Should You Pause Your 401(k) Contributions When Student Loan Repayments Resume?

Stressed and worried young Asian woman working from home, handling paperworks and going through her financials.
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After a three-year pause, student loan payments are set to resume for borrowers in October. A recent GOBankingRates survey found that resuming payments will have a significant impact on finances for many student loan borrowers, with nearly a third saying they will no longer be able to pay all of their bills. In addition, 19% said they will have to withdraw from their retirement accounts to make payments.

Even if you are able to afford to continue making 401(k) contributions while making your student loan payments, should you put your retirement contributions on pause to focus on paying down your student loan debt faster? GOBankingRates spoke to financial experts to get their advice on the best course of action.

Keep Making 401(k) Contributions If You Can

Todd Stearn, founder and CEO of, said that if you can afford to stay on top of student loan repayments and continue to contribute to your 401(k) plan, you should continue to contribute.

“Take the free money,” he said. “If your employer matches your 401(k) contributions, do your best to contribute as much as you can afford up to your employer’s maximum matching amount. You do want to pay off high-interest debt, but oftentimes, student loans are low-interest debt, so get that free matching 401(k) money.”

Jack Wang, wealth advisor at Innovative Advisory Group, said that mathematically, continuing to contribute to your 401(k) plan makes sense.

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“Saving is the far better option because compound interest can go on forever, whereas loan interest ends once the loan is paid off,” he said.

Put Contributions on Pause If Having Student Loans Causes You Stress

If having student loans is causing you emotional distress, Wang says it’s OK to put retirement contributions on pause while you focus on paying down this debt.

“Some people just don’t like having loans emotionally,” he said. “Despite what financial advisors might say, it really is about what lets people sleep at night.”

Put Contributions on Pause If It Will Cause You To Accumulate Other Debt

You should only be contributing to your 401(k) when payments resume if you can actually afford it — this means that you can pay all of your expenses without taking on credit card debt.

“If the resumption of loan payments causes the borrower to not have enough money for living expenses while saving in the 401(k), then reducing or stopping the 401(k) contributions temporarily is a good idea,” Wang said. “Yes, objectively, that may cost the person lots of money in the future, but I have seen situations where people max out their 401(k) contributions but then go into credit card debt because they don’t have enough money.”

Put Contributions on Pause If Your Student Loan Interest Rates Are High

Most of the time, your student loans will have low interest rates, in which case it makes sense to keep contributing to your 401(k) if you can afford to. But this isn’t always the case.

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“If the interest rate on your student loans is relatively high — above 5%-7% — it might be worth prioritizing loan repayment to avoid accruing large amounts of interest,” said Andrew Latham, certified financial planner and director of content at

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Methodology: GOBankingRates surveyed 1,028 Americans ages 18 and older from across the country between June 27 and June 29, 2023, asking nine different questions: (1) Have you used Artificial Intelligence (AI) for any of the following? (Select all that apply); (2) In retirement, how much do you think you’ll need in Social Security monthly, in order to retire comfortably?; (3) How much do you spend on your average Costco trip?; (4) How often do you go to Costco?; (5) What items do you purchase most frequently at Costco?; (6) How do you think the restart of student loan payments will affect the economy in 2023 and beyond?; (7) How much student loan debt do you currently have?; (8) How will the restart of student loan payments affect your financial situation? (Select all that apply); and (9) How much did you (or do you expect to) inherit from your parents/relatives? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.


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