High student loan debt is no secret. With $1.3 trillion in outstanding debt, the government sure cannot ignore it, and most college kids cannot forget it since about 60% of students have roughly $30,000 in debt. While these overall statistics show a dilemma for the entire college student body, there is another dilemma pertaining to a more specific demographic.
Student Loans Impact on Entrepreneurs
The demographic in question consists of entrepreneurs. A recent study analyzed the impact of student loans on entrepreneurship attempts by young adults, namely young graduates and college students. For many students in college, there are solid opportunities to turn ideas into realistic business ventures which gives the up-and-coming generation a reputation for entrepreneurship.
Unfortunately for this demographic, it fits into the generation that is getting slammed by student loan debt which was mentioned earlier. A research group known as Young Invincibles released a study that revealed some interesting results. Now to the main point.
It was shown that higher student loan debt is correlated with lower rates of entrepreneurship. Basically, students with plenty of student debt are much less encouraged to start up their own businesses. This makes a lot of sense from a logical point of view. Start ups require breathing room in terms of funds and cash expenditure. If money from an investor cannot be secured, then the chances of starting a new business are much bleaker.
These results are not especially groundbreaking; for instance, the young entrepreneurial crowd received attention not too long ago from Presidential candidate Hillary Clinton. She announced a focus in her overall student loan plan that provides relief to young business entrepreneurs. This group of borrowers would be allotted a three year grace period following graduation. The basic idea is to free up cash for business expenditures during this extended grace period.
All logistics aside, the actual benefits of this plan for young entrepreneurs may not be impossible since it is easy to see the benefits of three years without student loan payments. About half of the entrepreneurs in the study stated that student loans had a significant impact on their employment plan following college. On top of this, at least a quarter of the entrepreneurs claimed that student loans directly conflicted with business expenditures.
At any rate, the impact of student loans on this topic is clear. There are few secrets when talking about what student loans require down the road, so it is not surprising to see one of the most cash flow dependent industries suffer under rising student loans.
Author: Jeff Gitlen
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