College Student Loans and Business | Tips for Success

College student loans, whether private student loans or federally funded, can take a toll on your future self.

As you enter adulthood with your much-coveted diploma, a stable and financially rewarding life is not guaranteed.

With college student loans to repay and a new business in mind, some might see their chances in succeeding bleak.

However, there is still a chance for a successful business startup even with student loan debt to worry about.

How To Pay Off College Student Loans & Start a Business

This post was originally by FinancialWellness.org and shared with permission

1. Identify What Kind Of Student Loans You Have

First off, identify what kind of student loans you have. There are 3:

Federal
Private
Combination of federal and private

Monthly payments of federal student loans can be reduced through consolidation.

However, doing so would mean increasing your repayment term.

Instead, you can file for either Pay As You Earn (PAYE) or Income Based Repayment (IBR) to pay off your student loans at only 15 or 10 percent of your income.

This way, you can pay according to what you earn and not what you owe.

(PRO TIP: Need a bird’s eye view of all the options available for student loan repayment? Download the 8-Plan Cheat Sheet to Student Loan Repayment for free. Click here to learn more and grab your free copy.)

However, for private student loan borrowers, options for loan deferment are very limited.

Only a few lenders can do consolidation.

Most of which will not reduce your monthly payments or extend repayment terms.

2. Do Not Reduce Your Monthly Payments

Although the option to have your monthly payments deferred is one of the easiest ways to help you with your startup, this is not the easy way out.

If you have your monthly payments deferred, it means a longer term to pay for your student loans and additional interest.

Furthermore, if you don’t reach the minimum monthly payment required, the borrower will accumulate negative amortization.

This means your current balance will be greater than what you originally owe.

Continue paying off your student loans while still allotting something to your startup.

Deferring your payment simply prolongs your repayment term and will not make your debt go away.

Plus, you can also get lower student loan repayment plans.

3. Avoid Incurring More Debts

One of the things you need to refrain from is incurring more debt.

You don’t want to work hard just to pay off all debts and accumulated interest.

Avoid getting a new loan while you’re still paying for one or swiping your credit card for something that is not important.

As much as possible, always pay in cash.

If you don’t have enough cash, then maybe it’s not worth the credit card interest later on.

4. Create A Budget

Starting a business while having a student loan to pay off means managing your finances.

Do it by creating a budget.

This way, you can keep track of all your expenses, as well as control where your money goes.

By doing this continuously, you create a habit. A good one at that.

(Note: Different types of loans qualify for different types of repayment plans… And making sure that you’re in the correct repayment plan can mean better benefits, lower payments, and averaged out lower interest rates (which means an easier repayment for you!) Download this free cheat sheet to repayment plans to make sure you are taking advantage of the best one for you. Learn more here.)