In the U.S., student loan repayment and retirement planning rank among the most significant financial pressures adults face. More than 43 million borrowers carry student loan balances, and many continue paying those debts well into midlife or beyond. With such long timelines, it’s easy for retirement savings to take a back seat.
At the same time, studies show that many Americans—particularly high‑net‑worth (HNW) individuals and mid‑career earners—feel they haven’t saved enough for retirement. February’s Financial Aid Awareness Month offers a timely opportunity to think about how these priorities can work together instead of competing.
Whether you're covering Parent PLUS loans, tackling your own student debt, or helping a child fund their education, here’s how you can move forward with retirement planning while staying on track with loan repayment.
Take Advantage of Employer Benefits Through the SECURE 2.0 Act
One of the most impactful updates for borrowers comes from the SECURE 2.0 Act, which allows employers to match qualified student loan payments with contributions to your retirement plan. If your company provides this benefit, each monthly loan payment you make could generate a matching deposit into your 401(k) or another eligible plan—even if you’re not adding money to the account yourself.
This is a game changer because it helps you grow your retirement savings while staying focused on paying down debt. You benefit from compounding investment growth without sacrificing cash flow you might need for your loan obligations. This feature is especially valuable for early‑ and mid‑career professionals who want to pay down their loans but don’t want to fall behind on retirement readiness.
To get started, reach out to your HR department or plan administrator to confirm whether this match is available and ask how to enroll.
Apply Extra Student Loan Payments Correctly
Boosting your repayment efforts with extra payments can be extremely effective—but only if the payments are applied in a way that benefits you. Many servicers automatically use extra payments to prepay future installments rather than lowering your principal balance.
While this may look like progress on your account, it doesn’t reduce the amount you’ll owe in interest over time. To truly shorten your repayment schedule and cut long‑term costs, you need to request in writing that additional payments be applied directly to your principal.
If you’re not sure how your payments are being allocated, contact your servicer for confirmation and keep a record of your communication.
Use Retirement Contributions to Lower Income-Driven Payments
If you're enrolled in 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 help decrease your monthly student loan payment. IDR plans calculate payment amounts based on your adjusted gross income (AGI). Lowering your AGI through retirement contributions therefore leads to lower required payments.
This strategy delivers a dual financial benefit: you’re funding tax‑deferred retirement savings while reducing your loan burden. If you're pursuing Public Service Loan Forgiveness (PSLF) or another long‑term forgiveness option, lowering your AGI may increase the amount forgiven in the end. For RIAs, wealth and retirement advisors, and HNW individuals with layered priorities, this approach can be especially effective.
Consider Long‑Term Forgiveness Within Your Financial Strategy
If you're eligible for forgiveness programs spanning 10 to 25 years, it’s worth evaluating whether aggressively paying off your loans is the best use of your income. While fast repayment may feel satisfying, it may reduce the advantage of forgiveness and limit your ability to contribute meaningfully toward retirement.
By increasing your retirement contributions, you can potentially lower your AGI, reduce your monthly IDR payments, and increase how much debt is forgiven over time. Meanwhile, your retirement account continues to grow tax‑deferred—supporting your long‑term financial confidence.
Taking a broad look at your financial landscape can uncover strategies that help you manage loans responsibly while still building toward a secure retirement.
Practical Planning Helps You Move Forward on Both Goals
You don’t have to choose between paying down student debt and saving for retirement. With smart planning and a clear understanding of your options, you can make steady headway on both. Strategies might include confirming employer loan‑payment matching, ensuring extra payments target your principal, adjusting pre‑tax retirement contributions, or reviewing forgiveness eligibility.
Working with a financial professional can also be valuable, especially for individuals with multiple financial priorities or complex income situations. An advisor can help you run the numbers, evaluate tax considerations, and choose the path that aligns with your long‑term goals.
The Bottom Line: You Can Balance Both Priorities
The idea that you must decide between student loan repayment and retirement saving is outdated. Thanks to tools like the SECURE 2.0 Act, IDR plans, and evolving forgiveness programs, it’s entirely possible to make meaningful progress on both.
Financial Aid Awareness Month is the perfect reminder that financial literacy matters at every stage of life—not just during college. If you’re working through the realities of student loan repayment while planning for retirement, now is a great moment to reassess and recalibrate.
If you’d like support reviewing your financial picture or mapping out your next steps, connect today. A tailored plan can help you lighten your loan burden, strengthen your retirement outlook, and move forward with greater clarity and confidence.