How to Use The Debt Avalanche for Student Loans

debt avalanche for student loans

When it comes to paying back your student loans, there are a number of different strategies that you can pursue. Which one is right for you will depend on your personal goals. If you are interested in saving as much money as possible while paying off your educational debt, then the debt avalanche could be an excellent option for you.

Below, we take a look at the debt avalanche repayment strategy, how to use it for your student loans, and how it compares against other strategies so that you can make an informed decision about which option is best for you.

What is the debt avalanche?

The debt avalanche is a debt repayment strategy where a borrower focuses their efforts on paying off the loan with the highest interest rate. Once that loan is paid off, the borrower takes all of the money they were previously paying toward that first loan and then applies it to the loan with the second highest interest rate. This process is repeated until all of the debt is paid off.

Because the debt avalanche method focuses on the loan with the highest interest rate, it can lead to major savings in terms of interest payments over the life of the loan.

How to Use the Debt Avalanche to Repay Your Student Loans

1. Keep track of your student loans in a spreadsheet.

The first step to using the debt avalanche method for your student loans is to put all of your loans in a spreadsheet. You want to make sure that this list includes all of your student loans, including federal and private loans. The more information you can include about your loans, the better, but at a minimum you will need the loan name, balance, and interest rate. Use this free spreadsheet to keep track of your student loans.

Need help keeping track of your student loans? Download our free Student Loan Spreadsheet!

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2. Organize your student loans from highest interest rate to lowest.

Since you will be focusing your efforts on paying off the loan with the highest interest rate first, you will want to organize your list so that the loan with the highest interest rate is at the top. (See last column in example below.)

Avalanche Method Student Loan Spreadsheet

3. Make the minimum monthly payment on all of your student loans.

Of course, while you’ll be focusing on one loan in particular, you can’t stop making payments on all of your other loans. This means that each month, you should continue making the minimum monthly payment on all of your loans.

4. Make extra payments on the loan with the highest interest rate.

Here comes the fun part: Whenever you have extra money that you want to apply to your student loans, you will use it specifically to pay down the loan with the highest interest rate. Over time, you’ll see this loan’s balance begin to fall faster and faster. This is because you are lowering its principle, which means that it will accrue less interest each month.

Here are some other strategies you can use to pay back your loans even quicker. 

5. Once you have paid off your first loan, shift your focus onto the loan with the next highest interest rate.

Eventually, you’ll succeed in paying off that first loan, and it will almost certainly be ahead of the original repayment schedule. Congrats! But while you can and should celebrate, you don’t want to stop your efforts.

Remember all of the money you were previously paying toward the first loan? You should now apply all of that money directly to the loan with the next highest interest rate. This means that you’ll be paying the minimum monthly payment on Loan #2 plus everything that you had been paying on Loan #1. The result is that you’ll chip away at the second loan even faster than you did the first loan.

6. Continue tackling your loans until you have paid them all off.

You’ll continue this plan until you’ve paid off all of your student loans. Your payments should grow with each loan that you pay off. At the end, you’ll likely be making massive payments to the last loan on your list each month, allowing you to pay it off much faster than your original repayment plan would have allowed.

Pros and Cons of Debt Avalanche for Student Loans

The main benefit of using the debt avalanche is that you will save the most money in terms of interest charges. This is because you will be focusing on paying off the loan with the highest interest rate first.

Of course, the tradeoff is that it might take you quite a while to actually pay off your loan. If your loan with the highest interest rate also has the highest balance, then you could go quite a long time before you successfully pay off a loan in full. While that’s totally okay, many borrowers (including myself!) can benefit from a couple of quick mental wins that come with paying off loans with lower balances first.

Is the debt avalanche the right strategy for you?

Ultimately, only you can decide whether or not this is the right student loan repayment strategy for you. If your goal is to simply save as much money as possible while paying back your debt, then this will definitely get you there. If you want to free up money in your budget sooner, however, or need a quick win from successfully paying off a loan, then a different strategy, such as the debt snowball, could be a better option.

About Tim Stobierski

Tim Stobierski is the founding editor of Student Debt Warriors. A freelance writer and editor with a passion for teaching people about all things personal finance, his goal is to help parents and students tackle their student loan problems so that they can live happier, healthier lives. Tim's writing has appeared in a number of publications, including The Huffington Post, The Hartford Courant, Grow Magazine, and others. His first book of poetry, "Chronicles of a Bee Whisperer," was published in 2012 by River Otter Press.

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