It is no surprise that people nationwide are struggling with an enormous amount of debt as a result of student loans. In fact, the cumulative U.S. student loan debt is close to reaching an astounding $1.2 trillion.
To make matters even worse, the vast majority of people who have this type of debt are unable to make timely payments. This leaves former students stuck between attempting to hold collection agencies at bay while simultaneously seeking out entrepreneurial opportunities that may finally allow them to wipe their debt clean.
Current studies indicate that small businesses are in the process of booming, and approximately 70 percent of them are predicted to make a profit by the end of the year. In other words, this is a good time to move forward with your dreams, but you may be unable to gather enough funding if you are still shackled to an enormous amount of debt from your college days.
This problem plagues more than just the newly graduated. In fact, 67 percent of the unpaid student loan debt in the U.S. belongs to people who are at least 30 years old.
The good news is that there are ways to get out of this catch-22 situation. Utilizing the following tips will make it easier for you to avoid delaying the launch of your own business. Additionally, you will be in a better position to not become one of the 14.2 percent of Americans who have been forced to put their wedding plans on hold as a result of student loan debt.
1. Consolidate or Refinance Your Debt
One of the biggest problems associated with paying off debt is the high interest rates and minimum monthly payments that are often attached to multiple loans. For example, if you owe $20,000 in debt to four different companies, you will get stuck making four monthly payments and accruing what is virtually certain to be a mixture of interest fees.
If you consolidate student debt, you can restructure everything in order to make only one payment per month. This will work off your debt more quickly and effectively, which in turn will open more financial doors for your business.
2. Make Automatic Payments
Did you know that many student loan creditors offer a reduction in interest fees if you set up automatic payments? This includes the federal government, which will cut your interest rate by 0.25 percent. Saving a quarter of a percentage may not seem like much at a first glance, but it is actually worth approximately $500 per decade for every $30,000 borrowed.
Believe it or not, turning that savings into a larger payment will end up making a big difference in the long run. Additionally, you will appear more creditworthy to business lenders if you have maintained your student loan debt without falling behind.
3. Consider a Partnership
Even if you set up automatic payments and refinance or consolidate your debt, you may still find it difficult to move forward with your business plans if your loan amount is exorbitantly high. However, if you have a solid entrepreneurial plan for a company that is well-poised on paper to become a success, you may want to consider looking for at least one partner who does not have any remaining student loan debt.
A partnership will put you in a better position to get funding because you and your partner's credit scores will be combined and averaged out by most lenders. If you do choose to go this route, make sure that you select a partner whom you trust implicitly. Even with a high level of trust, it is also vital to make a binding legal agreement that will help protect you if the relationship goes south.
The sad reality of our modern student loans environment is that the majority of graduates end up spending several decades paying for their education. Steps are being taken at the government level that may eventually reduce or eliminate this problem for many people, but this will not assist anyone who is trying to launch a business right now. Instead, you can appear more creditworthy if you consolidate debt to help you pay off your loans more quickly.
