Snowball vs avalanche, federal vs private loans, interest capitalization, and forbearance.
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- What is the debt snowball method?
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A debt payoff strategy where you pay off the smallest debt first, then use that momentum to tackle larger debts.- What is the debt avalanche method?
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A debt payoff strategy where you pay off debts in order of highest interest rate first, regardless of balance size.- When is the snowball method most effective?
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When you need quick psychological wins or when loan amounts are similar in size.- When is the avalanche method most effective?
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When you want to minimize total interest paid over time and have strong discipline.- Why does the snowball method build momentum?
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Paying off entire debts quickly creates emotional wins that motivate you to continue attacking the next debt.- How much can the avalanche method save compared to snowball?
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Thousands of dollars in total interest, depending on debt amounts and interest rates.- What is the main difference between federal and private student loans?
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Federal loans are issued by the government with standardized terms; private loans are issued by banks or lenders with variable terms.- What is a Direct Subsidized Loan?
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A federal student loan where the government pays the interest while you are in school, in deferment, or in forbearance.- What is a Direct Unsubsidized Loan?
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A federal student loan where you are responsible for all interest, even while in school; interest accrues immediately.- What is a PLUS Loan?
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A federal loan for parents of dependent undergraduates or graduate/professional students, with credit requirements and higher interest rates.- What is deferment?
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A temporary postponement of loan payments where, on subsidized loans, the government pays interest; on unsubsidized loans, interest accrues.- What is forbearance?
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A temporary postponement of loan payments where interest accrues on all loan types; you may be able to make interest-only payments.- What is Income-Driven Repayment (IDR)?
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A federal loan repayment plan where your monthly payment is based on your discretionary income and family size, not loan balance.- What is Public Service Loan Forgiveness (PSLF)?
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A federal program that forgives remaining loan balance after 120 qualifying monthly payments while working for a qualifying government or nonprofit employer.- What is the grace period for federal student loans?
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The period, usually 6 months after graduation or dropping below half-time enrollment, during which you do not have to make payments.
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