Why Debt Snowflaking May Be One of the Best Student Loan Repayment Options

If you have student loans, then you’re probably very familiar with the debt avalanche and debt snowball methods as student loan repayment options. But what about debt snowflaking?

This is a relatively new idea for paying off debt that’s more budget-friendly for recent college graduates. And if you need help managing your student loan payments, this new strategy could be a good fit.

Here’s how to tell if the debt snowflaking method will help you pay off student loan debt faster. And, if it’s one of the best student loan repayment options out there for you.

What is debt snowflaking?

Debt snowflaking is a strategy that focuses on paying off a debt in extremely small chunks of money. These are sometimes called micro-sized debt payments.

This is one of the student loan repayment options that are somewhat easier on your budget. That’s because you can put down four $25 payments instead of one $100 lump sum.

Think of it this way. The debt snowball method recommends throwing as much money towards one debt as possible. Meanwhile, you’re paying the minimum amounts on the rest. As you pay off one debt balance you’ll tackle the next debt with all applicable funds and continue this “snowball” effect until you’re debt free.

On the flip side, debt snowflaking takes a less drastic approach. It combines very small amounts of money, or “snowflakes,” that consistently reduce your balance. They also save you a bit more money on interest payments over the long term.

How the debt snowflaking method works

This one of the student loan repayment options that hones in on the idea that the slow and steady approach is the one that wins the race.

Debt snowflaking can help you feel like you’re progressing more quickly with your student loan repayment since your balance continues to tick down on a regular basis.

It can be a good alternative for how to pay down debt for the long term. That’s because it gives you both financial and psychological benefits.

Here’s a breakdown of how this debt payoff plan works.

Step 1

Make a list of all your student loans and other debts. Then, organize them from the lowest balance to the highest.

You don’t have to worry about the interest rates as we’re simply focusing on the balance owed.

Step 2

Find out what the minimum payment amount is for each debt. Then, put this on the list as well. Make sure you pay at least that amount.

You’ll likely split this payment up throughout the month. You can make either bimonthly or weekly payments.

But for now, just record what the minimum payments are so you don’t incur fees for not paying the correct amount.

Step 3

Use specific income streams, or saving strategies, to pay down a specific student loan or credit card debt.

For example, every time you go to the grocery store and use a coupon, or make a purchase online and use a discount code, immediately set aside those savings to be allocated towards Loan #1’s debt balance.

Then, dedicate a weekend job to pay for Loan #2. Afterward, put all your birthday money and other “found money” throughout the year to pay for Loan #3. And so on.

Step 4

Continue snowflaking small payments onto your debts whenever you save money on a purchase or receive income from freelance work.

In addition, dedicate any extra money at the end of every week to a specific debt. Even if it’s just an extra $10 or $20.

Just make sure all of these amounts add up to at least your minimum payment due on that account every month.

Advantages of Debt Snowflaking

More budget-friendly debt payments

Since debt snowflaking is all about micro-sized debt payments, it’s a bit easier on your monthly budget.

You don’t have to worry about coming up with hundreds of dollars to go towards debt. But instead, can focus on small amounts every week or every two weeks.

This is one of the best student loan repayment options for freelancers or anyone with an irregular income.

Avoid debt payoff fatigue

One of the great things about this method is that you’re less likely to experience debt fatigue.

You’ll be making small but consistent positive changes throughout the course of paying off your debt. This makes the process seem a bit easier and doable.

When looking at a large amount of debt, you need a strategy that will feel easily obtainable. Not another plan that’s bound to fail.

Financial and psychological benefits

You’ll encounter both financial and psychological benefits early on in your debt payoff plan.

Why? Because it speeds up your debt payment momentum while boosting your confidence with small but consistent wins.

You’re also taking more frequent action towards your debt, thus creating more conscious money and spending habits.

Disadvantages of Debt Snowflaking

May possibly underpay your balance

Since this method requires micro-sized payments towards your debt, even $15 or $25 each time, it’s easy to underpay the minimum balance due on your loan.

However, this can lead to underpayment charges and other penalties fees if you’re not on top of the balance.

That’s why it’s important to list out the minimum balance for each account and divide that by the number of payments you feel you can easily make each month.

Lots of transactions

Debt snowflaking is one of those student loan repayment options that comes with a lot more transactions and payments from your bank account to different debts.

It’s a good idea to sign up for free online banking where you can set up regular payments to your loans automatically. This will eliminate the headache of having to keep all your payments organized, and from being overwhelmed with so many transactions.

Number of payment limitations

Before setting up multiple transactions to and from your checking account, verify with your bank to see if there are any transaction limitations.

Some financial institutions and lenders have a cap on the number of transactions or payments you can make every month. So if you’re setting up 5-8 micro-sized payments every month, you may go over this limit and incur transaction fees.

Is debt snowflaking right for you?

It’s important to weigh out all of the advantages and disadvantages of the debt snowflaking method so you can use it to it’s fullest potential.

When choosing among various student loan repayment options, take into consideration all the possibilities. Like with all student loan repayment options, there are pros and cons. So take your time to fully understand them and then make the best-informed decision.

Never hesitate to experiment with different methods until you find the one that really works for your situation. And if micropayments sound appealing to your budget, then debt snowflaking may be just the method for you.

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Published in Debt, Pay Off Student Loans, Student Loan Repayment Options

  • Christy Love

    Is “snow flaking” also similar to choosing the smallest payment plan options you can on federal loans? I was realizing this could be extremely useful if you have a mid-large amount of debt to pay over. There’s some plans that offer student loan forgiveness after 20 years or if you qualify for the forgiveness programs that require you to work at a government facility, this could do it as well and you can be forgiven in 120 payments or 10 years. I realize 20 years is far away, and all of us would love to pay off our loans ASAP, but I’m thinking if it’s money you don’t have to pay in the end, while reducing you current payments, I think it’s a pretty smart.

  • Jenny

    So I just had a crazy idea. Not sure if this would work… I was told that a borrower in IBR will have the loans forgiven after 300 payments. Sometimes IBR payments can be pretty low, and the student loan companies have to accept our payments, right? So…. what if someone with a low student loan payment made 2-3 payments a week? They won’t take a principal-only payment until you’ve paid off the accrued interest anyway, so they should be applied as regular payments. So by making 2-3 payments per week, those 300 payments could be knocked out in 2-3 years, but the actual amount you would pay would be a fraction of the loan balance. Would that even work, or does it have to be 300 payments OR so many years… whichever is longer?

  • GoFigure

    so, does anyone reply to the questions here?
    Anyway It is important to keep track of the DATE pmts are due as well as the minimum amount due. An excel spreadsheet works well or regular calendar items that send reminders a bit ahead. The small pmts can work well because then if the due date is arriving for the month on something or other, it’s a smaller pmt that has to be made in crunch time.

    • Hi GoFigure,

      Thanks for your comment. We try to answer as many comments as possible, but we’re not always able to reply to all of them.

      In any case, thanks for adding your advice here!