One of the most nerve-racking aspects of starting your own business is the financial risks you’re going to have to take. Some entrepreneurs are able to greatly minimize these risks, but there is always the chance that something might not work out as planned—and you’re going to be the one who suffers. If something doesn’t go right along the way, you’re going to be in debt. If you’re already in debt because of student loans, this stress can sometimes be too much to take. For this reason, many entrepreneurs feel like they must put their dreams on hold until student loans are paid off.
In some situations, it is best to wait until you are free of student loan debt to start your business. Most would say that you are being smart, and it’s best to put your goals on-hold if you don’t have the finances. However, there are a few reasons that you may want to do just the opposite. Putting a career goal on hold is just as suppressive as having to pay off debt, so before you assume you have no other choice, there may be a few things to consider:
Programs for Entrepreneurs with Student Loan Debt
As a recent graduate myself, I know that going to school is becoming more and more expensive and student loans are necessary for most. Unfortunately, this debt is scaring young entrepreneurs into holding off starting a business; however our economy is in desperate need of these startup businesses. For this reason, there are a few programs that are working to help young people start the business first and pay the loans second. After all, if the business is successful, the loans could very well be paid off in the same amount of time or faster than if that business was put on hold.
I decided to do some research, and below are two programs that help entrepreneurs:
- Gen Y Capital Partners – This is an opportunity from the Young Entrepreneur Council that will make it easier for young entrepreneurs to file for an LLC despite being buried in student loan debt. This program uses private funds, not federal money, and will pay for the entrepreneur’s federal student loan debt for up to three years.
- Income-Based Repayment Plan (IBR) – This plan was designed to lower payment caps based upon discretionary income, or income after accounting for the cost of living. This plan was recently improved by the Obama administration in November by shortening the forgiveness timeline to 20 years. This is often called the Student Startup Plan. Click here to learn more about the plan and see if you qualify.
For millions of people hoping to start a business as soon as possible, these financial “breaks” have made the difference. However, the risk of not being able to pay off debt doesn’t completely disappear, and many don’t find themselves so lucky.
Student Loan Debt Doesn’t Have to Bring You Down: Have a Plan
Getting involved in one of the above programs is a great idea, but you want to make sure you really have a solid business plan before getting too involved. The best thing you can do for yourself is try and pay off your student debt as fast as possible. You don’t absolutely have to wait until your debt is paid off to start your business, but it’s important to have a plan when it comes to your finances. Work on seizing tax breaks, sacrificing unnecessary spending, and making extra payments in addition to taking advantage of one of the above programs.
Did you start a business while still paying off your student loans? What was your experience?
Amanda DiSilvestro is a writer on topics ranging from social media to credit card processing. She writes for an online resource that gives advice on topics including small business loans to small businesses and entrepreneurs for the leading business directory, Business.com.Subscribe to the Podcast