A Fresh Look at Retirement Planning When You Still Have Student Loans

For many adults in the United States, two major financial responsibilities often collide: managing student loan debt and saving for retirement. With tens of millions of borrowers still repaying their loans well into midlife and beyond, it’s easy to see how retirement planning can fall behind. At the same time, surveys consistently show that Americans—especially high‑net‑worth professionals and those in their peak earning years—feel like they’re lagging on long-term savings.

Because February is Financial Aid Awareness Month, it’s an ideal moment to look at how student loan repayment and retirement goals can work together instead of competing for your attention. Whether you’re carrying your own loans, holding Parent PLUS debt, or contributing to a child’s education, understanding your options can help you move forward on both fronts.

Make the Most of Employer Benefits Through the SECURE 2.0 Act

One of the most noteworthy developments for borrowers is the student loan payment match introduced under the SECURE 2.0 Act. If your employer participates, every eligible payment you make toward student loans can trigger a matching contribution into your company retirement plan—such as a 401(k) or similar program—even if you’re not adding money to that retirement plan yourself.

This type of benefit allows you to prioritize debt repayment while still building retirement savings in the background. You also gain the advantage of compound growth, which can strengthen your long‑term financial security without requiring you to divide limited dollars between two goals.

To see whether this option is available to you, connect with your HR department or plan administrator and ask about enrollment requirements and how the match is applied.

Be Intentional When Making Extra Loan Payments

Paying more than your minimum amount each month can absolutely help you reduce your loan balance faster—but only if those payments are allocated correctly. Many borrowers don’t realize that loan servicers often apply extra funds toward future scheduled payments instead of directly reducing the principal.

When payments are applied this way, you may appear ahead on your account, but it doesn’t reduce the amount of interest that accrues over time. The most effective strategy is to submit a written request instructing your servicer to apply extra payments specifically to the principal balance.

This simple step can shorten your repayment timeline and lower the total interest you pay. If you’re unsure how your additional payments have been handled, contact your servicer for clarification and keep a record of your request for your own protection.

Use Pre‑Tax Retirement Contributions to Lower Income‑Driven Payments

For borrowers enrolled in an income-driven repayment (IDR) plan, contributing to a traditional pre‑tax retirement account such as a 401(k), 403(b), or SIMPLE IRA can provide an unexpected advantage. Because your IDR payment is tied to your adjusted gross income (AGI), lowering your AGI through retirement contributions can result in smaller monthly student loan payments.

This creates a powerful two‑pronged benefit: you’re investing in tax‑deferred retirement savings while simultaneously reducing your current loan obligation. For borrowers pursuing forgiveness through Public Service Loan Forgiveness (PSLF) or long-term IDR forgiveness, decreasing your monthly payments could increase the total amount forgiven.

For RIAs, wealth advisors, W&R professionals, and high‑net‑worth households with layered financial priorities, this approach can be an effective way to strengthen both debt management and retirement strategies at the same time.

Consider Forgiveness Programs When Mapping Out Your Strategy

Long-term forgiveness programs—typically lasting 10 to 25 years—should play a meaningful role in your overall planning if you qualify for them. While it may feel satisfying to aggressively pay down loans, doing so can reduce the amount ultimately forgiven and limit how much you can contribute to your retirement savings.

If forgiveness is available to you, directing more money into retirement accounts could lower your AGI, reduce your monthly payments, and increase the portion of your debt eventually wiped away. Meanwhile, those retirement contributions benefit from tax‑deferred growth, giving you greater momentum toward long‑term financial stability.

Taking a holistic look at your situation can help you determine whether accelerating repayment or optimizing forgiveness aligns better with your overall goals.

Balanced Planning Helps You Make Progress in Both Areas

Managing student loans and saving for retirement doesn’t have to be a trade‑off. With the right approach, you can move ahead on both. This may involve checking whether your employer offers SECURE 2.0 student loan matching, ensuring extra loan payments go toward your principal, boosting pre‑tax retirement contributions while on an IDR plan, or exploring forgiveness eligibility.

For individuals with complex income, multiple financial responsibilities, or high‑net‑worth considerations, working with a financial advisor can add clarity. An advisor can help you evaluate different scenarios, consider tax implications, and choose strategies that best support your long-term objectives.

The Bottom Line: You Don’t Have to Choose One Goal Over the Other

It’s a common misconception that paying off student loans and preparing for retirement are mutually exclusive. In reality, modern tools like SECURE 2.0 matching, income‑driven repayment plans, and forgiveness options can make it possible to progress on both simultaneously.

Financial Aid Awareness Month serves as a reminder that financial education matters at every age—not just when you're applying for college. If you’re working to balance student debt with retirement planning, this is a great time to reassess your priorities and adjust your strategy.

If you want support reviewing your financial picture or developing a personalized plan, now is an excellent time to reach out. With the right approach, you can reduce your loan burden, strengthen your retirement outlook, and feel more confident about the future ahead.