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How To Save Money On Student Loans And Start A Business?

Do you have a business idea?

Do you have a business idea? Are you so confident that you can succeed and become the next millionaire? That’s an excellent way to start. 

However, even though we share your vision, it’s worth noting that it’s common for startups to fail, especially at the first hurdle – getting funded. Sometimes too, you can be heavily invested and still fail like Quibi. 

It becomes more troubling when you start a business with student loan debt. You’ll face unique challenges which might make it difficult for you to secure funding or make payments on your student debt. 

However, regardless of these unique challenges, you can still succeed. It has been done before, why can’t you? You’ll, however, need to put in hard work and dedication. And perhaps most importantly, get your hands on some funds to make your business vision a reality. 

Here are some vital tips to help you get started! 

Analyze Your Repayment Options When Starting A Business 

Few challenges pop up when you decide to start a business with student loan debt. You’ll have to come up with a plan to pay back your student loans if your business doesn’t make money immediately. 

You also have to decide the amount of your money you can spend on your company. Some of the alternatives include the following: 

Income-Driven Repayment 

Do you have federal student loans? One of the best options is to choose an income-driven repayment plan when starting a business.  

When you take an income-driven plan, payments will be capped at the percentage of your income. That means if your business does not make much income, your payments could be low or not at all. 

You can get as low as zero dollars every month, depending on the type of income-driven repayment plan you choose. After making adequate on-time monthly payments, your remaining student loan balance will be forgiven. 

Of course, if your business performs well, thus increasing your income, your payment will also increase. By then, you’ll be able to afford the bills. 

Student Loan Refinancing 

Income-driven repayment plans are for federal student loans. If you have private student loans, you can’t change your repayment plans without refinancing. When you refinance your student loans with a private servicer, you may be able to lower your interest rate. 

You can also extend your repayment term to decrease your monthly payments. However, you’ll have to be eligible for student loan refinancing. Your credit score and income will determine if you qualify. 

If your income is low, a cosigner can help you provided they have a high credit score. That can help your business, especially if it’s now getting the momentum it needs. However, keep in mind that when you extend your repayment term, you’ll pay more interest with time. 

Student Loan Forgiveness For Entrepreneurs 

The federal government doesn’t provide loan forgiveness, particularly for entrepreneurs. However, you may be eligible for programs that can assist you with your student loan debts. 

For example, if you work for a qualifying non-profit organization, you can get Public Service Loan Forgiveness (PSLF). If you decide to run your business as a non-profit and meet the requirements, your remaining loan balance can be forgiven. That is after making a qualifying number of on-time monthly payments. 

Student Loan Forbearance 

Private and public student loan lenders can sometimes allow you to pause your loan payments temporarily. However, keep in mind that your interest accrues during the entire time your payments are halted. So you end up with more loan balance to repay. 

Borrowing To Begin Your Business 

Borrowing money to start your company can sometimes be challenging if you have student loan debt. Some loan lenders may not agree to give you a loan for your business when you have student debts. 

But you have several ways to secure yourself a loan for funding your business. You still have a fighting chance! 

Explore Business Or Personal Loan Options 

Even though it can be challenging to get a business loan or personal loan if you have student debt, it’s not impossible. A cosigner can help you increase your chances of acquiring a personal loan. If you have a robust business model, it can also increase the approval level for a personal loan. 

Another way to increase your chances is by switching to an income-driven repayment plan or refinancing your student loans. If any of them decreases your monthly payment, you can be eligible for a loan. That’s because your debt-to-income ratio will also decrease. 

Borrow From Your Family and Friends 

Family can be a great help sometimes. If your family or friends are interested in your business, you can ask them to invest. However, if they decide to help you, make sure you understand the loan terms. 

Ensure that you and your family or friends agree on when you’ll pay back the loan, including interest (if any). In short, make sure you cover all grounds. 

Final Thoughts 

Another alternative to start your business while having your student loans is to use your savings. If you have enough saved, you may be able to use the proceeds to get your business off the ground. 

You can also consider angel investors. Numerous angel investors are ready to invest in startups that they believe it’s great ideas. 

Before you start your business, you need to cover all grounds and know what you’re in for. We recommend that you get an advisor who can give you all the details you need to know before you begin. Hopefully, that will help your business to generate enough funds. 

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Written by Johnny Lee

Internet Entrepreneur | Digital Marketing Expert | Marketing Consultant | Stock Market Enthusiast|| Founder & CEO at Mag Media, based in California.

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