Many adults in the United States are juggling two major financial responsibilities: repaying student loans and preparing for retirement. With more than 43 million borrowers still carrying student loan balances—sometimes well into their 40s, 50s, and 60s—it’s easy to see why retirement planning often gets delayed.
At the same time, a large percentage of Americans feel behind on saving for retirement. This is especially true for high‑net‑worth professionals and mid‑career earners who are balancing multiple goals at once. With Financial Aid Awareness Month taking place this February, it's an ideal moment to explore how both priorities can work together with thoughtful planning.
Whether you're managing Parent PLUS loans, repaying your own education debt, or helping a child through school, here are the key points to understand as you build toward retirement while paying down loans.
Take Advantage of SECURE 2.0 Employer Benefits
A significant update under the SECURE 2.0 Act now allows employers to match student loan payments with contributions to your retirement plan. If your company offers this feature, every eligible payment you make toward your loans can trigger a corresponding deposit into your 401(k) or similar plan—even if you are not personally contributing at the moment.
This benefit is powerful because it allows you to grow retirement savings without shifting money away from your loan repayment strategy. It also gives your retirement account more time to accrue compound growth, which is especially valuable for early‑ and mid‑career earners.
To begin using this benefit, reach out to your HR department or plan administrator to confirm whether your employer participates and how to sign up.
Be Intentional With Extra Loan Payments
Paying extra on your student loans can be an excellent strategy—if the payments are applied correctly. Unfortunately, many servicers default to putting additional payments toward future installments instead of lowering your principal balance.
This might look like progress, but it doesn’t reduce the amount of interest you accumulate over the life of your loan. To truly speed up repayment, ask your loan servicer in writing to apply all extra payments directly to your principal. This often‑missed step can shorten your repayment timeline and lower your total cost.
If you’re not sure how your payments are being applied, contact your servicer for clarification and keep a record of your request.
Use Pre‑Tax Retirement Contributions to Lower Payments
Borrowers enrolled in income‑driven repayment (IDR) plans may reduce their monthly student loan payments by contributing to pre‑tax retirement accounts like traditional 401(k) plans, 403(b)s, or SIMPLE IRAs. Because IDR payments are based on your adjusted gross income (AGI), lowering your AGI can directly reduce your required monthly payment.
This approach offers two advantages at once: you’re building retirement savings on a tax‑deferred basis while also reducing your loan burden. For borrowers pursuing Public Service Loan Forgiveness (PSLF) or long‑term forgiveness plans, lowering your AGI may also increase the portion of your loan that could eventually be forgiven.
This strategy can be especially meaningful for wealth advisors, registered investment agents, and high‑income earners who have layered financial goals.
Account for Loan Forgiveness in Your Long‑Term Plan
If you’re eligible for forgiveness programs that span 10 to 25 years, it’s worth considering whether aggressive loan repayment is truly the best use of your money. While paying off your loans early can feel rewarding, it may reduce your overall forgiveness benefit and limit how much you can contribute to retirement savings during that time.
For borrowers who qualify for forgiveness, increasing retirement contributions could lower your AGI, reduce monthly payments, and potentially raise the amount forgiven over time. Meanwhile, those retirement savings continue compounding, helping you stay aligned with your long‑term financial goals.
Taking a broad look at your financial situation can reveal whether prioritizing retirement savings over rapid loan repayment may offer greater long‑term value.
Strategic Planning Helps You Move Forward on Both Goals
Balancing retirement savings with student loan repayment doesn’t have to be an either‑or choice. With the right strategies, you can steadily build toward both objectives. This may involve confirming eligibility for employer loan‑payment matching, ensuring extra payments reduce your principal, increasing pre‑tax retirement contributions under an IDR plan, or reviewing your forgiveness options.
If your financial picture includes multiple goals, complex income, or high‑net‑worth planning needs, working with a financial advisor can offer clarity. A professional can help you evaluate tax implications, compare financial scenarios, and create a strategy that aligns with your long‑term priorities.
Finding the Right Balance Is Possible
The idea that you must choose between paying off student loans and saving for retirement is a common misconception. With tools like the SECURE 2.0 Act, income‑driven repayment plans, and forgiveness programs, many borrowers can pursue both goals at the same time.
Financial Aid Awareness Month serves as a reminder that financial education benefits everyone—not just students. If you're managing student loan debt while planning for retirement, now is a great time to reflect on your current strategy and consider adjustments that move you closer to your goals.
If you’d like help reviewing your numbers or mapping out a personalized plan, reach out anytime. With the right approach, you can reduce your loan burden, strengthen your retirement outlook, and build confidence in your financial future.
