The Debt Avalanche
Stack debts highest interest to lowest — the cheapest, fastest payoff.
- Difficulty
- Easy
- Time to result
- ~months to results
- Steps
- 4
- Confidence
- 87%
The Debt Avalanche is Jean Chatzky's method for paying off debt in the cheapest, fastest order: rank debts by interest rate and attack the highest first while paying minimums on the rest, then roll down to the next. Long-term debts like student loans and mortgages are treated differently — pay them on schedule and use federal income-driven repayment programs if you're struggling. The key insight is that return on money equals the interest rate, so paying off a 6% loan is a 6% return, but a 50-cents-on-the-dollar 401k match is a 50% return you cannot pass up. So you pay the 6% debt slightly slower rather than forfeit the match. Sequencing beats the myth of one perfect move.
Origin
Jean Chatzky, host of the Her Money podcast, teaches this as the standard interest-rate-ordered payoff method, layered with her framing that return on money is equivalent to the interest rate avoided.
Core principles
- 01The cheapest, fastest way to clear debt is highest interest rate first while paying minimums on the rest.
- 02Long-term debts like student loans, mortgages, and car loans are best paid on their given schedule.
- 03Return on money is equivalent to the interest rate you avoid, so a 6% debt is a 6% return.
- 04Never let fast debt payoff crowd out a guaranteed higher return like a 401k employer match.
How to run it
- 1
Rank debts by interest rate
List every debt from the highest interest rate to the lowest.
- 2
Attack the highest rate, minimums on the rest
Pay off the highest-interest debt first while making only minimum payments on all the others, then move to the next highest once it's gone.
- 3
Keep long-term debts on schedule
Pay student loans, mortgages, and car loans on their given schedule; if federal student loans are a struggle, enroll in a Department of Education income repayment program.
Pro tip Staying enrolled means you get notified of helpful program changes automatically.
- 4
Protect the 401k match first
Don't accelerate a low-rate debt at the expense of an employer match — a 50-cents-on-the-dollar match is a 50% return you can't recreate.
Pro tip Pay the 6% debt a little slower and capture the 50% match; the math is overwhelmingly in your favor.
Watch out Skipping the match to clear a low-interest debt faster is a guaranteed loss of free money.
In the wild
Chatzky contrasts paying off a student loan at 6% — equivalent to a 6% return — with capturing a 401k employer match paying 50 cents on the dollar, a 50% return you forfeit if you divert that money to the loan.
→ Paying the debt slightly slower to grab the match leaves you far wealthier than clearing the loan first.
Common mistakes
Forfeiting the employer match to kill debt fast
Diverting money from a 50%-return 401k match to pay off a 6% debt sacrifices a guaranteed high return for a much smaller one.
Overpaying long-term loans off-schedule
Rushing student loans or mortgages instead of paying them on their given schedule can starve higher-priority moves like the match or emergency fund.
Is it for you?
Best for
People with multiple debts at different interest rates who want the mathematically cheapest payoff path.
Not ideal for
People who need early psychological wins to stay motivated and would quit without the smallest-balance-first momentum.
From the transcript
“The cheapest, fastest way to pay off debt is to just stack it highest interest rate to lowest interest rate.”
“If you're getting 50 cents on the dollar as a match in your 401k, that's a 50% return on your money. And you can't not…”
From the episode
The Money Reset Series: How to Escape Financial Overwhelm for Good