Navjot Brar | Feb 05 2026 16:00
Understanding the Connection Between Student Debt and Retirement Planning
Across the United States, two financial pressure points consistently show up for adults of all ages: student loan repayment and retirement readiness. More than 43 million Americans currently carry student loan balances, and many continue making payments well into midlife. With repayment stretching into a person’s 40s, 50s, or even 60s, it’s easy to see how planning for life after work can take a back seat.
At the same time, surveys reveal that a significant portion of Americans feel unprepared for retirement. This includes high-net-worth (HNW) earners, mid-career professionals, and families trying to juggle multiple financial responsibilities. As we recognize Financial Aid Awareness Month this February, it’s an ideal moment to look at how retirement progress and student loan management can support one another rather than compete for attention.
No matter whether you’re repaying your own loans, managing Parent PLUS debt, or helping fund a child’s education, there are practical ways to move forward on both fronts. Here’s what to keep in mind.
Tap Into Employer Benefits from the SECURE 2.0 Act
One of the most impactful changes for borrowers comes from the SECURE 2.0 Act, which introduced the option for employers to match student loan payments with retirement contributions. If your employer offers this feature, each qualifying loan payment can trigger a matching deposit into your 401(k) or another employer-sponsored plan—even if you’re not contributing to the retirement account directly.
This benefit is a game changer for individuals who want to prioritize loan repayment without pausing retirement accumulation. By pairing loan payments with employer-funded retirement deposits, you can still take advantage of compounding growth inside your account. This is particularly valuable for early- and mid-career adults working to reduce debt while building long-term financial stability.
If you think you may qualify, start by checking in with your HR team or plan administrator. They can confirm whether your organization offers this option and provide details on how to enroll.
Make Extra Payments the Right Way
Speeding up loan payoff by making additional payments can be a great strategy—if those payments are applied correctly. Many borrowers do not realize that servicers often apply extra payments toward future scheduled installments rather than lowering the principal balance. That may make you look ahead of schedule but does little to reduce the interest you’ll owe over time.
To ensure your additional payments truly help shorten your repayment timeline, you must request in writing that the extra amount be applied directly to your principal. Doing so can cut down on accrued interest and shorten the total repayment period.
If you're unclear about how your loan servicer allocates additional payments, call them to verify. It’s wise to keep documentation of any requests you make so you can reference them later if needed.
Use Pre-Tax Retirement Savings to Lower Monthly Loan Costs
For borrowers enrolled in income-driven repayment (IDR) plans, contributing to a traditional 401(k), 403(b), or SIMPLE IRA can serve two purposes. Because IDR payments are calculated based on your adjusted gross income (AGI), lowering your AGI through pre-tax contributions can reduce your monthly loan payment.
This means you’re simultaneously funding your retirement and lowering your current student loan obligation. For those pursuing Public Service Loan Forgiveness (PSLF) or other long-term forgiveness paths, reducing your AGI may also increase the amount ultimately forgiven.
For registered investment advisors (RIAs), wealth and retirement professionals (W&R), and HNW individuals with layered financial priorities, this approach can offer a strategic way to maintain retirement momentum without sacrificing debt management goals.
Consider How Forgiveness Programs Fit Into Your Financial Picture
Many borrowers qualify for forgiveness programs with repayment horizons ranging from 10 to 25 years. If that applies to you, you may want to evaluate whether accelerated repayment is truly the most effective long-term strategy. Paying down your loans aggressively can shrink your balance, but it could also diminish the amount eligible for forgiveness.
By contrast, focusing on maximizing retirement contributions—especially those that reduce your AGI—can lower your IDR payment amounts, increase potential forgiveness totals, and help your retirement accounts grow uninterrupted. Viewing your finances holistically can reveal opportunities to optimize both debt reduction and retirement security.
Smart Planning Makes It Possible to Prioritize Both
Managing student loan repayment while building retirement savings does not have to be a conflicting set of choices. With the right strategies, you can advance both goals simultaneously. Key steps may include confirming eligibility for SECURE 2.0 employer matching, ensuring extra loan payments reduce your principal, increasing pre-tax retirement contributions when enrolled in IDR, or confirming eligibility for existing forgiveness programs.
A financial advisor can help you break down these choices and understand how they work together. This can be especially useful if you have multiple income sources, long-term financial goals, or higher-net-worth circumstances requiring more complex planning.
The Bottom Line: You Can Make Progress on Both Fronts
Many people assume they must choose between tackling student loan debt or saving for retirement. Fortunately, that isn’t the case. Thanks to tools like the SECURE 2.0 Act, income-driven repayment plans, and expanded forgiveness options, balancing these goals is more realistic than ever.
As we acknowledge Financial Aid Awareness Month, it’s a good reminder that financial literacy benefits people at every stage of life—not only students. If you’re juggling student loan payments while preparing for the future, this month offers the perfect opportunity to review, rethink, and realign your strategy.
If you’d like support analyzing your numbers or mapping out a personalized plan, feel free to reach out. With the right approach, you can reduce your loan burden, grow your retirement savings, and build more confidence in your long-term financial outlook.
