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Student Debt Crushes Small Business Creation


America’s trillion-dollar student debt burden is killing small business creation, according to Bloomberg. From 2005 to 2010 self-employment for those 25 and younger fell by 19 percent; 23 percent of respondents to one survey stated that debt problems had put their small business plans on hold. The Bloomberg story discusses the case of Dr. Steve Sherick, who’s trying to expand his emergency-care business:

“It deters an entrepreneurial spirit when you already start four steps behind the starting line,” said Sherick. “The student debt increases the risk for an entrepreneur like me and makes it harder to expand new business, get loans and thus hire new people” […]

“The burden of student debt probably places pretty big constraints on your viable options after graduation,” said Dane Stangler, director of research and policy at Kansas City-based Kauffman Foundation, which focuses on supporting entrepreneurship. “With more student debt and stricter bank lending, it really hinders the ability of students to take risks, start a company.

The problem is growing. More and more young adults are graduating under a crushing debt burden, and older adults are increasingly on the hook for it as well. As a result, the housing market is suffering, and so are start-ups, the lifeblood of the US economy.

Where does it end?

[Ball and chain image courtesy of Shutterstock]

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  • Anthony

    “For many young entrepreneurs, it is critical to invest capital to develop ideas, market products, and hire employee, the CFPB said in its report. Student debt burdens require these individuals to divert cash away from their businesses so they can make monthly student loan payments.”
    Bloomberg article references post college rather than initial business start-up; debt is definitely consequence of choices made relative to systemic options. Private lenders/Investment bankers availed capital for school choice and now choose not to compound risk.

  • Andrew Allison

    What forced students who took on debt which limited their future to do so? The answer, I fear, is “see money, take it”. It is fundamentally dishonest for somebody who took a loan in order to get an education to complain that the loan is preventing them from making a living. Should they perhaps have chosen a less costly path to hoped-for prosperity.

  • ljgude

    My grandson graduates High School this week and is working hard to develop his free lance computer skills to the point where they can help finance his education. Labor exchange style Internet services like oDesk make this approach viable for many youngsters who have the opportunity to graduate with four years experience in running their own business. Even grandfathers can get in on the action by buying them programming books from O’Reilly and the like. Alternately, they can put it all on the never never and play Call of Duty for four years.

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