I had a friend that approached me about 18 months ago regarding the best way to pay down his loans. I started with a simple model and as it came to fruition, wound up with a solution[1] that factors in the present value of savings, future interest rates, and tax consequences. This is a more mathematical effective strategy for paying down debt.
By considering the present value of savings, you are able to judge the relative difference between a loan that recognizes savings in 30 years vs 10 years, for example. Future interest rates are important here because it reflects your opportunity cost of paying down debt (ie you could be saving this money in a risk-free investment instead). Lastly, taxes are extremely impactful because, for those who qualify, paying down a tax-deductible mortgage or student loan ultimately lowers your after-tax income.
Although my site is still somewhat beta, I invite folks to come sign up for free and give it a try.
Another benefit of the snowball method is you can reduce the number of lenders you owe money to more quickly. Then, if for some reason you can't keep up with payments, you have fewer ominous phone calls to worry about and are less likely to have to file bankruptcy.
Interestingly, at that point the psychology goes from motivational to avoiding extra stress altogether.
