Starting a Startup with Student Loan Debt

Launching a startup always feels somewhat risky. Launching a startup when you have student loan debt to pay? That can feel downright dangerous.

Elena Lucas knows the feeling well. Despite owing what she calls “Monopoly money” worth of college and graduate school debt, Lucas turned down a secure position with a large solar company to co-found UtilityAPI, a renewable energy software company. “It was a leap of faith,” she remembers, “but I had to give it a go.”

With student loans deterring many of her peers from pursuing entrepreneurial goals, Lucas is something of a rare breed these days. According to a recent Gallup poll, 19 percent of college graduates with student loan debt have delayed starting a business because of their loans. For borrowers with over $25,000 in debt, that number goes up to 25 percent.

Happily for Lucas, the risk has been paying off – big time. With a recent trip to the White House, a SoFi commercial and a Forbes’ 30 under 30 honor under her belt (not to mention a $1.8 million funding round from the U.S. Department of Energy), Lucas weighs in on what she’s learned about startups, student loans and the risks – perceived and real – involved in combining the two.

The “safe job” myth

Shortly before Lucas met her UtilityAPI cofounder, she was laid off from her analyst job. It was a wake-up call in more ways than one. “I thought that getting a Master’s degree meant I’d never be unemployed,” she says, “but companies reorganize, or you could be a bad fit for the role – there’s never any guarantee of employment.” Add that to the fact that Lucas had already worked at a Fortune 200 company and didn’t love the bureaucratic nature of such a big enterprise – “It was frustrating for someone who values efficiency” – and the idea of a ‘nice, secure job’ quickly lost its appeal.

Testing the waters

Before the layoff, Lucas was already exploring the idea of entrepreneurship. She attended talks, started a Lean In circle, even launched her own website and newsletter focused on the energy/environment space. “I always tell would-be entrepreneurs to be curious, ask questions and connect with as many people as possible” before diving into the deep end.

By immersing herself in the startup world before having a company of her own, Lucas knew what she was getting into – a ton of hard work and an emotional rollercoaster, but ultimately something that was a better fit for her skills and personality. When the UtilityAPI opportunity arose, she went into it with eyes open, which helped mitigate the anxiety of taking a risk.

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Betting on yourself

As an entrepreneur, Lucas has never seen her student debt as a hindrance – instead, she feels it opened doors for her. “I’ve had to create my life in terms of taking out loans for college and grad school,” says Lucas. “Yes, it was a lot of money, but school was a way up for me, so I can’t regret the loans that helped make that happen.”

Again, Lucas’ attitude here goes against the norm – a recent AICPA survey found that 68 percent of Americans with student loans regret how they financed college. But viewing student loans as an investment vs. a burden motivates Lucas to bet on herself, which helped drive her decision to choose starting her own venture vs. building someone else’s company.

Weighing the upside

Many people feel that having student loan debt is a cause for caution, but Lucas’ high-stakes situation was precisely what compelled her to go all in. “Between the high cost of living in San Francisco and my high student loan debt, it felt riskier not to take a chance on something that could pay off in a big way.”

At the end of the day, Lucas felt her enterprise would either be successful and allow her to pay off her debt, or it wouldn’t be successful and she’d simply go back to working for someone else. But to her, it was worth the risk to potentially realize a greater return on investment through entrepreneurship.

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The final word

Lucas recognizes her path won’t work for everyone. “Pursuing a startup when you have student loans is a really personal decision. It’s worked for me, but I know it’s not right for everyone.” Having a strong awareness of her goals, skillset and potential allowed Lucas to evaluate the risks involved in starting her own company and make a more confident decision – one that, so far, has paid off.

If you’re a founder or co-founder working on your business full-time and you have student loan debt, visit SoFi’s student loan refinancing to learn more about how SoFi can help you!