Can You Start A Business When You Have Student Loan Debt? Yes, It’s Possible

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Earning a college degree is a great accomplishment, but it can feel slightly overshadowed by a mountain of student debt. That can feel especially true when you  have a compelling idea for a startup at the same time that you’ve graduated from college. Debt financing be intimidating, but it can also stand in the way of getting venture capital funding. 

Here are some financing options to eliminate student debt while launching your early stage company. It is possible, it just takes a little bit more legwork. 

Crowdfund your startup and student debt.

It may seem too good to be true at first, but many crowdfunding sites aren’t just for startups. Many sites also allow for student debt campaigns. That means you can use one crowdfunding site for an equity financing campaign and a different one for your student debt. Student-debt friendly crowdfunding sites include PigIt, GoFundMe, ZeroBound, YouCaring, GoGetFunding, LoanGifting, and Indiegogo.

Pay attention to the rules of each crowdfunding site and compare fees before moving forward with your student debt campaign. Some sites let you keep your funds even if you haven’t hit your goal amount, but others won’t. There are also crowdfunding sites that charge a fee for tuition campaigns.

To maximize contributions for these student campaigns, be as detailed as possible in your video and write-up about why you need help. Create a hashtag to use on social media sites to drive more people to your campaign. Be realistic about how much money you’re requesting. Also, provide regular updates on how you have used the money and what else you’re doing to reduce the debt.  

Consolidate debt into a single payment.

Student founders often consolidate their debt as a strategy to reduce interest payments. Student debt is often difficult to pay down, even with a low interest rate. This is because you may have different loans and other types of debt. In the process, you realize you can only make minimum payments and are paying a range of potentially high-interest amounts. Instead, consider consolidating you payments into one. That way, you can make a larger contribution while you work on growing your company.

There are numerous debt consolidation companies. One place to start is to apply for a Federal Direct Consolidation Loan if you have several federal student loans. While you will not be able to lower your interest rate, you can extend payment time and make one payment.

For private student loans and federal loans, you can use a student refinancing program that will let you lower the interest rate and save money. This way, you’ll also benefit from having one payment to make each month. 

Focus on grants that help student-based startups.

While you put all your available money into paying down student debt, you can turn to grant programs to fund your student-based startup. There are actually quite a few grants available to help fuel student entrepreneurs’ dreams.

Potential grant programs for student business owners include federal, state, and city and local-level grant programs. Many organizations and companies are looking for entrepreneurs who need funding. Grant options include the Intuit National Association for the Self-Employed (NASE) Grant, FedEx Small Business Grant, Etsy Maker Cities Grant, and the Visa Everywhere Initiative.

Take a traditional job with loan repayment assistance.

While you position your new business as a side gig during weekends and evenings, you can take on a traditional job with student debt repayment benefits. There are hundreds of companies that have added this perk to attract the best talent. 

For example, Aetna provides student loan repayment to part-time and full-time employees of $5,000, up to $10,000, respectively. Nvidia offers up to $500 per month to put toward student loan repayment with payments made directly to the student loan provider. That benefit can mean up to $6,000 a year with a lifetime maximum of $30,000. 

Buy yourself time before raising equity.

You probably aren’t ready to take on venture debt or raise a series A equity round, but that shouldn’t stop you from taking advantage of debt funding. It’ll give you the time and space to build a strong business plan, a better balance sheet, and healthier cash flow. In the meantime, get to know angel investors or venture capital firms in your space. Someday, startup funding rounds may be an option, especially if you spend time eliminating as much of your student debt as you can.

John Boitnott has been writing for TV, print, radio and internet companies for 25 years. He’s written for BusinessInsider, Fortune, NBC, Fast Company, Inc., Entrepreneur and Venturebeat, among others.

Feature Illustration: Laura Caseley For The Money Manual