For many adults in the United States, student debt and retirement planning are two major financial priorities that often compete for attention. Tens of millions of borrowers are still paying down education loans well into midlife, and it’s easy for long-term savings to take a back seat. At the same time, studies continue to show that many Americans—particularly high‑earning and mid‑career professionals—feel unprepared for retirement.
With Financial Aid Awareness Month this February, it’s an ideal moment to take a fresh look at how these goals can work together. Whether you’re juggling Parent PLUS loans, dealing with your own student debt, or helping a child fund their education, you can still make meaningful progress toward retirement.
Take Advantage of Employer Opportunities Through the SECURE 2.0 Act
A valuable benefit introduced by the SECURE 2.0 Act allows employers to match student loan payments with contributions to a retirement plan. If your company participates, each qualifying loan payment you make may result in a deposit into your 401(k) or similar account—even if you aren’t currently contributing to the plan yourself.
This feature is impactful because it lets borrowers continue prioritizing loan payments without pausing retirement savings. Those contributions have the potential to grow over time through compounding, helping you build long-term security while lowering your loan balance.
This can be especially useful for individuals early in their careers or for mid‑career earners who want to make headway on debt while still preparing for the future. To explore this benefit, reach out to your HR department or retirement plan administrator and ask whether your employer has implemented this option.
Ensure Extra Payments Are Applied Correctly
For borrowers aiming to accelerate repayment, sending in additional funds is a smart tactic—but only when those payments reach the right place. Many loan servicers automatically direct extra money toward future monthly payments rather than lowering the principal balance.
While that may look helpful on your account dashboard, it doesn’t reduce the amount of interest that accumulates over time. To shorten your repayment period and cut down on interest, you must request—ideally in writing—that any extra payments be applied directly to the principal.
This simple step can significantly reduce the overall cost of your loan. If you’re unsure how your payments are being handled, call your servicer for clarification and keep a record of your communication.
Use Retirement Savings to Reduce Your Student Loan Payments
Borrowers on income‑driven repayment (IDR) plans can benefit from contributing to pre‑tax retirement accounts such as a traditional 401(k), 403(b), or SIMPLE IRA. Because IDR payments are calculated based on adjusted gross income (AGI), lowering your AGI through retirement contributions can decrease your monthly loan payment.
This creates a double advantage: you’re building tax‑deferred retirement savings while reducing your immediate loan expense. For individuals in public service working toward Public Service Loan Forgiveness (PSLF) or those using another long-term forgiveness option, lowering AGI can also increase the amount ultimately forgiven.
For wealth managers, registered investment advisors, and high‑net‑worth borrowers handling multiple financial priorities, strategically combining retirement contributions and repayment planning can have a significant long‑term impact.
Account for Long-Term Forgiveness in Your Strategy
If you qualify for loan forgiveness programs that span 10 to 25 years, it’s important to consider whether rapid repayment is the best approach. While eliminating debt quickly can feel satisfying, it may reduce the benefit you receive from forgiveness and leave fewer resources available for retirement contributions.
Basing your plan on eligibility for forgiveness could mean prioritizing higher retirement contributions, lowering your AGI, and reducing your required monthly payments. Over time, this approach may increase the amount forgiven while also growing your retirement fund.
Stepping back to evaluate your entire financial picture can help you strike the right balance and make decisions that support your long-term security.
Thoughtful Planning Helps You Move Forward on Both Goals
You don’t have to choose between paying off student loans and saving for retirement. The key is selecting strategies tailored to your income, tax situation, and financial objectives. Opportunities to consider include:
- Checking whether your employer offers retirement matching based on student loan payments.
- Confirming that any extra loan payments are applied to your principal balance.
- Increasing pre‑tax retirement contributions if you’re using an IDR plan.
- Evaluating your eligibility for loan forgiveness programs and how they fit into your plan.
For individuals with multiple financial goals or complex compensation structures, working with a financial advisor can bring valuable clarity. A professional can help you analyze tax implications, assess repayment options, and determine how each decision affects your long-term outlook.
The Bottom Line: You Can Pursue Both Goals Successfully
It’s a common misconception that borrowers must choose between tackling student loan debt and preparing for retirement. With the right guidance and a thoughtful strategy, it’s entirely possible to do both. Tools such as the SECURE 2.0 Act, income‑driven repayment plans, and loan forgiveness programs are making it easier than ever for borrowers to take a balanced approach.
Financial Aid Awareness Month serves as a good reminder that building financial literacy matters throughout adulthood—not just during the college years. If you’re working your way through student loan repayment while planning for retirement, this is the perfect moment to regroup and outline your next steps.
If you’d like support mapping out your options or reviewing your financial numbers, don’t hesitate to reach out. A customized plan can help you lower your loan burden, strengthen your retirement outlook, and move forward with confidence.
