The Most Effective Debt Payoff Strategy You Need to Know

Grace Lemire
Grace Lemire

Grace Lemire is a freelance writer and editor with over five years of experience in the personal finance industry. She has been featured on a variety of publications, including NPR, CNN, FinanceBuzz, Dollar Geek, Pangea, and True Finance. Her work focuses on the intersection of personal finance and technology. In 2023, Grace was nominated for the Best Personal Finance Advice award in’s FinTok Awards.

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Daniel Kahn
Daniel Kahn
Daniel is the co-founder and COO at Sparrow. Daniel is responsible for the day-to-day operations of a company, working closely with other members of the executive team to develop and implement strategies to support the growth and success of the company.
Daniel was a 2023 Forbes 30 Under 30 lister in the Education category.  Daniel was born and raised in Raleigh, North Carolina and graduated from Duke University in 2020.
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Camden Ford
Camden Ford

Camden leads Sparrow’s business operations – everything from product management to business analytics. After graduating Cum Laude from Duke University where he studied Civil Engineering, Camden worked as a Consultant for A.T. Kearney where he worked in their Strategic Operations practice. With a strong background in analytics, Camden strives to deliver data-driven conclusions and insights.

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November 14, 2023

Even thinking about your student debt can be overwhelming, but knowing how you’re going to pay it off is important.

Let’s review the 3 main strategies for paying off debt and their general effectiveness.

1. (Least Effective) The Shotgun Approach

The Shotgun Approach is where you pay just a bit more than the minimum payment each month on all of your debts. When you think about it, this may seem quite effective because you’d be making progress on all of your debts at once.

In reality, this isn’t as effective of a strategy, and frankly isn’t recommended, because it will take you much longer to get rid of any single debt. Additionally, your loans are likely not all at the same interest rate. With the Shotgun Approach, you’d be throwing money towards your loan with a lesser interest rate when you could be throwing larger chunks of money towards your loan with a higher interest rate.


  • You would make progress on all of your loans.


  • It will take you a lot longer to pay off any one debt.
  • You won’t be throwing as much money as you could towards your debt with the highest interest rate.
  • You will likely pay more over time.

Bottom Line: This isn’t a very effective method, and we don’t recommend it.

2. (Medium Effectiveness) The Debt Snowball Approach

The Debt Snowball Approach is the second most effective method and operates under the following steps:

  1. Look at all of your debts, and find the one with the lowest balance.
  2. Calculate your monthly minimum payments.
  3. Pay that minimum monthly payment on every loan you have.
  4. Put all extra money you have into the smallest debt you owe until you pay it off. Once you pay off that loan, the monthly payment you’ve allotted for it is now “extra” money in your pocket.
  5. Roll over that “extra” money to your next smallest loan.
  6. Continue this process until all debt is paid off from smallest balance to biggest balance.

Source: Moolanomy, Dave Ramsey’s Snowball Approach

The Debt Snowball approach is ranked at medium effectiveness because it is a proven method for paying off student debt, however, it isn’t the best. Your largest student loan will accrue interest rapidly as it compounds. So, you could save yourself some money over time by opting for the Debt Avalanche method which we’ll discuss next. 


  • The initial psychological boost from paying off a loan in full could help you with paying off the others.
  • This method is effective for people who might not have as much money right after graduating. You can start small with payments on your smallest loan and work your way up as your career stabilizes financially.


  • Your largest debt will be accruing interest while you pay off your smallest debt, which could increase fairly rapidly depending on your interest rate.

Bottom Line: It’s okay, but we wouldn’t recommend.

3. (Most Effective) The Debt Avalanche Approach

The Debt Avalanche approach has been deemed the most effective strategy for paying off student loan debt. It operates with the following steps:

  1. Look at all of your debts, and find the one with the highest interest rate.
  2. Make the minimum monthly payment on each debt you have.
  3. Pay extra on only the highest interest rate until the debt is paid off. This will allow you to get rid of the highest interest rate first.



  • Your loan with the highest interest rate would be paid off first, saving you a decent amount of money in the long run.
  • You will save more money in the long run with the Debt Avalanche approach in comparison to other repayment strategies.


  • This method isn’t the best habit-former. 
  • This method can be intimidating and less motivating. Starting with paying off your largest balance could leave you feeling like you aren’t making much progress.

Bottom Line: This is by far the best option for debt repayment due to its ability to save you money in interest.

The Difference Between Debt Snowball and Debt Avalanche

The Debt Snowball and Debt Avalanche approaches might sound pretty similar. So what is the difference?

In very simple terms, the Debt Snowball method is focused on lowering the number of loans you have and the Debt Avalanche method is focused on lowering the overall amount you will owe. While both are useful strategies and effective in their own regard, one method might be easier or more effective for you personally.

The Debt Snowball method focuses more on maintaining motivation and the overall balance size as where the Avalanche Method focuses on saving money on interest.

Source: Art of Thinking SMART

Which Method Should I Use?

It might be confusing trying to decide which method to use, and ultimately, it comes down to which one fits your financial goals best. While we definitely recommend the Debt Snowball or Debt Avalanche methods over Debt Shotgun, there are pros and cons to each one. You may find that you need the psychological boost of Debt Snowballing, or that saving money on interest with the Debt Avalanche method makes most sense for you.

With both the Debt Snowball and Debt Avalanche methods, there are free worksheet templates online to help you break down the payments over time. This can help you visualize what each method would look like to decide whether one fits your financial goals better.

Either way, having a strategy in general and sticking to it will set you up for success.

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