Turning an idea into a thriving business while you’re still carrying student loans can be challenging. Not only will you have a wide range of new business expenses to manage, but also student loan payments and, of course, the cost of living.
Still, managing everything life is throwing at you is doable if you have the right mindset and the right tools.
Whether you’re an aspiring entrepreneur or new business owner with student debt, it’s crucial to know your options.
As you lay out your plans for business success, here are some of the ways you can lessen your student debt load:
1. Extend Your Repayment Period
If you don’t make any changes after graduating, you’ll end up on the 10-year Standard Repayment Plan. If the monthly payment on this plan is unmanageable, however, it might be wise to stretch those payments out a bit. Don’t assume you’re stuck with whatever repayment plan you are given. The federal government makes it possible to restructure your loans into various repayment plans and timelines, provided you meet certain requirements.
For example, you can go on an Extended Repayment Plan, which lets you repay your loans over 25 years instead of 10, a move that will drastically lower your monthly out-of-pocket expense. Or you could go on a Graduated Repayment Plan with monthly payments that start low then increase over time (a good option if you expect your income to grow in the near future).
Keep in mind, though, extending the repayment term lowers monthly payments in order to increase cash flow, but you will end up spending more in interest overall.
2. Consider Income-Driven Repayment
Here’s another option if your income is low: If you qualify, you could sign up for an income-driven repayment plan that requires you to pay a small percentage of your discretionary income each month, then culminates in complete loan forgiveness after 20 to 25 years.
While this option may not be on the table forever for business owners who become successful (income limits apply), it can reduce your monthly payments drastically while your income is low or nonexistent. In other words, income-driven repayment can buy you time with lower monthly payments while you get your business off the ground.
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3. Refinance Your Loans
If you have private student loans (or don’t mind giving up the protections that come with federal loans), you could always consider refinancing in order to cut the interest rate, lower monthly payments, and potentially save thousands of dollars in interest overall.
This isn’t the best option for everyone, but it can work great for business owners who have lots of loans with high-interest rates. Most refinancing companies do require good credit, decent income, and solid employment history, so consider hanging onto your day job or potentially getting a cosigner in order to qualify. Regardless, it always pays to run the numbers and see how much you could save by lowering your rates.
4. Volunteer Your Debt Away
When you’re building a new business, it can be difficult to pick up a part-time job that might bring in extra money. On the flipside, though, you might find time to do some volunteering; certain types of volunteer positions can lead to student loan repayment help. Platforms such as ZeroBound and SponsorChange.org have crafted new ways for student loan borrowers to exchange their time for student loan repayment assistance. While each project is different, they all offer financial help to volunteers who need to pay down their loans.
If you’re a business owner, volunteering in exchange for repayment or forgiveness could help you kill two birds with one stone. On one hand, you could secure some much-needed help with your loans. On the other, you could make valuable connections within your community.
If your student loans have you feeling buried in debt, remember that like most things, the situation is only temporary. As you build your business and boost your income, those pesky monthly payments could easily become a minor inconvenience. Still, there’s nothing wrong with seeking out help in the meantime. The better you are able to manage your loans, the better you’ll learn to handle every stress and hurdle your new business throws your way.