If you graduated from college in the last decade, there’s one thing you know intimately:

Student loan debt is a real bummer.

There’s an estimated 43 million student loan borrowers in the U.S. right now, and collectively, we owe roughly $1.3 trillion in student loans. The average debt for 2016 graduates was $37,172 – 6% more than the previous year.

What’s more, the Federal Reserve Bank of Philadelphia and Pennsylvania State noted a correlation between student loan debt and entrepreneurship. When student loan debt rises, we see fewer small businesses spring up. And that’s bad all around. With nearly $40k in debt hanging over our heads from the day we’re handed that diploma, millennials are putting startup dreams on hold to pursue higher-paying occupations.

Does it have to be that way? Nope. While it’s not easy, it’s a hundred percent possible to launch a new business without defaulting on student loans.

Here’s how.

Extend Your Repayment Period

The number one way to bring down your monthly loan payments and free up cash to start a small business is to extend the repayment period. When you get that first bill, six months after graduation, the standard repayment period is 10 years – your monthly payment is based on that. You can choose, however, to extend it out to 20 years, significantly reducing what you have to shell out each month.

You can also elect income-based repayment (IBR or PAYE) or graduated repayment plans. Income-based plans calculate a monthly payment based on how much income you actually pull in. That means you’ll have a lot more breathing room until your business really takes off. Graduated repayment calculates a lower upfront payment that gradually increases at years 2, 4, and 6.

Another option is to forbear your loans. At the height of The Great Recession, the government added a 3 year forbearance option for struggling recent grads – you pay nothing toward your loans for up to 36 months.

While you’ll end up paying more in interest, these are all good options to create a little more fiscal flexibility to support a new business. You can read more about all your options for repayment on the Department of Education’s Federal Student Aid website.

Build a Safety Net

I know, I know. When you’re in debt up to your eyeballs, the last thing you want to worry about is building up a savings account. But a sizable safety net can provide essential coverage while your business gets off the ground. There’s no way to predict a startup’s revenue with 100% accuracy, so you need a backup plan for when income fluctuates.

Make a point to save at least 3-6 months of living and operating expenses, before you jump into the business.

It’s vital that you can cover expenses and continue to make timely student loan payments, even when business is just getting off the ground, because delinquent payments can seriously harm your credit score. That means it gets even harder to secure a loan or other types of financing for your business.

Start with a Side Hustle

It’s nearly impossible to know exactly when a new business will break even and begin turning a profit, and when you’re pouring all of your capital into building it, it might not be feasible to live without any income. While it’s tempting to dive head-first into a new venture, try to hold off on ditching your 9-5 job.

With a full-time job and a side gig, you’ll be able to build up that financial safety net while you get a feel for:

And you can do all of this while still bringing in that comfortable salary. That means you can give the business the time it needs to scale effectively, instead of forcing growth that’s unsustainable just to cover your monthly payments. Once the business starts making real money – enough for you to pay yourself a livable salary – you can feel secure in leaving your day job and still being able to make those payments.

Volunteer or Start a Nonprofit

If you don’t have a full-time job in addition to your startup, try to scrape out some time to do volunteer work. When you volunteer with certain organizations, you can earn forgiveness of part of your student loans, making it well worth the initial time investment.

Depending on what your dream business is all about, you might operate as a nonprofit. After working in a nonprofit for a set period of time, you can become eligible to have your student loans completely wiped out – poof!

Have a Lean Mindset

It goes without saying that frugality and a lean business model will offer the most wiggle room to eek out those monthly student loan payments.

On the business end, consider bootstrapping your startup – that way you don’t have to take on any additional debt. Bootstrapping also forces you to stay lean. Always invest a little extra time in finding new efficiencies – seek out the most affordable materials, invest only in marketing with the best ROI, look to contractors and virtual assistants instead of hiring full-time employees... the list goes on.

A lean mindset doesn’t just apply to your business, though – you should also put emphasis on living a generally frugal lifestyle. Live with roommates, eat at home, cut coupons, and resist the temptation to buy that next hot tech gadget. Do your best to limit the pull of your personal expenses on that cash flow.

Don’t Let Debt Scare You Away

Student loans aren’t fun, but in 2017, they’re a fact of life for a lot of us. It’s okay to be a little intimidating by looming debt, but don’t let it postpone or crush your dream of entrepreneurship. Work hard, follow these tips, and you’ll have a booming business and debt-free life in no time.

content digest cta