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5 Ways To Launch Your Startup If You’re Struggling With Student Loan Debt

According to a recent study from Bentley University, more than half (66 percent) of Millennials hoped to start their own business in 2014. Unfortunately, that dream hasnt rooted in reality yet.

As The Wall Street Journal notes, the share of entrepreneurs under the age of 30 reached a 24-year low last year; just 3.6 percent of households headed by someone under the age of 30 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 its tempting to theorize on why there are fewer young entrepreneurs these days, lets get real.

Student loan debt undeniably plays a huge role here, whether we want to admit it or not.

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

With young people forking over hundreds of dollars right out of the gate, its no wonder they are delaying milestones left and right.

They arent suffering from a lack of fortitude; theyre suffering from huge student loan payments that leave them with scarce discretionary income to build and launch a brand new business idea.

Still, it doesnt have to be this way.

If youre a young person tired of hearing you cant get ahead, read these tips for how you can manage debt while building a business from scratch:

1. Investigate income-driven repayment programs.

Certain income-driven repayment plans allow you to reduce the amount of money youre required to pay toward your federal student loans each month.

Most have income and other eligibility requirements, but if youre 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 youll never know unless you check.


2. Extend your repayment period.

If you dont 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 youll end up paying more money overall.

Taking longer to repay your loans means also paying more interest over time. Its a choice youll have to make: more funds available now or more money saved in total.


3. Continue working while you launch your business.

Continuing to slave away at your day job while you hustle to get your startup off the ground may not sound sexy, but its definitely the smart choice.

Dont 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.

And if youre going to keep working at a job youre not that into, you might as well make it count.


4. Look into refinancing.

If you have loans with high interest rates (older PLUS loans, for example, can carry rates as high as 8 to 9 percent), it might make sense to refinance.

Student loan refinancing generally works best for borrowers with solid credit and income history who can benefit from lower rates and/or better repayment terms.

Though you can refinance both federal and private loans, its important to note you lose valuable government protections such as deferment and income-driven repayment options when you refinance federal loans with a private lender.

Make sure to consider the pros and cons of refinancing before you pull the trigger.


5. Consider deferment as a last resort.

If youre 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 its 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 youre back on your feet.


The Bottom Line

Student loan statistics paint a grim picture for todays youth, especially those being held back from their dreams.

But todays entrepreneurial young can find a way to follow their dreams if they look hard enough. It may not be easy, but nothing worth doing usually is.

Read more: http://elitedaily.com/life/launch-startup-student-loan-debt/1592402/

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