Four Tips for Budding Entrepreneurs To Manage Student Loan Debt by Tisa Silver Canady
Concerned about
student loans blocking you from building a business? Student loan debt does not
have to be a dealbreaker. Every individual is different but here are four
general tips to consider when you need to manage student loan debt and you want
to build a business.
1. Stay current - It is critical for
you to remain up to date with your payments. Student loan payments are reported
to credit bureaus and late or missed payments will have a negative impact on
your credit score. Poor credit will subject you to higher interest rates or
flat out rejection when applying for other loans. High interest debt will rob
you of cash you could be pumping into your business. Staying current is a tip
that applies to any debt but it is important to remember that federal student
loans are not just any debt. The penalties for going into default are
far-reaching, including seizing your tax refund and federal benefit payments,
and having your wages garnished.
2. Consider consolidation – Consolidation
is the process of combining at least two existing loans to create one new loan
for the same amount. If recordkeeping is not your strong suit, then it may help
to have one loan with one servicer and one bill to pay as opposed to having
multiple loans with different servicers and separate monthly bills. Federal
student loan consolidation is free. You can explore the process and complete
the application online for free via studentloans.gov. Note:
Federal consolidation loans often offer a longer repayment term. If you pick a
longer term, you will pay more interest in the long-run. Paying extra each
month can shorten your repayment term and lessen the amount of interest you pay
overall.
3. Income Based Repayment –
Income-based repayment plans allow you to pay based on how much you earn
instead of how much you owe. This kind of flexibility may be particularly
useful if you are in the process of building a business and have unstable
income. Contact your loan servicer to find out which income-based
plan(s) you may be eligible for. You can estimate payments here: Repayment Estimator.
4. Search for forgiveness – There
are several opportunities for student loan forgiveness, typically based on work
in exchange for cancellation of debt or repayment assistance. Federal
forgiveness options include Public Service Loan Forgiveness, Teacher Loan Forgiveness and Perkins Loan Cancellation. State
higher education governing bodies may offer loan repayment assistance for
residents who work in certain fields. Lastly, check with your employer to find
out if student loan repayment assistance is offered. Keep in mind that
cancelled debts and repayment assistance may have tax implications if they are
treated as taxable income.
When it comes to
managing your debt, do not be discouraged. Be deliberate! Get familiar with
your debt, develop a personal repayment strategy and work toward finding the
balance between meeting your obligations and building your business.
To find out more about Tisa Silver Canady, visit her at:
www.tisasilver.com Twitter: @tisasilver
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