Millennial entrepreneurs are sinking into student loan debt with soaring college tuition. It’s exceptionally challenging, time-consuming, and costly to start a new company, especially for recent college graduates. The Federal Reserve estimates that Americans owe approximately $1.3 trillion in student loans.
The millennial generation signifies a sizable share of the nation’s 43 million student loan borrowers, and their debt load upsurges every year. Beyond principal balances, the impact of student loan debt is felt in monthly expenditures. Ambitious entrepreneurs who finished post-graduate work can face an even higher average monthly payment amount.
But, the truth is, most startup businesses fail, and the hype and mainstream appeal of entrepreneurship do not reflect the reality of the millennial employment marketplace. Student loan debt proves problematic for young entrepreneurs trying to save for a startup or small business attainment. Also, it produces cash flow burdens once the business is up and running.
Too often, large student loans dishearten talented millennials from chasing their entrepreneurial dreams completely. It doesn’t have to be that way. By learning to manage their student loan responsibilities, millennial entrepreneurs can overcome these hindrances and make their proprietorship dreams a reality.
Handling Student Loan Debt When Opening or Buying a Small Business
Launching or purchasing a business isn’t for the faint of heart. It involves personal sacrifice and the aptitude to make hard decisions in both your business and personal lives. If you’re a millennial entrepreneur, here’s the bad news: Your student loans aren’t going away.
But the good news is that you can organize repayment with good bookkeeping to minimize the impact that your student loan debt has on your business proprietorship plans.
Student loans can be either federal or private, although the choices are more restricted for private loans. Federal loans can be easily amalgamated to simplify repayment and lower monthly payment amounts. Under some circumstances, federal loan consolidations can be restructured into a graduated payment plan.
Instead of uniform monthly payments over the life of the loan, payments are lower during the early years when you are just starting as a business proprietor and cash flow is tight. Payments increase after two or four years but graduated repayment plans provide the breathing room you need to get your corporation off the ground.
Private loans can also be combined, especially if you have a good credit rating. Talk to your moneylender to determine whether you qualify for consolidation and, if so, which plan is most helpful in aiding you to achieve your objectives.
IBR and PAYE Programs
During the initial period of business proprietorship, most entrepreneurs have limited personal revenue. Instead of paying themselves, proprietors usually pour money back into their businesses. It’s a smart business stratagem, but it makes it even more difficult for entrepreneurs to keep up with student loan payments.
Federal student loan defaulters with little or no income can apply to participate in Income-Based Repayment (IBR) and Pay as You Earn (PAYE) programs. These government-sponsored programs can be a Godsend to cash-strapped entrepreneurs because they catalog monthly payments to personal income. Monthly payments are capped at either 15 percent (IBR) or 10 percent (PAYE) of the borrower’s personal, unrestricted income.
Bootstrapping is a tried and true strategy for entrepreneurs and business owners in the early stages of their professions. To advance the odds of business success, new proprietors often live thriftily, even if it means radically altering their lifestyles for some time.
A bootstrap mentality can also be useful for handling student loan debt. By leaving yourself with a prudent lifestyle for a few years, you can pay down your student loans without seriously impacting your business plans. The most important thing to keep in mind is that your student loan debt won’t last forever. Once you’re able to repay your loans, you’ll have more money to invest in your company.
While millennials show enthusiasm and assurance for starting a company, they are combating unemployment, underemployment, and the unending student loan crisis. While we believe that entrepreneurs are critical for a healthy economy, most of us will have to be patient if we want to become successful business owners.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.