Loan Repayment Guide for Freelancers/Self-Employed

If you are a freelancer/self-employed and looking at different options to repay your student loans then this article is for you.

Updated by Anuroop C on 26th February 2020

Freelancers lead one of the most opted forms of employment in 2019. With more people moving on to freelancing and self-employment due to either a bad workplace environment or an inspiration to become an entrepreneur or just simply unemployment, it is one of the most sought after forms of employment. However, due to the nature of the job, the pay can quite be unpredictable and erratic. Sometimes, you might not have a penny and the next week or so, you might end up with the actual money.

But it should also be noted that even the number of people borrowing student loans is also at a steady increase. Therefore, sometimes it can come down to the point where you are self-employed/freelancer, you can still have the responsibility of paying off your student loans. If you are one such person, then this article is for you.

Table of contents

The different financial restrictions/commitments that a self-employed or freelancer must face?

Be it a self-employed person or a freelancer, every person has some big financial commitments that he shall go through(though not all of them are mandatory). Let us check out these commitments and how the self-employed can deal with them along with the student loan burden that they shall try to clear and their unpredictable income.


Planning your retirement is one of the most important aspects of your life, and you might have a proper plan or at least a vague vision of what it is going to be like. As mentioned before you might want to balance that with the other financial commitments that you have already have along with the erratic monthly income payments.

The greatest advantage of being self-employed is that you are the employee and employer as well. This comes as a great advantage under the 401(k).

As per the normal 401(k), employees can contribute up to a maximum of $19,000 per year. But for the self-employed individuals, they can create an individual or solo 401(k) and can contribute as both the employee and the employer. The combined cap on both the contributions is a 401(k) is $56,000 per year. Using these retirement savings, freelancers can avoid showing large sums of money that will be considered under the IDR calculations. If done with the proper guidance of a tax counselor, this can be used to achieve your financial aspirations.

Buying a house

This is also the dream of many, but buying a house can be challenging while you are having a student loan debt. Learn more about taking a mortgage while having student loans.

Marriage and children

These are also some things that need to be done with a lot of care and is a big financial commitment. Therefore you need to make sure that you are well balanced on the income from the self-employment and the student loans that usually take half of your life to be paid off.

Emergency fund

Having an emergency fund is an important part of financial security. If things become difficult in the future or for any kind of a medical emergency, this emergency fund can come in handy.

With so many investments and financial commitments, it can be difficult to know and realize what to do with your student loans. These are the following ways in which you can tackle your student loan debts.

Looking for student loans? Find the best student loans just for you.

Repayment of Student Loans- For a Freelancer

Income-Driven Repayment plans

If you have federal loans, then these plans are some of the best benefits that can be provided. They can help you tremendously in repayment of your student loans. You tell the government how much you are making and the government takes only part of the salary you make sometimes, as less as 15 percent. Know more about the Income-Driven Repayment Plans

Income-Driven Repayment Plans include the following plans- ICR, IBR, REPAYE, and PAYE.

These are great for people with fixed incomes. However, not so much for self-employed people, due to the type of income.

So here’s how people can qualify or at the very least apply for these income-driven repayment plans.

Most borrowers apply for IDR plans by using their option of importing their tax return form the IRS and sending certain information directly to the Department of Education.

People with a growing business will benefit from this approach to documenting income. Payments will be based upon earnings from the past year rather than looking at present or expected earnings.

For freelancers not facing good times, things get a bit complicated, as the payment amounts are based on the earnings of the previous year. People in this situation can have their monthly payments calculated immediately. Documenting income without using a tax return can be difficult, especially for self-employed. Freelancers will need to send a letter to their loan servicing ahead of time to make sure that all of the required are present in the income letter. Working out closely with your loan servicer can be of help as this is not just a simple form in which everything is present. But loan servicers are more inclined towards making mistakes, but make sure that you succeed, at least after a couple of tries.

Refinancing your student loans

Refinancing student loans for the self-employed is often a challenge as they need to document their income. Different lenders have different requirements to refinance your student loans. Therefore making a thorough market search is very important. But here you can find the best places to refinance your student loans with.

Some companies tend to be hesitant to lend money to self-employed people, but some only care all about the annual income. Out of these, it is important that you always find the lender that offers you the lowest interest rates. Make sure that you do not refinance your federal student loans as they offer benefits that can come handy, especially for freelancers. Learn more about refinancing your student loans while being self-employed.

Forgiveness of your Student Loans

Public Service Loan Forgiveness(PSLF)  for federal student loans is rare and they are especially rare for freelancers. For example, if you are a freelancing doctor in a private hospital, then you are not qualified for PSLF. But if you are an ER doctor in a government hospital or 501(c)(3) hospital would be eligible, then you can be eligible for PSLF.

However, if you are enrolled in the Income-driven repayment plan then according to the 20 or 25 years forgiveness programs, borrowers with high debt amounts and freelancing can benefit from these forgiveness programs. Find more on 20-year loan forgiveness programs.

So this covers up the repayment options for freelancers. It is a tough time for freelancers out there especially because of the improper arrangements for the self-employed. Therefore it is most important on your part to know every detail in anything you do regarding your financial well being.