My brother Nolan was home from Champaign for a week, and on Sunday he watched me move two cells around in my spreadsheet for about the fifth time. "You know you can just pick one," he said, eating his third piece of my mom's rhubarb crumble. He's right. It still took me most of June.
Here's the question I was stuck on. Now that the credit card is gone and I'm sending $1,100 a month to my student loans, the extra money above the minimums has to go somewhere. I have six federal loans. Which one gets it?
The avalanche method says you pay the minimum on everything and put every extra dollar on the loan with the highest interest rate. When that one is gone, you move to the next highest. It's the math answer. It costs the least in total interest.
The snowball method says you put the extra on the smallest balance first, no matter the rate. You knock out a loan quickly, you feel good, and that feeling keeps you going. It's the psychology answer.
My six loans make this an actual decision. My highest rate is 5.05%, on my freshman-year loan, which was about $5,600 when I listed everything in April. My smallest balance is a 4.53% loan from sophomore year that was about $1,900. Those are two different loans, so the two methods point in two different directions.
What the spreadsheet said
I ran both versions in the club sheet, with $1,100 a month and the same order of payoffs after the first loan. The difference was smaller than I expected. Avalanche saved me about $150 in interest over the life of the loans, by my rough math. It also finishes my 5.05% loan around October if I add some summer pet-sitting money, versus spreading that loan out much longer under snowball.
$150 isn't life-changing. I spent almost that on brunch and rideshares in a single bad month in Rogers Park. So for a couple of weeks I leaned toward snowball. Knocking out the $1,900 loan by August sounded great. Seeing one row disappear from the sheet sounded great.
Why I picked the 5.05% loan
Three things decided it.
First, my rates aren't all that different, but the high one is also big. The 5.05% loan is my most expensive loan by daily interest, about 77 cents a day on its own when I started. Every month it sticks around is a month I pay the most for it.
Second, I'm not short on motivation right now. Snowball is designed for people who need early wins to keep going. I just paid off a credit card and I check the club sheet more often than I check my texts. If I were struggling to stay with it, I'd think about this differently.
Third, I know myself well enough to know that $150 would bother me. Not a lot, but a little, every time I looked at it. I'd rather have the slightly slower first win and the lower total.
So the extra goes to the 5.05% loan. I called my servicer to make sure my extra payments go to that one loan instead of being spread across all six, which is what they had been doing by default. It took one phone call and some hold music. I also put a note in my planner to check the first statement and confirm it actually happened.
The one argument for snowball I still like
Snowball has a quiet practical advantage that has nothing to do with feelings. When a loan disappears, its minimum payment disappears with it. That frees up cash every month if something goes wrong. If my car died tomorrow and I had to cut back to minimums, having fewer loans would make my required payment lower.
With six loans on the standard plan, that's a real point. I've decided it doesn't outweigh the interest for me right now, because I'm also building my emergency fund, and that's what is supposed to handle the car. But I get why people choose snowball, and I don't think they're wrong.
When I told Nolan I'd finally decided, he asked which one I picked. I explained avalanche for about two minutes. He nodded, said "So, the biggest number first," and went back for a fourth piece of crumble. Close enough.
