Many people in their twenties and even thirties are facing the same issue: exorbitant student debt that makes it prohibitive for them to get out there and roll up their entrepreneurial sleeves. Young people have these amazing ideas and yet cannot foresee being able to pursue them by way of starting a company because they are strapped by tens if not hundreds of thousands in debt from school loans. We are seeing young professionals in their early twenties who have already accrued 150+k in loans. And with the monthly payback, it becomes impossible for them to go after their dreams in terms of starting a new company.
That is not to say that all such recent graduates or young professionals are hampered by student debt. Some do simply opt to take the risk and go for it. In some cases it pays off, in others, they find they've dug themselves into an even deeper financial hole. That debt lingering over your shoulder can make the prospect of starting your own business a scary one; then again, if the idea is good, if you believe in yourself, and if you are determined, you can potentially make it work—student debt and all. Below are a few tips for balancing student debt payments with making a go of it as an entrepreneur.
Simplify Where Possible
Many graduating or those who have graduated have more than one loan, especially if they are also responsible for grad school loans. Some individuals have as many as 10 plus different loans by the time all is said and done. Between federal loans and some private, there can be a multitude of payments due and at varying interest rates as well. Consolidation is one way to help simplify all of these balances owed. And if done correctly, you could end up with a lower interest rate overall.
You can approach a traditional bank to this end in terms of helping you to consolidate all of your student loans. There are also now companies specifically dedicated to helping students consolidate such loans. Keep in mind, that to qualify for these kinds of consolidation programs you generally have to have a credit score above 600 and your history must be devoid of any bankruptcies or student debt defaults.
There are a few downsides to note…The fees could add up when going the consolidation route. Also, check to see if there are any sort of federal forgiveness programs out there before applying for a consolidated loan. Especially now, given the current circumstances, forgiveness programs could be a conceivable option. Some programs will allow for some forgiveness if you agree to say, work in a nonprofit or in a low-income area for example.
Look into Deferrals
Putting off paying those loans, especially if you want to own a business might be one option to consider. You will likely accumulate interest during this period, but it will free up more cash to inject into your new company. The government does offer deferral options. These however tend to be for those going on to grad school, serving in the military, or facing some form of economic hardship. Additionally, they will offer an income-based repayment plan. So if you are an entrepreneur, and the company is not generating a great deal of revenue right off the bat, this could potentially be a solution for you in terms of alleviating student debt. It reduces what you pay monthly and thereby frees up more cash.
Several private lender startups out there focus specifically on helping entrepreneurs start companies regardless of how much student debt they may currently be saddled with. Doing a bit of research to this end and exploring what's out there could help paint a more optimistic picture of where you stand. Some have seen a significant drop in payments by working with such lenders. While you may be looking at a seven percent interest rate right now, consolidation could drop you to around 5%; depending on how much debt you have, this could be a fairly substantial savings every month.
Learn to Live Cheap
This may not sound like the most fun piece of advice, but for young business owners just starting, especially those with student loans to repay, it is probably a realistic one. Yes, you may qualify for loan consolidation, thus bringing your monthly payments down, and this is certainly good news. But it is still going to require you to work incredibly hard and until your company starts making some actual money, you are likely going to have to live on the cheaper side. Many an aspiring entrepreneur takes on a full-time job to keep up with their student loan debt while still pursuing their dreams. Think outside the box as well. Numerous people have been able to see their company idea come to life because of crowdfunding initiatives for example. If you truly believe in your idea and can sell that excitement to the public, you never know how much you stand to make from these types of platforms. But again, it is a combination of working hard and living sparingly until you start to see some real cash come in.
First Union Lending loves assisting entrepreneurs who are working hard to see their dreams come true. Even if you are faced with mounting student debt, we may still have a funding solution for your company. We offer short term loans, lines of credit, and merchant cash advances, among other financing options. And with programs ranging from 5k to one million, we have a loan product for just about any type of small business. Even if your credit score isn't where you want it to be, odds are, we still can get you qualified. Most of our clients see the money in their account within two business days—we do work that fast. Call today and let's get started together!