Don’t Let Student Debt Hold You Back from Business Success

student debt

Student loan debt figures for millennials are staggering – today the average student can expect to graduate with over $35,000 in debt.

It’s a problem that has a very real impact on the ability of young small business owners to get started and succeed in business, as the latest data from the SBA corroborates:

  • Student debt is rising among the young while self-employment is declining.
  • Households with a self-employed member and student debt are less likely to apply for business loans (only 17% do).
  • Business owners with student debt had smaller ventures and employ approximately 75% less workers than young business owners without student debt.

More recent studies confer with SBA’s findings. According to the folks at, student debt is a particular problem for the smallest of small businesses – those with one to four employees.

Why? To start or grow a business, you need cash. If you don’t have reserves then you need to borrow it. For that you need to demonstrate that you are in a financial position to take on debt, if a student loan is eating away at your already limited financial resources, the chances of getting a loan are slim.

So what are your options? Well, first and foremost, you need to eliminate your debt – an action that can also improve your credit score. Here’s how:

If You Have a Federal Student Loan
If you have a federal loan you don’t have to stick with the same repayment plan, you can change at any time. offers an overview of your options here. These give you the flexibility to potentially reduce your interest payment and term of the loan. The available plans also take into consideration financial hardship and current and predicted income levels. Use this Repayment Estimator to get an idea of which plans you may be eligible for and get estimates for how much you would pay monthly and overall.

If You Have a Private Student Loan
These loans tend to be less flexible but talk to your lender to see what options you have for changing or refinancing your repayment plan.

Check out this comprehensive blog from Student Loan Hero – The Beginner’s Guide to Paying Off Student Loans – for more tips on paying off federal and private student loans.

Explore Other Options
While you’re busy paying off your student loan but still dreaming of entrepreneurship, think of other ways to get started, while reducing your debt.

For instance, could you run your business as a freelancer or contract worker on the side (while still employed as a salaried nine-to-five employee)? This would give you time to earn a little extra and put it towards paying off your debt, while building your network and client base.

You should also be making smart banking decisions. Consider opening an account with a credit union as opposed to a traditional bank. They tend to provide more affordable services (lower fees and interest rates on loans), they are also lending at a pace that outpaces banks (something that could come in handy when you are ready to apply for a business loan). Read more about the benefits of credit unions to small businesses.

Whatever you decide, make sure you don’t miss a payment on your student loan, this will impact your credit score and any future evaluation for a business loan.

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Tags: Financing