Self-Employment and Student Loans – Student Debt Diaries

During my student debt repayment saga, I always had a main job working for other people. As mentioned in numerous prior articles on this website, I also had several part-time jobs that allowed me to generally work at my own pace and not deal with bosses and the other challenges of working for someone else (however, my main job always involved working for other folks). Years after I paid off my student loans, I decided to open up my own firm, and it has been a great decision for me. The experience has shown me that there are a few things you should keep in mind when considering self-employment and student loans.

Save Money

Perhaps most importantly, the main thing you should keep in mind when considering self-employment and student loans is that you should have a sizable amount of money saved up before starting out on your own. Self-employed individuals need to pay for living costs and housing expenses, even though they might not have a reliable income stream. On top of this amount, self-employed individuals also need to make student loan payments, which can be a substantial amount of money.

The only way to deal with issues concerning cash flow and other matters involving self-employment is to save a healthy amount of savings. Student debt borrowers should save even more so that they can make student loan payments if there is an issue generating income for some period of time. Before I started self-employment, I saved a substantial amount of money so that I felt I could live for a few years just on my savings, and this is a good idea for others who also wish to start their self-employment journey. However, if you have a spouse with a reliable income stream or other circumstances, it might make sense to save more or less money to be secure while you pursue self-employment.

Prepay Loans

Another strategy you should keep in mind when considering self-employment and student loans is to prepay your debt. Rather than let money sit in a bank account, it often makes sense to prepay the loans for a variety of reasons. Firstly, prepaying student loans should provide you with a financial cushion that will push back the next due date on the debt so you do not need to make payments immediately if financial issues arise. Secondly, prepaying student debt should decrease the amount of principal on the debt, which will reduce the total amount of money you will need to devote to the debt over the course of the loans. Furthermore, if you pay off higher-interest student loans this way, the effective rate on your debt can go down. For all of these reasons, prepaying student loans can help you get on a strong financial footing, which can be helpful when considering self-employment.


Another tactic to keep in mind when evaluating self-employment and student loans is that forbearance may be available if you face financial issues. Student debt borrowers are generally permitted to apply for a forbearance to cease paying student loans for some period of time due to economic difficulties. Different plans have different rules about forbearances and when they might be available to student debt borrowers. Typically, such relief is permitted when a borrower loses a job, has a substantial financial need, or other limitation in their ability to repay student loans. Forbearances are typically only permitted for a certain period of time, usually up to a maximum of six months or a year.

Forbearances can be a lifeline for self-employed individuals. If a student debt borrower has difficulty generating income while working for themselves, they can apply for a forbearance. It generally takes a substantial amount of time to earn income from self-employment, and forbearances can help bridge the gap between when you begin self-employment to when you start generating reliable income.

Minimize Expenses

It is even more important when contemplating self-employment and student loans to minimize expenses. Of course, this website has discussed at length how saving money is an important tactic for student debt repayment. Indeed, this ensures that a borrower has the most money possible to pay down their student debt.

Self-employed individuals may have even less money available and may not have a consistent income stream to pay for expenses. It took me many months of hard work before I was breaking even when I decided to pursue self-employment, and it was not fun seeing my savings diminish while I dug into my bank account to pay for living expenses. At the time, I had already paid off student loans, and if I had student debt, it would have been even more harrowing to shell out more money while I was building my business and creating income streams for myself. Self-employed individuals should live with family, sell their car if possible, and pursue other drastic steps in order to minimize their overhead so that they do not have as many expenses when they are building their business.

All told, self-employment and student loans is difficult because starting a business is extremely hard even if someone does not have student loans. As a result, student debt borrowers who wish to pursue self-employment need to take certain steps to set themselves up for success. In this way, borrowers can work towards their dreams without letting the financial responsibilities of student debt get in their way.

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