If you’re a recent graduate with both a business idea and student loan debt, Hillary Clinton has a proposal for you. Her technology policy initiative, released earlier this year, contains her presidential plans to promote entrepreneurship, in part by making it easier for graduates with innovative ideas to get them off the ground while balancing student loan payments. There are two parts to the student loan portion of Clinton’s entrepreneurship proposal.
What is Being Proposed?
The first is an opportunity for young entrepreneurs to defer their payments for up to three years while building up their businesses. Not only would monthly payments be put on hold during this time, but so would the accrual of interest.
For those with large student loan debts, the interest charged each month can be a substantial sum, so this is something that recent graduates and those about to graduate are taking note of. The availability of various income-driven repayment plans, such asPAYE and REPAYE, have made it possible for graduates to cap their student loan payments based upon income. Still, it’s easy to see how a three-year moratorium on worrying about student loan payments could greatly benefit those wishing to start a business.
The second aspect allows young entrepreneurs to have their student loan debt forgiven after five years, up to a maximum of $17,500, if the businesses they start are located in a distressed community. This is essentially a subsidy of up to $3,500 a year to a new business, and worth even more when interest accrual over the long run is taken into account. The subsidy would also be available for businesses not necessarily located in distressed communities but that provide a measurable social benefit.
Of course, terms like “distressed community” and “measurable social benefit,” which are integral to the proposal, have yet to be defined. The broadness or narrowness of their definitions will determine the number of young, entrepreneur-minded borrowers that can take advantage of this program if it comes to pass. The technology policy initiative also contemplates the possibility of expanding these student loan benefits to the first set number of employees of such a business. This would expand the reach from those starting a new venture to those engaging with it while it is newly formed, making the impact even greater.
Clinton’s plan comes as no surprise, since student loan debt in general has been a trending topic for quite a while among those this year who were hoping to make it onto the presidential ballot in November. Even its tie-in to young entrepreneurs is unsurprising. Job growth is an indicator of economic growth, and recent data has indicated that crushing student loan debt is a prohibitive factor preventing new businesses from being started.
It’s hard enough to plan for business expenses when first starting out, and for many would-be entrepreneurs it may be difficult to stomach taking on business loans when a student loan payment comes knocking at their door every month already. Many attribute the rise in student loans to the decline in the rate of start-ups over the past few decades – at least in part. Only time will tell us if that decline is about to reverse.
Author: Jeff Gitlen
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