Why Student Loans and Retirement Cripple Each Other

Student loans and retirement are two major financial topics at the heart of employees’ financial concerns. Unfortunately, they may have a crippling effect on each other and may cause a ripple that negatively affects other financial goals and challenges, too.

Who Is Affected?

Student debt is not just a young person’s issue. Adults in every age group, from 20-somethings to retirees, carry student loan balances. According to the Federal Reserve, more than 43.5 million borrowers collectively owe over $1.7 trillion in federal student loan debt as of 2024.¹

Here’s a snapshot of the average student loan debt by age group²:

• Ages 25–34: $33,173
• Ages 35–49: $43,438
• Ages 50–61: $45,159
• Age 62 and older: $41,269

Even adults approaching or already in retirement often still carry significant education debt. In fact, the number of borrowers aged 62 and older has quadrupled in the last decade.

How Is It Affecting Employees?

When employees are focused on paying off student loans, they often scale back retirement contributions just to keep up with debt. This trade-off means they may miss out on employer matching funds, compounding investment growth, and early savings opportunities.

With retirement savings put on hold, they may struggle to meet future needs. If an unexpected expense arises, like a medical emergency or a child’s education, they may resort to early withdrawals from limited retirement savings, triggering taxes and penalties.

And it doesn’t stop there.

Carrying high levels of student debt often leads to the following:

• Increased financial stress
• Difficulty covering day-to-day expenses
• Persistent credit card debt and high-interest payments

When student loans become overwhelming, other financial responsibilities tend to follow suit.

What Can You Do?

Whether you’re focusing on retirement or repaying student loans, a great place to start is with a budget. Look at your income, expenses, and debts to determine how much you can realistically allocate toward saving or paying off loans.

Then, tackle your specific goals with tailored strategies.

Possible Next Steps for Student Loans

• Planning for future education costs? Consider education-specific savings options like a 529 Plan.
• Need funding for college now? Explore grants, scholarships, and work-study programs that don’t require repayment.
• Already have loans? Look into the following:
  • Income-Driven Repayment (IDR) plans
  • Loan consolidation to lower payments
  • Forbearance or deferment options during hardship
  • Public Service Loan Forgiveness (PSLF) if you qualify through public sector work

If you’re a parent repaying loans for your child’s education, these strategies may still apply — and working with your loan servicer can help identify the right path.

MSA members can also work with a Money Coach to explore these options more deeply.

Real Life Example

Sarah, an MSA member, had $80,000 in student loan debt and $20,000 in credit card debt. Her Money Coach, Dave, helped her budget and consolidate her loans under a federal program with a potential 10-year payoff plan.

“I have savings for the first time in my life! I have around $3K in my savings account! I saved enough to move into a better apartment and buy a new car — all thanks to working with Coach Dave!”

Next Steps for Retirement

No matter where you are in your career, it’s never too late or too early to plan for retirement.

• Start by saving a small portion of each paycheck — even $10 a month can grow over time.
• If your employer offers a 401(k) with a match, aim to contribute at least enough to get the full match.
• Consider opening an IRA, either Traditional or Roth, depending on your tax situation.

MSA members can consult a Money Coach to evaluate which retirement accounts and strategies may align best with their goals.

Real Life Example

Anthony wanted to retire in ten years but had limited savings and no pension. Through MSA, he partnered with a Retirement Specialist to estimate future income needs, evaluate current assets, and create a savings strategy. He increased his 401(k) contributions and opened a Traditional IRA — steps that brought him closer to a secure retirement.

Next Steps for Greater Financial Success

Ignoring student loans or delaying retirement savings can have long-term consequences. Take control by participating in a financial wellness program that helps you:

• Strengthen foundational habits
• Identify financial challenges and goals
• Create and implement a personalized action plan

MSA members have access to one-on-one coaching, online tools, financial software, and educational resources to support their journey.

Hundreds of members like Sarah and Anthony work with MSA Coaches each day, and now, you can too. Tackle your debt, grow your savings, and feel confident about your financial future.

Schedule a session with a Money Coach today.

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¹ Federal Reserve. (2024). Quarterly Report on Household Debt and Credit. https://www.federalreserve.gov/publications

² Student Loan Planner. (2024). Student Loan Debt by Generation. https://www.studentloanplanner.com/student-loan-debt-by-generation/

U.S. Department of Education. (2024). Federal Student Aid Portfolio Summary. https://studentaid.gov/data-center/student/portfolio

Investopedia. (2024). Student Loan Debt by Age. https://www.investopedia.com/student-loan-debt-by-age-5200927

Information provided in this article is for informational purposes only and is not intended to offer specific personalized investment, financial planning, tax, legal, or accounting advice.  We recommend that you consult an attorney, tax advisor, or accountant regarding your unique circumstances.

My Secure Advantage, Inc. or any of its representatives do not endorse any of the websites or company names listed here.

Testimonials were provided by members of MSA.  They did not receive compensation of any kind for their statement.