Few students these days can afford to finance their own educations. Most turn to student loans to pay their way through college, with the result that they start their careers with a load of debt hanging over their heads. In fact, recent graduates who took out student loans owe more than $30,000 on average.

Student loans reduce retirement savings

While student loan debt is certainly healthier to carry than the equivalent amount of credit card debt, it's still a pretty big drag on anyone's finances. The money that you put toward student loan payments every month is money that's not available for other uses. Since your rent and utility bills are non-negotiable (landlords aren't the type to accept IOUs), it's your savings that tend to suffer when you have high student loan debt.

Student loan debt

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If you've just graduated from college and are decades from retirement, that might not sound like such a big deal. However, remember that retirement savings benefit hugely from the power of compounding. Saving a little money decades before retirement can yield you a bigger return than saving a lot of money later on -- if you start early, you won't have to save as much money and you'll still end up with a massive wad of cash by retirement age. And given the low interest rates on most student loans, it makes a lot of sense to carry the loans for longer and direct more cash into retirement accounts instead, so that you can maximize those all-important early contributions. During the early years of your career, when you're probably not rolling in the dough just yet, diverting a big chunk of your income into student loan payments may make it impossible for you to start saving.

How to save despite loan balances

The bottom line is that you may want to consider rearranging your priorities. Every dime you save toward retirement now will turn into dollars by the time you're ready to use it. If your student loan payments are eating up all your extra dimes, perhaps it's time to free up some of that money and redirect it into retirement accounts.

This does not mean defaulting on your student loans; that would be truly self-destructive, as the federal government would not take your failure to pay lightly. You can simply choose a repayment program that leaves a little more room in your budget for saving. Fortunately, federal student loans offer a smorgasbord of repayment options, many of which can make your payments quite small. Private student loans generally don't have such flexibility, so you'll probably be stuck with a standard payment schedule for those loans.

Choosing the right repayment plan

If you didn't make a repayment election at the time you graduated, the Department of Education will have placed you on the standard repayment plan, which assigns you fixed payments over a period of 10 years (or 30 years for consolidated loans). This repayment plan gets your loans paid off as quickly as possible, but also comes with the highest monthly payments. If all your spare income is going into student loan repayment, you might instead pick a different payment plan with smaller payments. You can then take the money you're saving each month and stick it in a retirement account. Fortunately, switching to a new repayment plan is easy: You may even be able to select a new plan using the My Federal Student Aid website, and if not, you'll find contact information for your loan servicer on the site.

Depending on your needs, you might prefer the extended repayment plan, which gives you a 25-year repayment period, or one of the graduated plans, which start you out with small payments and gradually increase the payment size over time. The idea behind the graduated plans is that payments rise in tandem with your income, so they're taking up the same percentage of your income over the years. If your income is extremely small right now, consider one of the income-based plans, which cap your student loan payments at 10% of your take-home pay.

Once you've chosen a repayment plan, be sure to set up an automatic transfer to take the money you're saving on your student loan payments and put it directly into a retirement savings account. If you don't take steps to protect the money you've just freed up, you'll probably just end up spending it elsewhere, but if you get the money out of reach immediately, you won't even miss it.