A woman sits at a desk and reads debt management tips from Fifth Third Bank on how to lower debt.

How to Pay Down Debt


From managing student loans to lowering credit card balances, here are debt management tips to help you pay down debt.

From managing student loans, adjusting to increased gas prices, and budgeting for everyday groceries, it’s understandable how some may fall behind on expenses and begin to accumulate debt. Whether you’re growing the balance on your credit card or are slowly becoming unable to add to your savings account, don’t panic. There are debt management tips you can follow to lower debt and get your finances back on track.

Let’s take a closer look at two common forms of debt and some solid advice for managing both.

Student Loans

Repaying college loans is one of the biggest financial challenges Americans face. The average student loan balance was $40,904 in 2022, according to data from the Education Data Initiative. Many borrowers found some relief during the pandemic from the government’s pause on federal student loan repayments, which began in March 2020 and has recently been extended until September 2022.

Welcome as the pause in federal student loan payments has been, there may still be many borrowers who will find making monthly payments again in September difficult to integrate into their budgets, especially after the financial challenges COVID-19 may have posed. Those borrowers may want to consider steps to make their student loan payments lower, including:

  • Government-sponsored income-driven repayment programs. Low earners may qualify for these programs that cap monthly federal loan payments at a percentage of an employee’s discretionary income. The loan balance is often forgiven after 20 to 25 years of payments.

  • Forbearance programs. These allow qualified borrowers to suspend federal student debt payment for a period of time, although interest on the balance continues to accrue.

  • Refinance. Borrowers may be able to refinance and consolidate student loans with a private lender for a lower interest rate and lower payments. One caveat: Private student loans are not eligible for government-sponsored forbearance, income-driven repayment programs, or other federal repayment programs.

Something else to consider: The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, now allows borrowers to withdraw a lifetime limit up to $10,000 from a 529 plan for student loan payments. Those withdrawals are tax-free. Because of this change, borrowers can now use existing 529 savings to pay down debt or use a tax-advantaged 529 plan to save for future repayments.

Prioritizing savings for student loan repayment can be a big help. With the Fifth Third Momentum® account you can save for specific goals, such as student loan repayment.

Credit Card Debt

The average credit card debt for Americans hit $5,525 in 2021, according to credit reporting agency Experian. Millions of consumers are burdened by credit card debt and trying hard to pay it down.

The good news: There are two proven strategies with wintry names that can make credit card debt reduction easier. These are the debt avalanche method and the snowball approach.

Both methods help build momentum that can keep you motivated to make sure those balances keep moving down. That said, both methods work best when you’ve made a commitment to allocating a chunk of extra money beyond minimum monthly payments toward debt repayment. Here’s more on each of these strategies.

The Debt Avalanche

Sounds a little dramatic, but the debt avalanche method simply means you start from the top with your highest-interest-rate loan. From there, the momentum and diligent payments will slide you, like an avalanche, toward the end of your debt. Here’s how it works:

To start your avalanche, make a list of your debts by annual percentage rate (APR), starting with the highest rate first. Then rank the rest in descending order of APR. When you eliminate your highest-interest-rate debt first, you eliminate the debt that generates the most interest each month, allowing more of your monthly payments to go towards paying down principal.

Let’s assume you’ve found $500 a month in addition to minimum monthly payments to put toward paying off debt. If you pay that $500 to a credit card debt with a 20% interest rate, your interest charge will drop from $166.67 to $158.33, about $8 less than the previous month. The amount of interest you owe continues to decrease in the same pattern each month. While $8 may not seem like much, it can add up to hundreds or even thousands of dollars over the life of the debt.

The Debt Snowball

The snowball method can keep you motivated to pay off debt because you can see progress clearly. Just as a snowball rolls over and over and builds momentum, so does your debt repayment when you use this method.

With the snowball method, you pay off your debt in order of the smallest to largest balance, regardless of APR. As you pay off each balance, you assign the payment you were making on that debt to the next one and continue until you roll through all of your debts.

To use the snowball method, first, list all of your debts by balance from smallest to largest. Assign the extra money you will be using to pay off debt to the smallest balance, while continuing to pay the minimum balance on all of your other debts. With the extra money, you’ll likely finish paying the smallest debt relatively quickly.

When you do, put what would have been that minimum monthly payment, plus the extra money you’ve designated to pay off debt toward the next smallest balance on your list. When that one is paid, move on in the same way.

The snowball method lets you get rid of small debts relatively quickly, and that is a psychological boost. True, you are not working toward lessening the burden of interest payments in the same way as the avalanche method, but you will quickly see progress that keeps you whittling down the pile.

By making a concerted effort to pay off your debt, you’re on your way to financial wellness. You’ll clear the way to make sure you achieve the rest of your financial goals and make the most of your promising future.

To find the best ways to deal with your debt situation and find the repayment tools and strategies that work best for you, reach out to your Fifth Third banker. We can provide the customized approach that may work best for you.

Share this Article