Winter semester just ended at colleges and universities around the country and that means an exciting chapter is beginning in the lives of college graduates. As graduates look back on their time in school, they may have many wonderful memories but the real tangible evidence of that time are often twofold: A degree and college debt.
The degree will look good on your wall but the college debt is the source of great concern for many. With the average student loan debt load now topping $20,000, the idea of starting a business often takes a back seat to getting a more stable job with immediate income. The sad truth is that college grades with sometimes upwards of $400 or more per month in debt payments along with normal living expenses makes starting a business impossible. They don’t have the funds in reserve to wait for the business to grow enough to sustain their debt payments.
Thanks to the Obama Administration’s new student loan mandate, starting a business will be possible. Starting in 2012, student loan payment amounts will be set based on the person’s discretionary income, the money leftover after living expenses. Recent graduates will no longer have to make a payment that is higher than 10% of their discretionary income. For a student who had a $50,000 loan, they may have paid $350 or more per month but in 2012, that could drop to $100 or less.
How does it help the entrepreneur? If you’re planning to form an LLC, your business will take time to grow and during that time your income may come from a part time job or what you can pay yourself from your growing business. Since your payment will be based on this small amount, Washington has now made it possible for you to start a business while keeping your student loan payments low. Finally, after 20 years of loan repayment, the remaining balance will be forgiven.
It’s not quite that easy. Washington lawmakers only have the power to control payments levels on government sponsored loans. Private loans will not see a change under the new legislation. Also remember that as your business grows so will your loan payments.
If you have believed that starting your own business was impossible because of high student loan payments, that is about to change. The Obama Administration wants to make it easier for college graduates to form an LLC without having the overhang of unmanageable student loan payments. Look for more information about this at the beginning of 2012.