Debt

Good debt vs. bad debt

Debt isn't inherently bad — it's a tool. A mortgage or student loan at a low rate can be a reasonable way to finance something valuable. A 24% APR credit card balance is a financial emergency.

A useful rule of thumb: high-interest debt (roughly 10%+ APR — most credit cards) should be paid off aggressively before almost anything else, including extra retirement contributions beyond an employer match. Moderate-interest debt (roughly 4–5%+, excluding your mortgage) is worth prioritizing too, but with a bit less urgency.

Avalanche vs. Snowball

Once you've decided to focus on debt payoff, you need an order to attack multiple debts in. Two popular methods:

• Avalanche: pay minimums on everything, then throw extra money at the debt with the highest interest rate first. This saves you the most money mathematically.

• Snowball: pay minimums on everything, then throw extra money at the smallest balance first, regardless of rate. This builds momentum and quick psychological wins, which helps a lot of people actually stick with it.

Neither is 'wrong.' If you're confident you'll stay motivated either way, Avalanche saves more in interest. If you know you need quick wins to stay on track, Snowball is worth the (usually small) extra cost.

Student loans

Federal student loans come with protections private loans don't: income-driven repayment, deferment/forbearance, and forgiveness programs like Public Service Loan Forgiveness. Don't refinance federal loans into a private loan until you're certain you won't need any of that flexibility — it's a one-way door.

The income-driven repayment landscape is in flux: the SAVE plan was blocked in court and is being phased out through 2026, replaced by a new Repayment Assistance Plan (RAP) and a Tiered Standard plan. Of the older plans, only IBR is sticking around long-term — PAYE and ICR are closing to new borrowers and phasing out by 2028. If you're on an affected plan, your servicer will contact you directly; don't ignore that notice.

Refinancing federal loans with a private lender can lower your rate if your credit is strong and income stable, but it permanently gives up federal protections and forgiveness eligibility — only do it once you're sure you won't need them.

Should you cosign a loan?

Cosigning makes you fully responsible for someone else's debt — it's not a character reference. If they miss a payment, it's your credit the lender comes after, and you have no more control over whether they keep paying than you did before you signed.

Ask yourself one question before cosigning: could I comfortably make every payment myself if this person simply stopped? If the honest answer is no, don't cosign — no relationship is worth the damage a defaulted cosigned loan does to both your finances and the relationship itself.

Try it yourself

Use the calculator below to compare how long payoff takes — and how much interest you pay — under each strategy for your own debts.