Student loan borrowers got a reprieve from making payments on their debt during the pandemic, when the country found itself deep in the throes of a financial crisis. That reprieve began in early 2020 and lasted all the way until, well, now.
But since President Biden was unsuccessful in having student loan balances forgiven, millions of borrowers are going to have to do something this month that they haven't done in years -- send a payment to their student loan servicers.
Clearly, money spent on student loan payments is money that can't be spent or saved elsewhere. But it's troubling to see that in a recent Nationwide survey, 66% of respondents said that the reinstatement of student loan interest and payments will significantly impact their ability to save for retirement.
If you're worried about making loan payments and funding your nest egg simultaneously, here's what to do.
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1. Put the process on autopilot
When you're juggling a new payment, whether it's student loans, a car loan, or something else, it can be difficult to keep up with other goals. So a good way to take human error out of the equation is to make sure your retirement plan contributions are put on autopilot.
If you have a 401(k), you're all set there, since contributions to these accounts come right out of payroll. But with an IRA, you'll need to go a step further and set up automatic transfers into your account so you're able to stay on track.
Of course, before you set up those transfers, you'll need to crunch some numbers to see what monthly contributions you can afford in light of the fact that you'll also be making student loan payments. And you may need to cut some expenses to allow for both student loan payments and nest egg contributions. But even if you set up a $50 monthly transfer, that's $50 going toward long-term savings instead of being accidentally spent elsewhere.
2. Take full advantage of your employer match
You may have to scale back your retirement plan contributions to keep up with your monthly student loan payments. But one way to compensate is to snag your complete 401(k) match.
If your employer matches 100% of up to $3,000 in annual contributions, work a side hustle or cut other spending to free up that $3,000. If you do, you'll end up with $6,000 in your 401(k), thanks to that match.
You can stay on track for retirement while repaying debt
It's clear that restarting student loan payments is going to have an impact on a lot of people's finances. But repaying student debt doesn't have to derail your retirement savings efforts, either.
Think about it this way: If you're able to do both simultaneously, then imagine how easy it will become to fund your IRA or 401(k) plan once your student debt is done with.
One thing you may want to specifically do, in fact, is pledge to take the money you aren't spending on loans at that point and beef up your IRA or 401(k). That's a great way to compensate for reduced contributions while you're tackling your student debt payments.
