Yes, You Can Save for Retirement While Tackling Student Loans—Here’s How

Having debt to pay off can undoubtedly make it more challenging to achieve additional financial goals like saving for retirement. While it can be helpful to hone in on specific priorities, this doesn’t necessarily mean you have to choose one of these objectives and completely abandon the other. It may take some extra time and planning, but you can tend to your retirement savings while also chipping away at student loan debt. 

Can you really save for retirement while paying off student loans? Here’s how 

Experts suggest making the following moves as quickly as possible to be proactive about your financial future. 

Step 1: Take advantage of student loan repayment programs

The first step is to understand your student loan repayment options, advises Jack Wang, wealth advisor and host of Smart College Buyer podcast. This includes researching any income-driven repayment plans for which you may be eligible, or if you hold private loans, if refinancing is possible, he says. 

“Determine if your employer offers student loan repayment benefits and/or retirement plan contribution matches,” offers Wang. “You want to be able to take full advantage of any such programs to maximize your efforts to pay off loans and save.”

Something else to consider is that employers are recognizing the financial stress employees of all ages are under, and some are offering various forms of support, adds Patricia Roberts, Chief Operating Officer at Gift of College, Inc.

For example, certain companies are offering tax-free student loan repayment assistance through the end of 2025 (unless extended), and others are offering contributions to retirement accounts by treating employees’ student loan payments as if they were 401(k) contributions and matching to increase retirement savings. 

Step 2: Assess your financial priorities

This is the most important step, says Wang, because these are opposite goals, and some people need to pay off debt to have daily peace of mind while others aren’t as concerned and can focus first on building wealth. 

As Roberts says, “After all, there are no loans for retirement.”

“If building wealth is more important, lower your monthly payments on your loans either by using income-driven repayment plans, or by refinancing,” says Wang. “Then save the difference from the lower monthly payment and maximize any employer match or benefit if possible.” 

This will allow your savings to grow and compound, he explains. Worried about staying in debt longer and paying more in interest over time? You may indeed pay more interest, but this is usually more than offset by the amount of interest earned on the savings over time, says Wang. 

Step 3: Make every dollar count toward debt or savings

If paying down your student loans is top-of-mind and you want to cut your debt as quickly as possible, prioritize paying the most costly loans first, recommends Abigail Wright, Senior Business Advisor and Finance Expert at ChamberofCommerce.org. 

“Some student loans have very high interest, and those are the ones it will cost more to pay back the longer you wait,” she says. “Pay extra on those, but never stop saving for retirement entirely! Retirement accounts such as a 401(k) will add up over time, so even small contributions today will be worth more in the future.”

If you are struggling, choose an income-driven repayment plan, according to Mark Kantrowitz, President at PrivateStudentLoans.guru. Otherwise, he says, choose the repayment plan with the highest monthly payment you can afford.

Step 4: Stay on track with payments 

Regardless of your personal preference, always meet the required payment on all your student loans, as the penalties for defaulting on your student loans outweigh any potential benefits from saving more for retirement, cautions Kantrowitz. 

Build your nest egg now

Saving as much as you can ultimately requires time and money, says Wang, so start as soon as possible so you can have more time both to add more money yourself and gain interest. 

Saving for retirement doesn’t have to be in the form of an official retirement plan, either, he notes. Getting matches on 401k contributions is beneficial, but other options include Roth IRAs (assuming you’re eligible to contribute) or non-qualified brokerage accounts, offers Wang. 

“These other options can offer more flexibility in withdrawals if needed, yet still potentially grow and be used for retirement or any other purpose,” he says. 

[ami-stories label=”More student loan help:” article1_id=”439005″ article1_title=”Major Changes Could Impact Student Loans, Pell Grants, PLUS Loans and Repayment Plans: What to Know” article1_url=”https://firstforwomen.com/home/money/changes-proposed-for-student-loans-and-pell-grants-what-to-know” article1_target=”1″ article1_nofollow=”” article1_sponsored=”” article2_id=”438159″ article2_title=”Involuntary Collections of Defaulted Student Loans to Resume in May: What Borrowers Should Know” article2_url=”https://firstforwomen.com/home/money/involuntary-collections-restart-for-defaulted-student-loans-details” article2_target=”1″ article2_nofollow=”” article2_sponsored=”” article3_id=”436090″ article3_title=”Late Student Loan Payments Could Drop Credit Scores By 171 Points—Here’s How to Protect Yours” article3_url=”https://firstforwomen.com/home/money/do-student-loans-affect-credit-score-what-you-should-know” article3_target=”1″ article3_nofollow=”” article3_sponsored=””]