Several prior articles on this website have already discussed how student loans can impede student debt borrowers from achieving numerous goals in life. Indeed, student loans can make it difficult to buy a home, save for retirement, and accomplish many other objectives. In addition, starting a business while paying off student loans is extremely difficult for a variety of reasons.
As numerous student loan borrowers are already aware, student debt impacts the amount of capital an individual has at their disposal. I personally had to spend a few thousand dollars each month to make the minimum payments on my student loans, and this was money that I could not devote to other goals. Since interest rates on student debt are usually pretty high, it rarely makes sense to do anything with available money other than pay down student loans.
Student debt also impacts your ability to borrow more money. When lenders evaluate whether you are capable of taking on additional debt for a mortgage, car loan, business loan, or another purpose, they typically assess the amount of debt you currently have. Since student loans eat into the amount of cash borrowers have to pay down debt, it can be difficult to find financing when starting a business while paying off student loans.
During my student debt repayment saga, there was one point when I seriously considered starting a business. Towards the end of my time paying off student loans, my brothers and myself discussed opening a restaurant or a bagel store. Two of my brothers are experienced in the hospitality industry, and they wanted all of us to be involved in opening a restaurant.
I seriously considered starting a business while paying off student loans, since I had already paid off the vast majority of my debt by the time we thought about founding this venture. In addition, the interest rates on my remaining student loans were relatively low, and they were close to the interest rates that my brothers and myself would have been able to obtain while starting a business. In addition, I had some savings from all of the side-hustles I worked and because I made sure to maintain a healthy emergency fund.
My brothers and myself eventually decided not to open up a business. Most of us had student loans and other financial pressures, and we did not think we could properly capitalize the business. However, the experience of planning the restaurant showed me how starting a business while paying off student loans is a difficult proposition.
As mentioned on this website, I recently opened my own law firm, and I first got the idea to hang out my own shingle while paying off student loans. I have always wanted to be my own boss, and I have an entrepreneurial spirit. I first considered opening my own law firm a few years after graduating from law school.
However, I had over six figures of student debt at the time, and I did not have much savings other than my emergency fund. I knew that I could not pay off my student loans and still have capital available to run my own law firm. I only felt comfortable starting a business after I had paid off my student loans, but I by no means think it is impossible to try starting a business while paying off student loans.
From my own personal experiences, I believe there are a few things you should keep in mind when thinking about starting a business while paying off student loans. For one, I would caution against opening a business if you still have student loans with an interest rate around 5 percent or higher. Student debt with such a high interest rate can impede your financial future, and all available money should likely be devoted to paying off high-interest debt. Depending on the industry, businesses can have a high failure rate, so the safer bet is to pay off high-interest debt rather than risk available money on opening a new business.
In addition, if you are thinking about starting a business while paying off student loans, you should consider not asking for a forbearance on your student loans unless you absolutely need one, especially if you are doing income-driven repayment. A forbearance can delay your eventual debt-forgiveness if you are repaying student loans with income-driven repayment, and interest will continue to accrue on student loans in forbearance under all repayment plans. In addition, if you need to put your student loans into forbearance, you might not have enough capital necessary to open a business.
Also, it goes without saying that you should have more emergency savings than usual if you are planning on starting a business while paying off student loans. I recommend that you have enough money saved to pay your living costs for a year if you are planning on starting a business. Of course, this sum should probably also include sufficient funds to pay your student loans for a year. While it might be difficult to save up this money, it is important that you have funds upon which you can rely if your business does not succeed. In addition, saving all of this money is a good test for determining if you are committed to starting a business while paying off student loans.
In the end, student debt can keep many people from achieving their life goals, and starting a business while paying off student loans is an extremely difficult task. It is hard to save up the money necessary to start a business while paying off student loans, and student loan payments can consume money you might use to pay for living expenses while starting a business. However, with some careful planning, it is possible to start a business while paying off student loans.