Why the Debt Snowflake Method Can Be So Helpful for Student Loan Repayment

 July 27, 2020
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When student loan balances and monthly dues seem overwhelming, the debt snowflake method can help.

This more budget-friendly method of paying off student loan debt could be especially useful for cash-strapped borrowers. Debt snowflake involves directing small payments — even as little as $5 at a time — toward your loans. It can lower your balances and perhaps even slow the growth of interest.

Let’s look at some of the advantages — and disadvantages — of this method to determine if debt snowflake is the right student loan repayment option for you. Specifically, we’ll cover the following topics:

What is the debt snowflake method?

Debt snowflake is a strategy that focuses on paying off a debt with extremely small chunks of money on a regular schedule. They are sometimes called “snowflakes,” or microsized debt payments.

This student loan repayment option can be somewhat easier on your budget. That’s because you can put down four $25 payments per month instead of a lump sum of $100 that needs to be paid on your loan balance. You can do this by finding savings in your daily life, like making coffee at home instead of buying a pricey latte at the local coffee shop or saving loose change or dollar bills every week. Then take those small savings and put them toward paying off your student loans.

If you gather enough snowflakes to make more than your minimum monthly payment, you could even lessen the toll of interest and shorten your repayment term by months.

Lump Sum Extra Payment Calculator

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To make the most of the debt snowflake method, make sure any additional money you pay goes toward your principal and not your interest. To do this, you’ll likely have to contact your lender and direct them on how to apply your payments — and follow up to ensure it was handled properly.

Debt snowball/avalanche vs. debt snowflake

If you have student loans, you may have heard of the debt snowball and debt avalanche methods of loan repayment, which recommend throwing as much money toward one outstanding debt as possible.

The debt snowball plan often starts with the loan with the lowest balance, while the debt avalanche plan tackles the highest-rate loan first. With either approach, you’ll also pay the minimum amounts on any other debts or loans you have. After you pay off the targeted debt balance, you’ll tackle the next debt with all applicable funds and continue 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, throughout the month that consistently reduce your balance. It can also save you a bit more money on interest payments over the long term by lowering your outstanding debt if you can pay more than the minimum required payments.

How debt snowflake method works

This student loan repayment option homes in on the idea that the slow and steady approach is the one that wins the race. In other words, every little bit helps.

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 more regular basis than just once a month. It can also promote better financial habits, as you’ll be more conscious of how and when you’re spending your cash and which expenses you can do without.

The debt snowflake method can be helpful for paying down debt in 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 or compile a spreadsheet of all your student loans and other debts. Then, organize them from the lowest balance to the highest. You can also try out a student loan budgeting app.

You don’t have to worry about the interest rates, as the debt snowflake method simply focuses on the balances 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 every month.

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

For example, every time you go to the grocery store and use a coupon, make a purchase online and use a discount code or save money from not buying a cup of coffee, immediately set aside those savings to be allocated toward the debt balance on Loan 1.

Then, if you have a weekend job or make extra money with a side hustle, dedicate that income 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

Keep up the momentum. Continue snowflaking small payments toward your loans 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 additional $5, $10 or $20, to help pay it down faster and save on interest in the long term.

Just make sure all of these amounts add up to at least your minimum payment due on that account every month, or you’ll risk being charged late fees, as well as potentially piling on more student loan interest.

Advantages and disadvantages of debt snowflake method

Weigh all the advantages and disadvantages of the debt snowflake method so you can enjoy its fullest potential, or take an alternative route.

Advantages Disadvantages
More budget-friendly debt payments
Avoid debt payoff fatigue
Financial and psychological benefits
Easy to underpay your balance
Lots of transactions to track
May come up against limitations on number of payments

Advantage: More budget-friendly debt payments

Since debt snowflaking is all about microsized debt payments, it’s a bit easier on your monthly budget. You don’t have to worry about coming up with a big amount all at once to make your monthly debt payments. Instead, you can focus on small amounts every week or every two weeks.

This is one of the most attractive student loan repayment options for freelancers or anyone with an irregular income. It’s also a good option for recent grads who want to start tackling their student loans without feeling overwhelmed, but don’t make a high enough salary to pay down big chunks of debt.

Advantage: Avoid debt payoff fatigue

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

You’ll be making small but consistent payments — and positive changes in your financial habits — throughout your repayment. This makes the process seem a bit easier and doable.

When looking at a large amount of debt, you sometimes need a strategy that feels easily achievable, rather than one that seems unmanageable.

Advantage: Financial and psychological benefits

When you follow this micropayment plan, you can enjoy both financial and psychological benefits early on. Why? Because it speeds up your debt payment momentum — much like the debt snowball method — while boosting your confidence with small, but consistent, wins.

You’re also taking more frequent action toward tackling your debt, thus creating more conscious money and spending habits. As an added bonus, you’ll be better organized with your finances and well-positioned to make larger payments when you start to earn more money.

Disadvantage: Easy to underpay your balance

Since this method means making microsized payments toward your debt, even $15 or $25 each time, it’s easy to underpay the monthly minimum balance due on your loan.

If that happens, it can lead to underpayment charges and other penalties and fees. 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.

Disadvantage: Lots of transactions to track

Debt snowflaking is one of the student loan repayment options that generates a lot more transactions and payments from your bank account toward different debt balances.

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

Disadvantage: May come up against limitations on number of payments

Before setting up multiple transactions to and from your checking account, check with your bank to see if there are any limitations on the number of transactions you’re able to make.

Some financial institutions and lenders cap the number of transactions or payments you can make every month. So if you’re setting up five to eight microsized payments every month, you may go over the bank’s limit and incur transaction fees, which could end up costing you money that could instead be put toward debt repayment.

Andrew Pentis and Ali Romano contributed to this report.

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1.90% – 5.25%7Undergrad
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1.86% – 6.01%Undergrad
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1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 4, 2022.

2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.

3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Apr 22, 2021 and may increase after consummation.

4 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.

5 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
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Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

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Interest Rate: A simple annual rate that is applied to an unpaid balance.

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This information is current as of April 29, 2021. Information and rates are subject to change without notice.

6 Important Disclosures for Navient.

Navient Disclosures

You can choose between fixed and variable rates. Fixed interest rates are 2.99% – 8.24% APR (2.74% – 7.99% APR with Auto Pay discount). Starting variable interest rates are 1.99% APR to 8.24% APR (1.74% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.

7 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 11/15/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.

8 Important Disclosures for PenFed.

PenFed Disclosures

Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.