, as the sheer number of your debts may make you feel as if you can never pay them all off. The debt snowball is an excellent way to start making headway. Once you pay off your smallest debt, you’ll have a feeling of accomplishment, and suddenly your next-smallest debt won’t seem to be as large of a hurdle. With the debt snowball method, you can constantly win little victories, and that’s often enough to keep people on the track to long-term success.

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Who Might Not Be Suitable

If you’re mathematically oriented or are driven to pay off your debt in the most financially efficient method possible, the debt snowball method might not work for you. As you’ll be paying off your debts in terms of size rather than in terms of the interest you’re paying on each debt, you’ll likely end up paying more in the end if you choose the debt snowball method.

Debt Avalanche

The debt avalanche approach targets your highest-interest credit cards first, with only minimum payments being made on your other debts. The concept behind the debt avalanche method is that by paying off your high-interest debts first, you’ll ultimately pay the smallest amount of interest as you pay down your debt.

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Who It’s Best For

The debt avalanche method works best for those looking to get out of debt with the smallest cost possible. By putting as much money as possible towards your most expensive debt, you’ll ultimately get out of debt having paid the smallest amount of interest that’s mathematically possible. For those trying to get out of debt in the fastest time possible, the debt avalanche method is the most successful.

Who Might Not Be Suitable

With the debt avalanche method, there’s no psychological boost from the small victories attached to the debt snowball method. If your highest-interest debt is also your largest, it may feel as if you will never get it paid off, as you shovel money towards that debt month after month and all of your remaining debts still linger — and grow larger. 

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The Bottom Line

The most important thing to remember when paying off debt is that actually creating and sticking to a strategy is more important than which method you choose. Although the debt avalanche might make more sense mathematically, if you’re not able to stick with it, then the debt snowball method might be the better choice for you.

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Last updated: Sept. 17, 2021


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