The struggle with student loans has been an ongoing crisis for young Americans for years now. Even if an individual graduates, immediately lands a full-time job in their field, and proceeds to launch a successful career, they can still spend years and even decades paying off their loans.
If you own your own business, the challenge of paying off past student debt can become astronomically more complicated. Fortunately, there are still plenty of ways that entrepreneurs can utilize some savvy financial footwork — regardless of the state of their business — to help pay off their student loans in a manageable manner.
Here are a few suggestions for ways that small business owners can pay off their outstanding student loans.
Assess your situation
With running a business, paying student loans, and covering personal expenses all on your plate, you must take the time to set a clear, well-informed, and updated budget that you can follow. Start by:
- Calculating your basic personal income and expenses.
- Next, make sure that you understand exactly what you owe on your debts every month as well as the size of your loans, what you’re paying in interest, and how long it’s going to take until you’ve paid them off.
- Now calculate what kind of cash flow you need to keep your small business up and running.
It’s important to start the repayment process with a clear idea of your complex financial situation.
Once you have a budget in place, it can also help you live below your means. You can trim your expenses, ensure that you have enough money to put toward your debts, and generally exercise a more responsible attitude toward your financial situation.
Consolidate other debts
If you financed your education through several different private loans, it may be worth bringing them together into a single loan with a good interest rate and a single payment. If you do this, though, it’s wise to review each account and consider if rolling them into a collective account will actually help.
You always want to simplify your loan balances carefully. You want to ensure that you’re truly reducing things like the interest rate or the size of your monthly payments. Otherwise, it may not be worth the trouble.
Refinance existing loans
If all of your loans are in a single place, you may not have the option of consolidating them into a single account. Even so, it can still be worth looking into the option of refinancing the single loan that you have now that you have a business behind you.
For instance, if you’re like many people, you may have had poor or even fair credit when you attended school. This may have locked you into a loan with a high interest rate. If your business has impacted your overall income (for better or for worse), you may want to take advantage of that fact to refinance at a lower interest rate. A few suggestions for ways to refinance your loan include:
- Using a larger income from your business to make all of your payments on time, thus boosting your credit score and, by extension, making it possible to qualify for a better interest rate.
- Also using any additional income to pay down your existing debt and make yourself a more attractive prospect for potential lenders.
- Getting a cosigner to sign on to the restructured loan terms with you.
- Using the fact that you now have a smaller income from your business to try restructuring to an income-based repayment plan that will lower your current payments.
Refinancing your student loans can be a great way to either spread out your payments over a longer time, reduce the amount of interest your paying, or otherwise help make your situation more manageable.
Finally, if you’re struggling to make your payments as you juggle the costs of your own business, you can try to delay the repayment of your student loans. You can attempt to do this by requesting a forbearance or deferment.
Both of these options let you wait to pay back the loan for a specific period of time. You can use that time to get your finances back in the black and prepare to make regular payments again.
Keep in mind that a forbearance gives you a breather, but the interest on your loans will continue to accrue during that time. Depending on the type of loan that you have, a deferment may allow you to delay both the interest and principal together.
Managing multiple financial challenges
Entrepreneurs aren’t strangers to financial challenges. Countless factors must be considered when starting and running a business. Nevertheless, when you throw something like student loans into the mix, it can become overwhelming trying to manage everything.
That’s why, as a business owner, it’s important to go about paying back your loans strategically. Start with a clear budget to assess your situation. Then decide if consolidation, refinancing, deferment, or even forbearance is the best option for you at the moment. Doing this proactively can save you from countless headaches compared to leaving the issue to be resolved at a future date.
About the Author:
Jori Hamilton is a writer from the Pacific Northwest who has a particular interest in social justice, politics, education, healthcare, technology, and more. You can follow her on Twitter @ HamiltonJori.