For many adults in the United States, two major financial pressures often compete for attention: student loan repayment and retirement planning. With more than 43 million Americans carrying student loan balances—many well into middle age—it’s easy to understand why long-term savings goals sometimes fall by the wayside.
At the same time, surveys consistently show that a large share of Americans feel unprepared for retirement, including high-net-worth individuals and mid-career professionals juggling multiple financial demands. With Financial Aid Awareness Month taking place this February, it’s an ideal moment to step back and explore how to manage both priorities without sacrificing one for the other.
Whether you’re paying down Parent PLUS loans, tackling your own student debt, or assisting a child through college, the following guidance can help you stay on track with retirement while making meaningful progress on your loans.
Take Advantage of Employer Support Through the SECURE 2.0 Act
One of the most game-changing opportunities now available to borrowers comes from the SECURE 2.0 Act. This legislation allows employers to match qualifying student loan payments with contributions to your retirement account, even if you aren’t making contributions of your own.
This benefit is significant. It provides a way to build retirement savings while directing your income toward student loan repayment. It also lets you tap into the power of compound growth in your retirement plan without having to choose between saving and paying down debt. Professionals early or midway through their careers may find this especially helpful as they work to reduce loan balances without delaying their long-term planning.
If you aren’t sure whether your employer offers this type of match, reach out to your Human Resources department or your plan administrator for details on eligibility and enrollment.
Make Extra Payments the Right Way
Putting additional money toward your student loans is a smart approach if your goal is to pay them off more quickly. However, this strategy only works effectively when those extra funds are applied correctly.
Many servicers automatically count additional payments toward future bills instead of lowering your principal balance. While this may look like progress, it does not reduce the amount of interest that accrues over time.
To ensure your extra payments shorten your loan term and reduce total interest, you must request in writing that these funds go directly toward the principal. Although it’s a small administrative step, it can have a substantial impact on how much you ultimately pay.
If you want to confirm how your payments are being allocated, call your loan servicer and ask for a breakdown. Keeping a copy of your request is also a good practice.
Use Retirement Contributions to Lower Income-Driven Payments
Borrowers enrolled in an income-driven repayment (IDR) plan can reduce monthly student loan costs by contributing to a pre-tax retirement account such as a traditional 401(k), SIMPLE IRA, or 403(b). Because IDR payments are tied to your adjusted gross income (AGI), lowering your AGI through retirement contributions can reduce your monthly student loan payment.
This approach offers two key advantages. You grow tax-deferred retirement savings while simultaneously lowering your current obligation toward student loans. And if you are pursuing Public Service Loan Forgiveness (PSLF) or another forgiveness track, reducing your AGI may increase the amount forgiven later.
For high-net-worth individuals, wealth and retirement professionals, and those managing several financial goals at once, this strategy can create meaningful long-term benefits.
Consider How Forgiveness Options Fit Into Your Strategy
Many borrowers qualify for forgiveness programs that span 10 to 25 years. If you’re eligible for one of these options, it’s essential to evaluate whether accelerating your payoff is really the best use of your resources.
Paying extra may feel productive, but it could decrease the benefit you receive through forgiveness and limit how much you can invest in retirement accounts. By contrast, prioritizing retirement contributions can lower your AGI, reduce your IDR payments, and increase the amount of debt forgiven over time—all while building long-term financial security.
A holistic look at your finances can help you determine whether aggressive repayment or strategic planning will serve you better over the long run.
Thoughtful Planning Helps You Move Forward on Both Goals
Managing student loan repayment and saving for retirement doesn’t have to be an either-or decision. With the right plan, you can make progress in both areas. That may include confirming whether your employer offers student loan-linked retirement matching, ensuring extra loan payments go toward principal, increasing pre-tax retirement contributions if you’re on an IDR plan, or determining whether forgiveness programs apply to you.
If your financial situation involves multiple income sources, complex goals, or high-net-worth considerations, partnering with a financial professional can bring clarity. An advisor can help you compare scenarios, understand tax implications, and choose strategies that align with your long-term objectives.
The Bottom Line: You Can Build Retirement Savings While Paying Down Debt
There’s a common misconception that borrowers must choose between eliminating student debt or investing for retirement. In reality, both goals are achievable with thoughtful planning and the right tools. With updated programs like the SECURE 2.0 Act, various IDR plans, and expanded forgiveness options, borrowers today have more support than ever.
This Financial Aid Awareness Month is a reminder that strong financial habits benefit people at all stages of life. If you’re working to balance student loan payments with your retirement vision, now is a great time to reassess your strategy and plan your next steps.
If you’d like guidance reviewing your options or creating a path forward, reach out today. A personalized financial plan can help you reduce your loan load, strengthen your retirement future, and move ahead with confidence.
