Student Loan Debt Relief Improves Retirement Savings

Early planning can be a form of student loan debt relief that improves retirement savings.  It is a win-win!  Student loan debt relief comes in a variety of ways.  Research reflects workers with student loan debt save significantly less for retirement than they should.  A working paper from the Center for Retirement Research at Boston College points to that topic specifically.  It shows that bachelor degree holders with student loans have notably lower retirement savings at age 30.  This is when compared to counterparts without college debt.  The implication is that making a student loan payment each month reduces retirement plan contribution rates.

Today’s 43.2 million student loan borrowers carry an average debt of $39,351 each, according to  However, all is not lost.  With early planning and ingenuity, early-career workers can manage their student loan debt relief.  Better yet, students can avoid the debt  altogether.  It is important to note, that planning must start early – ideally, when the individuals are still students in high school.  It may be worth it – retirement savings almost doubles in households without student loans.  According to a recent study on student loan debt from the Employee Benefit Research Institute (EBRI), the average retirement plan balance was $46,768 for families with heads of household younger than 35 with a college degree, compared to $25,581 for families with student loan debt.

So how can students plan early to avoid or reduce student loan debt?  James Lewis, co-founder of the National Society of High School Scholars (NSHHS) has a suggestion.  Students – and their parents – must equip themselves with knowledge and a game plan.  Here are a few tips he recommends to get started:

  1. Take Advanced Placement (AP) classes in high school. High AP test scores not only help with college acceptances –  the high scores may also help pay for college.  Such credits can pay for half or even a full year of tuition.  Students should start by finding out which colleges accept AP credits and when to start taking classes.  Another path, dual enrollment in college while the student is still in high school, can help defer costs.
  2. Consider the military or ROTC. Students can earn tuition dollars through military service and work/study programs.  The Army is one of the largest scholarship providers in America.  In 2019, the Army awarded $3.2 million in scholarships to NSHSS members.
  3. Seek widely available scholarships. There are vast numbers of scholarships available – in most cases, more than students (or parents) realize.  According to Rachel Cruze, best-selling author and personal finance guru Dave Ramsey’s daughter, offers another strategy.  “Future college students should make it their part-time job to apply for scholarships and stay away from the student loan trap!”

For today’s early-career employees, it’s obviously too late to pre-plan for options.  They will need to find student loan debt relief in other forms.  In this case, employers can help by offering benefits such as student loan repayment assistance programs.  As their name implies, student loan debt relief programs do exist.  These repayment assistance programs are benefits where an employer can help employees pay off a portion of their student loan debt.  Employees welcome the help.  In fact, nearly half (45%) would prefer student loan payment contributions to retirement plans, like 401(k)s and 403(b)s.  For younger employees, that number is even higher at 54%.  Moreover, due to regulations passed during the Covid-19 pandemic, companies can use pre-tax dollars for employer repayment assistance up to $5,250 through 2025.

Financial wellness programs are another benefit employers can leverage to help employees seeking student loan debt relief.  Financial wellness helps workers to prioritize paying off debt and saving for the future.  Recent studies have shown that offering financial wellness programs in the workplace can help in other ways.  They can help improve employees’ physical and mental health, making them happier and more productive.  That benefits everyone.


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