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Entrepreneurs Under 30:
How to Start a Business When You Still Have Student Loans

See also: Entrepreneurial Skills

Many potential business owners under the age of 30 emerge from college with excellent business ideas and dreams of starting a successful company. But even with their newly-earned degree in hand, many of these would-be entrepreneurs never make it beyond the planning stages.

A significant amount of debt following them, instead of making progress toward establishing their own business, they end up entering the corporate world simply to pay off the loans that funded their education.

If this story sounds familiar, you’re not alone.

A 2014 Kaufman Foundation study found that the average amount of US student debt that new graduates are saddled with nearly doubled between the years 2007 and 2014 to a staggering $28,000. When you factor student debt in with increases in the cost of living, it is little wonder that - according to the same Kaufman Foundation report - the number of businesses owned by people under 30 have declined significantly over the past two decades.

As recently as 20 years ago, people under the age of 30 were the most likely to start a business. However, by 2016, that same demographic became the one least likely to pursue a career of entrepreneurship.


Begin By Learning the Basics of Starting a Business

Anyone who has ever started a business understands that entrepreneurship is never easy, no matter what your circumstances may be. But today's young entrepreneurs find themselves in one of the most difficult positions possible when it comes to creating a viable business.

Graduating from college with tens of thousands of dollars of student loans and credit card debt makes it difficult to obtain the financing necessary to make your dream a reality.

If you have a business idea you believe in, don’t convince yourself that it isn't worth putting entrepreneurial plans into action. You can overcome the burden of student debt with a smart, strategic business plan, prudent financial planning and a bit of luck; turning your initial thoughts into a thriving business.

Starting a business goes far beyond just having a great idea - many people with dreams and innovations that seem destined for greatness start businesses that end up closing shop within a year. Launching a business takes research and solid planning, which means taking the time to create a realistic business plan.

A comprehensive business plan should begin with a clear statement of your business goals and exactly how you plan to achieve them. Your business plan should also include all your market research and the financial planning that you have done to ensure that your business will succeed.

A business plan isn’t only an outline; a well-written plan shows investors (with solid math and research) that you have done your homework and are ready to take your idea from the planning stages to reality.


Explore Business Financing Options

With a business plan drawn up you will be better equipped to seek outside funding for your business. If you are already struggling with your student debt, it is probably not a good idea to seek a traditional business loan. In most cases, traditional lenders will not lend to recent graduates who are heavily in debt and floundering to make payments.

In your case, it’s wise to consider other options such as:

  1. ‘Alternative Financing’ Options

    In the internet age there are many routes to alternative financing that simply did not exist in the past.

    For instance, starting a Go Fund Me campaign is one way that people are obtaining the funds that they need to get their businesses off the ground. A cleverly-managed crowdsource campaign, linked to social media pages, is one surefire way to get the word out about your new entrepreneurial endeavor.

  2. Peer-to-Peer Lending

    Unlike banks, peer-to-peer lending networks allow you to borrow directly from others in your peer group and repay them with interest. In a peer-to-peer lending arrangement, the money you borrow may come from one lender or be crowd-sourced from several different lenders.

  3. Seek a ‘Cash Ready’ Business Partner

    Instead of taking out a business loan, you can find a business partner to invest in your vision. When approaching a potential business partner, it is important to realize that you are selling a stake in your company, and not necessarily an equal partnership. It is critically important to have a compelling and well-researched business plan in hand whenever you are seeking funding from a potential business partner or mentor.


Look Into Debt Management Programs

Even if student debt was an unavoidable part of getting your degree, it does not have to cripple your ability to start and run your own business. In fact, by managing your finances wisely, you will be able to pay down your debt and still manage your own business.

There are several ways that you can reduce your payments and manage your debt, including:

  1. Federal Student Loan Repayment Plans

    Entrepreneurs can lower their student loan payments by choosing an income-based repayment option. These plans will actually put a cap on your payment amounts to as little as 10% of your discretionary income.

    If you are struggling to make your student loan payments, it is a good idea to see if you qualify for an income-based payment plan. With these repayment plans it is important to realize that you must never miss a payment!

  2. Credit Card Consolidation

    College students are known to use credit cards to buy everything, from groceries and gas, to much needed books and school supplies. As a result, many college students find themselves graduating with nearly as much debt on credit cards as they have in student loans. If you have thousands of dollars in credit card debt accrued from several different credit card accounts, not only is the interest likely to be adding up at an almost exponential rate, but keeping track of all of your payment dates can be difficult as well. By consolidating your credit card debt, you will be able to lower your interest rates and consolidate many accounts into one manageable payment.

  3. Refinance Your Current Debt

    Refinancing your private personal loans is another effective way to manage your debt, lower your interest rates and reduce the amount of your monthly payments. It is important to note that Federal student loans cannot be refinanced in this way. To reduce Federal student loan payments you must go through one of several repayment plans.


Seek Mentoring Programs

The assistance and advice of successful mentors is an indispensable asset when starting a new business.

Successful mentors can point you in the right direction for financing, get you in touch with interested partners, make you aware of ways of structuring your business to leverage tax laws and help you navigate the difficult process of turning an entrepreneurial idea into a thriving business.

Mentoring programs are available everywhere including your college, your local community and among your professional circles. There are government run mentoring programs, startup incubators and business accelerators at work within the larger business community that can be found at your local chamber of commerce or by searching the Internet.


Even if you’re saddled with significant student debt, by managing your finances, reducing your monthly payments and drawing up a realistic business plan, you will be able to move forward on the journey of starting your own business.

Beginning an entrepreneurial venture can be a profitable and personally rewarding experience, but it is not for the faint-hearted. As they say, without risk does not come great reward.


About the Author


Beth Kotz is a contributing writer to Credit.com. She specializes in covering financial advice for female entrepreneurs, college students and recent graduates.

She earned a BA in Communications and Media from DePaul University in Chicago, Illinois, where she continues to live and work.

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