$1 Trillion in Student Loan Debt Hampering Young Entrepreneurs

Jamar Thrasher |

It appears more and more American college graduates are declining to start their own businesses due to the rising costs of tuition and crushing student loan debt. Bloomberg examines the obstacles facing young entrepreneurs:

Former students hobbled by a collective $1 trillion in education loans can be hindered in expanding or forming small businesses and creating jobs for themselves and others. While self-employment among those 65 years old and over increased 24 percent in 2010 from 2005, it fell 19 percent among individuals 25 and under in the same period, according to the Small Business Administration. …

The share of 25-year-olds with student debt increased to 43 percent last year from 25 percent in 2003. The average education-loan balance among that age group grew by 91 percent over the period, to $20,326 from $10,649, according to the Federal Reserve Bank of New York.

Many successful companies are the product of the innovation of students or recent graduates (think Facebook, PayTango, StudentInTuition, Microsoft, FlipLynk. etc.). Yet the combination of rising student debt and economic uncertainty are crushing the dreams of some would-be entrepreneurs.

Recent graduates are finding it more difficult to get bank loans, so they lack the startup cash needed to implement a strong marketing campaign, buy equipment, or hire employees. A report by the federal Consumer Financial Protection Bureau, parsing more than 28,000 comments submitted by the public, finds that “student debt may suppress risk-taking and innovation by discouraging the formation of new businesses by young entrepreneurs.”

The fact that more young college graduates are not starting their own businesses could very well threaten the future of American innovation. Who knows? The next Mark Zuckerberg or Bill Gates may have just graduated in May, and we’ll never know what they could have accomplished had student loan debt not gotten in the way.