How to manage student loans without losing sight of retirement

Student loans have been in the headlines a lot lately — from changing repayment plan options to court decisions about forgiveness. It can be hard to know what applies to you or how to move forward if you have loans.

• Student loan balances are significant. Student loan borrowers today carry an average federal balance of about $39,000, and parents who helped fund their children’s educations owe about $110 billion in Parent PLUS and other student loans.^{1, 2}
• Getting organized and staying current are powerful first steps. Knowing what you owe, to whom and at what interest rates — as well as checking current repayment information — can help you make more confident decisions.
• You may be able to work on both goals. Even small, steady retirement contributions while you repay loans can add up over time.

Put your loans in one list. Use an app, spreadsheet or notebook to list each loan’s servicer, balance, interest rate, monthly payment and remaining term.

Check how loans fit into your budget. Add your total monthly loan payments to your essential expenses and calculate what’s left for savings.

Choose one small next step from the tips below. That might be finding $10 to $25 per paycheck for savings or visiting the StudentAid.gov Manage Loans page to review repayment options.

• Making payments on time will help you avoid extra interest, fees and penalties for forgotten or missed payments.
• You can receive a quarter percent interest rate discount on federal loans and many private ones by having payments automatically withdrawn from your checking account.
• If you don’t have a budget, create one using our tips and worksheet or tools like budgeting apps or spreadsheets.

• Making additional payments could help reduce your total interest charges and help you pay loans off faster. It may not make sense to pay more if you’re seeking loan forgiveness or income-driven repayment, since loans are forgiven after a certain period or number of payments.
• If you decide to make extra payments and can’t do so regularly, consider using unexpected funds, such as bonuses or financial gifts, toward loans.
• Ask loan servicers to apply extra payments toward the principal; otherwise, they may apply the money to future payments.

• Some employers offer student loan repayment benefits; assistance ranges from lump-sum payments to matching your loan payments.
• Check with your HR department or benefits administrator to find out about available programs.

• Setting aside even a small amount toward retirement while you repay loans will give your money more time to grow. That’s important because time allows compounding to boost your savings, meaning your earnings are reinvested to earn more.
• Some employers also match retirement plan contributions up to a certain amount. If your does, consider contributing enough to get the benefit.
• If you’re on an income-driven repayment plan, making retirement plan contributions pre-tax could lower your student loan payments while helping you save more for retirement.

• Borrowers aged 62 and older have some of the highest average balances,¹ which could be due to interest accruing over a longer period or taking out loans for advanced degrees or family members.
• Consider modifying your loans; depending on what you qualify for, it could help you reduce or eliminate loan debt or free up funds for retirement savings or expenses.
• While everyone’s situation is different, some experts suggest putting additional funds toward retirement vs. loans at this stage; a financial professional can help you determine what’s right for you.