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Will Student Loans Ruin My Retirement?

July 25, 2023

graduation cap with money

This article is for informational purposes only and is not intended to be tax or investment advice.

There are few topics hotter than student loans, and it seems everyone wants to know just how student debt affects people in their day-to-day lives. Recent reports estimate $28,9501 in education debt per student upon graduation. That's a lot of money!

It's one thing to try to work a monthly loan repayment into a budget. It's another to try to do this while meeting long-term goals — such as retirement.

The decision to utilize student loans to fund higher education is personal. It may not be the best choice for everyone. Here is what you should know about this type of debt, its role in the economy, and what it may mean for your future.


The State of Student Loan Borrowing

The numbers don’t lie: more students are taking on debt to acquire a degree, often at a steep cost. First-time, full-time students at public two-year colleges get enough grant aid2 to cover tuition and fees. This still leaves them with room and board and book expenses to cover.

Woman with graduation cap and diploma


Total federal grant aid2 went down 32% in the past decade. This included a 39% decline in Pell Grants and 3% in veteran’s benefits. As a result, students and parents borrowed $95.9 billion in the 2020-2021 school year.

Nonfederal (private) loans increased from $9 billion to $12 billion over the past decade. Federal loans totaled over $38 billion at the end of 20212.

Recent pandemic-related measures gave students a break from paying federal student loans. This break has recently ended. Student loan repayment has resumed after a very long pause, which may not be something borrowers have budgeted. For some borrowers, this will be their very first payment.

The Biden administration also tried to forgive up to$20,000 in student loan3 debt per qualified borrower. Federal and circuit courts4 are now reviewing five lawsuits surrounding this executive order on loan forgiveness. However, lenders aren't going to wait to see what happens--they expect to receive scheduled payments.

How Student Loans Can Affect Your Retirement

Students with educational debt start their post-graduation lives at a significant disadvantage. Grads without debt can use their income toward living expenses and goals.  Yet, borrowers must balance these responsibilities with their student loan obligations. They can't put life off while they take care of loan debt.

This may have a ripple effect on their finances for years to come. Financial issues that arise from student debt may include:

  • Not being able to save: Unexpected expenses could leave borrowers with no emergency savings in a position to borrow even more money
  • A high debt-to-income ratio: Lenders may not see these student loan holders as an ideal borrower for a home or auto loan
  • Chance of not paying at all: During hard times, borrowers could end up defaulting on their loans and may face wage or income tax garnishment

What about bankruptcy? Student loan debt isn’t treated the same as other types of consumer debt. Students will usually have to repay their loans unless they can show hardship.


5 Tips for Navigating Loan Debt AND Planning Your Retirement

Many people pay their student loans and go on to have healthy financial futures. You can even treat student loans like any other debt, by paying them off while building your credit score through on-time credit payments. 

Consider these tips to reduce student loan debt and build your retirement fund.


1. Avoid taking more student loans than necessary

Tap into all available financial aid opportunities. These include merit aid, grants, scholarships, employer-paid tuition reimbursement, and work-study programs. File your Free Application for Federal Student Aid (FAFSA)5 on time each year. It's the best way to get access to the most financial aid possible.


2. Break up your retirement goals

Don't set one lofty retirement milestone, such as $250,000, and leave it at that. Such a large amount can seem unattainable. Instead, break down your savings goal into annual, monthly, and even weekly mini-goals. A financial advisor or wealth strategist can help you make a plan that works for your budget.


3. Use employer retirement perks

Take full advantage if your company offers 401(k) plans or other retirement benefits. If they offer employer matching, this is as good as free money. It's also easier to save when retirement contributions are taken out of your check. You won't have a chance to spend it on something else. 


4. Ask for help

Is your student loan payment too large? Ask your lender about deferment and income-based repayment plans. Most have a process for demonstrating need, and you can find a payment arrangement that works for you.


5. Look into refinancing

Federal subsidized and unsubsidized loans offer lower interest rates. Private lender rates are generally higher and often change. See about consolidating loans into one lower-rate loan to help you pay your debt sooner.


When to Start Saving for Retirement

Are you ready to form good financial habits? You'll need to look behind at the decisions you’ve made and plan for the future you want to enjoy. Student loan debt may seem like something that’s holding you back. But, it doesn’t have to keep you from putting at least something toward your retirement plans.

Saving $20 or $50 a month toward retirement is better than nothing at all. It also does something very important: it builds a habit. When you know the money will come out of your account every month for retirement, you can grow to appreciate it. Then, as your student loan burden lessens, you'll be used to adding to your nest egg.

You can also look for tax benefits, like the Saver's Credit.6 Other options include employee-offered retirement perks. Both help you grow your money grow faster than doing it alone. Every little bit counts. There's no better time to start than today.

Are you ready to see what retirement options are available? Contact Centier Financial Partners who can help guide you on the best path as you pay down student debt.


  1. Alicia Hahn, & Jordan Tarver. (2023, May 9). 2023 Student Loan Debt Statistics: Average Student Loan Debt. Forbes.
  2. The White House. (2022, August 24). FACT SHEET: President Biden announces student loan relief for borrowers who need it most
  3. College Board. (2021). Trends in College Pricing and Student Aid 2021.
  4. Allison Gormly. (n.d.). Understanding the lawsuits slowing down student loan forgiveness.
  5. Apply for Aid Using the FAFSA Form. (n.d.). Federal Student Aid.
  6. IRS. (2023, May 3). Retirement savings contributions savers credit. Internal Revenue Service | An official website of the United States government.