What Adults Managing Student Loans Should Know About Planning for Retirement
For many adults in the United States, juggling student loan payments and preparing for retirement can feel overwhelming. More than 43 million borrowers carry student loan debt, and countless individuals continue paying down those balances long into their 40s, 50s, and even 60s. With so much income tied up in repayment, it’s easy for retirement planning to slip down the priority list.
At the same time, research consistently shows that many Americans—especially high‑net‑worth (HNW) earners and mid‑career professionals—feel they’re not saving enough for retirement. With February marking Financial Aid Awareness Month, it’s an ideal moment to reflect on how both goals can coexist and how thoughtful financial planning can help lighten the burden.
Whether you’re paying down Parent PLUS loans, tackling your own student debt, or contributing to a child’s educational expenses, here’s how you can work toward retirement while keeping loan repayment on track.
Make the Most of Employer Benefits Under the SECURE 2.0 Act
A powerful opportunity now available to borrowers is the employer match on student loan payments created by the SECURE 2.0 Act. If your employer participates, qualifying payments you make toward your student loans can be matched with contributions to your workplace retirement plan—even if you’re not personally adding money to that plan.
This benefit is especially valuable because it allows you to build retirement savings without diverting funds away from debt repayment. It also gives you the advantage of compound growth in your retirement account while you focus on reducing your loan balance. For professionals in the early or middle stages of their careers, this can be an important way to move forward in both areas at once.
To see whether this benefit is available to you, reach out to your HR department or retirement plan administrator for details and enrollment steps.
Be Strategic When Making Extra Loan Payments
If paying off your student loans sooner is one of your goals, adding extra payments can help—but only if those payments are applied correctly. Many loan servicers automatically direct additional payments toward upcoming scheduled payments rather than using them to lower your principal balance.
Although it may seem like you’re getting ahead by reducing future bills, this approach does not cut the amount of interest that accrues over time. To truly accelerate your payoff timeline, you’ll need to submit a written request instructing your servicer to apply any extra payments directly to your principal.
This simple but important step can shorten your repayment period and save you money on interest. If you’re unsure how your payments are being allocated, call your servicer for confirmation and keep documentation for your records.
Lower Your Loan Payments by Contributing to Retirement
For borrowers using an income-driven repayment (IDR) plan, contributing to a pre‑tax retirement account—such as a traditional 401(k), 403(b), or SIMPLE IRA—can reduce your monthly student loan payment. Because IDR plans calculate your payment based on your adjusted gross income (AGI), lowering your AGI through retirement contributions results in a lower monthly amount owed.
This strategy offers a double benefit: you grow your retirement savings tax‑deferred while also decreasing your loan payment obligation. If you’re pursuing Public Service Loan Forgiveness (PSLF) or any other long‑term forgiveness option, reducing your AGI can potentially increase the balance forgiven at the end of your repayment period.
Consider Long‑Term Forgiveness Within Your Overall Strategy
If you qualify for forgiveness programs that span 10 to 25 years, it’s important to evaluate whether aggressively paying down your loans is actually in your best financial interest. While eliminating debt quickly may feel rewarding, doing so can limit the benefits of forgiveness and reduce the funds available for retirement contributions.
When forgiveness is an option, boosting your retirement contributions can help lower your AGI, reduce your monthly payments, and increase the amount eventually forgiven. Meanwhile, the money you place in retirement accounts continues to grow tax‑deferred, supporting your long‑range financial goals.
Taking time to review your entire financial picture can reveal opportunities to maximize both debt management and retirement readiness.
Practical Steps to Support Both Goals
Paying off student loans and building retirement savings doesn’t have to be an either‑or decision. With a tailored plan, you can make meaningful progress on both fronts. Consider steps such as checking whether your employer offers SECURE 2.0 student loan matching, confirming that extra payments are being applied to your principal, increasing pre‑tax retirement contributions if you’re on an IDR plan, or exploring qualification for forgiveness programs.
The Bottom Line: You Don’t Have to Choose
Many people assume they must focus solely on paying off student loans before they can think seriously about retirement, but that isn’t the case. With thoughtful planning—and with tools such as SECURE 2.0 employer matches, IDR plans, and forgiveness pathways—you can move forward on both goals simultaneously.
Financial Aid Awareness Month is a reminder that financial education is important at every stage of adulthood. If you’re trying to balance student loan repayment with saving for your future, now is a great time to reassess your plan and explore new strategies.