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4 Ways To Launch Your Startup If You’ve Got Student Loan Debt

According to a recent study from Bentley University, more than half (66%) of Millennials hoped to start their own business in 2014. Unfortunately, that dream hasn’t happened…yet.

As The Wall Street Journal notes, the share of entrepreneurs under the age of 30 reached a 24-year low last year, with just 3.6% of households headed by someone under the age of 30 that owned stakes in a private company. Compare that to 1989, when 10.6 percent of adults under the age of 30 were owners or part-owners of a private business or firm.

So, what changed?

While it’s easy to speculate why there are fewer young entrepreneurs these days, let’s be real here.

Whether we want to admit it or not, student loan debt plays a huge role.

According to the most recent student loan statistics, the average student loan debt among 2016 graduates who took out loans is well over $37,000 and the average monthly student loan payment sits at around $351 this year. And that’s just the average.

With young people shelling out over hundreds of dollars just to get the qualifications they want, it’s no wonder they are delaying milestones.

They aren’t suffering from a lack of knowledge or fortitude; they’re missing out because of their huge student loan re-payments that leave them with just enough money to start a family or set up home. Starting a business simply is last on most millenials list, even though it’s something most of them want the most.

But, it doesn’t have to be this way. If you’re a young budding entrepreneur with big dreams, tired of hearing you can’t get ahead because of excuses and reasons, here’s some advice…

1. Opt for an income-driven repayment programs.

Some income-driven repayment plans allow you to reduce the minimum amount of money you’re required to pay toward your student loans each month. Most have income and other eligibility requirements, but if you’re raising capital for your first business, a lower monthly payment can be a big help if you qualify.

While each of these programs vary, they all calculate your new payment based on your “discretionary income,” a term used to describe any amount you earn over 150 percent of the Federal Poverty Limit (FPL). If your income is low, your monthly payment may be low or nonexistent under one of these plans. But you’ll never know unless you check.

2. Extend your repayment period.

If you don’t qualify for income-driven repayment, you might still be able to renegotiate the terms of your payment plan. By extending the length of time you have to pay back your student loans, you lower your monthly payments and open up cash flow for business-related expenses. However, keep in mind that lengthening the repayment period through income-driven repayment or an extended term means you’ll end up paying more money overall.

Taking longer to repay your loans means also paying more interest over time. It’s a choice you’ll have to make: more funds available now or more money saved in total.

3. Bootstrap for as long as you can.

Continuing to slave away at your day job while you hustle to get your startup off the ground may not sound like the startup dream you were hoping for, but it’s definitely the smart choice.

Don’t leave the security of your full-time position if you want to bankroll your new business and keep up with your student loan payments. Consider working part-time or full-time as you launch your business and work toward profitability.As you continue working, you should make it a point to stash away the largest chunk of your monthly pay you can bear. The more you can save, the more you can pour into your new business idea.

5. Consider deferment as a last resort.

If you’re struggling financially and need a temporary break from your loans, you can consider applying for student loan deferment and forbearance. Both these options allow you to stop making payments for a certain period of time, depending on which one you choose.

Deferment and forbearance should be treated as last-resort options, though, because you can end up with an even bigger mess once it’s time to make payments again. During deferment, unsubsidized and PLUS loans will continue to accrue interest, while all loans accrue interest during forbearance.

If you need time to get your finances in order to start your business, pausing payments can help, but be prepared for an even bigger balance to deal with once you’re back on your feet.

Student loan statistics paint a grim picture for today’s youth, especially those forced into a career they don’t want whilst being held back from their dreams.

But if you’re really hungry and truly meant to be an entrepreneur, you’ll find a way to get there.

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