How to prioritize paying student debt and saving for retirement
You should be doing both… which includes making regular payments toward your student loans and contributing enough to your retirement plan to receive an employer match (if eligible). Make at least the minimum payment on your loans for the apparent reasons (i.e., don’t wreck your credit). Also, the employer match is an instant 25%, 50%, or even 100% return on your investment – where else can you get that?
Consider interest rates… assuming a 5% on your student loans, it would be difficult to match that return on an after-tax basis when investing. However, if you are looking out 30-40 years until retirement, a balanced portfolio may be able to outperform your student loan rate – but the higher the rate, the more difficult that will be and debt repayment is a guaranteed “return.” It may be worth looking into lowering rates by refinancing with companies like SoFi and CommonBond.
Think about taxes… because you can contribute pre-tax money to a 401(k) and IRA. Lower income savers are also eligible for a ‘saver’s credit’ on those same contributions. You can deduct up to $2,500 of interest paid toward student loans each year – and you don’t need to itemize to take advantage! But the main point is to be informed. Check out companies like Student Loan Hero and Payitoff to evaluate your options. Although it may seem like it, I promise, you are not doomed forever – start planning now!