Michael Maylahn started working on the idea for Stasis, a low-cost system to monitor vital signs, as a University of Southern California undergrad. He and his co-founder, Dinesh Seemakurty, knew their idea could help hospices, nursing homes, and hospitals in the developing world and, potentially, the U.S. But they faced a major obstacle as they incorporated their Los Angeles-based company in early 2015: Maylahn, now 24, was graduating with $140,000 in student debt.

Under water
The real toll that educational debt takes on entrepreneurs
$1.16 trillion
The total outstanding loan debt in 2014, according to the College Board. It has grown at an average rate of 8% per year, from $798 billion (in 2014 dollars) in 2009.
63
The percentage of students who left college with some amount of educational debt between 2006 and 2015, according to Gallup.
Two million
The number of U.S. graduates in that nine-year period who have delayed starting a business because of student debt, according to Gallup.
17 percent
The decline in the formation of new businesses (with one to four employees) in areas where student debt increased by 2.7 percent over a decade, according to 2015 research by the Philadelphia Federal Reserve.
$25,500
The average debt for a graduate of a four-year public university in 2013-14, according to the College Board. For a graduate from a private nonprofit institution, the average was $30,200.

When he transferred from community college to USC, Maylahn thought he wanted financial security--and with his degree in biomedical engineering, he had a job at a middle-market health care tech company in sight. "But I was in love with Stasis," he says. He took the riskier bet--and the company has now raised more than $1 million in funding. Stasis has conducted a pilot program in India, with plans to fully launch by midyear. Maylahn is even able to pay himself a stipend.

"Looming student loans make the leap to entrepreneurship very difficult," says David Klein, CEO and co-founder of online student lender CommonBond. But "those determined to do it can figure out how."

1. Simplify your balances--carefully

Maylahn had accumulated 13 loans, federal and private, all with different interest rates and due dates. Consolidating them made keeping track of his debt and his payments far easier--and lowered the rate of interest he was paying.

This is something you can do with both federal and private loans, generally after you graduate, leave school, or drop below half-time enrollment, through some banks or, alternatively, a crop of new, online startups, including SoFi, Common­Bond, LendKey, and Earnest. But to qualify for most loan refinancing, your credit score has to be good--in the high 600s at least, according to Klein. Also, you likely won't be eligible if your record includes any bankruptcies or defaulted student debts.

There are downsides even if you qualify, including potential fees. Make sure when you refinance to obtain a lower interest rate that you won't be losing out on any federal loan forgiveness programs. If you currently are taking advantage of such programs (for example, by teaching in low-income areas or working in nonprofits or fields such as nursing or law enforcement), consolidating your loans could affect the terms of that forgiveness.

2. Pay another day

You can also put off paying your student loans through federal and private programs--though in most cases, you'll continue to accumulate interest on the underlying balance.

The government offers loan deferral and forbearance mostly to those enrolling in graduate programs, taking public service jobs, entering the military, or facing severe economic hardship. It also offers income-based repayment programs, which allow you to cap your monthly loan repayments at 10 to 15 percent of your discretionary income. Participating in this sort of program may mean you pay more interest over time, but it can help you reduce minimum monthly payments and put that extra capital toward a startup.

If you qualify for their services, private lender startups like SoFi offer programs--and deferrals--explicitly to help entrepreneurs start companies despite their debt loads. These are competitive: SoFi co-founder Dan Macklin says there are now about 10 applicants for every spot available in its entre­preneurial program. Getting into the running isn't easy. SoFi, for example, recently ran a Super Bowl ad touting its exclusivity. It and its competitors plan to grow by lending to graduates who will eventually have enough money to qualify for other financial services, including wealth-management and mortgages.

When a mentor recommended that Maylahn look into SoFi, he was paying about 7 percent interest on most of his loans; by consolidating them, his interest rate dropped to 5.1 percent. Through its entrepreneur program, SoFi waived his debt repayments of $1,825 per month (with interest still accruing) for up to one year. "It has been a lifesaver," Maylahn says.

3. Work hard and live cheap

Even if you qualify for refinancing, consolidation, or deferral--and especially if you don't have any outside support--it's going to be very difficult to start a business while repaying your student loans. But it can be done. Just ask Rachel Graper. The 34-year-old took a full-time job upon graduating from Carnegie Mellon business school in 2008, trying to pay off her total graduate and undergraduate debt of $171,000. But she didn't give up on her startup ambitions.

Even while making a good salary, "I lived like a student," she says. "I used a student ID to take the bus to work and had a roommate." With some help from a 2014 Kickstarter campaign, she launched her business, Ideal Grain Free Granola.

"At the current rate, I'll pay off my student debt in 10 years," Graper says. "I make it my priority every month." And her granola is now selling in 16 stores in New York City and Pittsburgh.

From the May 2016 issue of Inc. magazine
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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