Recent graduates and college dropouts account for a disproportionate share of the founders of technology startups that have transformed the economy over the past decade, says Shikhar Ghosh, a senior lecturer at Harvard Business School. Many freshly-minted M.B.A.s “are willing to sleep on a couch for a year or two, but they can’t do it with the burden of student loans,” he adds.Jackson Solway created an online service last year to connect employers with teams of freelancers. He hoped he could sell it to companies eager to keep staffing lean. But he gave up on his new business venture this spring, after just one year. Faced with $400-a-month payments on nearly $40,000 in student-loan debt, he says he had little choice but to look for the steady paychecks that accompany a regular job.If he didn’t face student-loan payments, he says, he would have worked at his nascent business venture for at least another six months.
And this story is only one of many. Take a bird’s eye view of all the unrealized or deferred start-ups, and it’s not unreasonable to think that student debt is directly impacting new business creation in the US. This is another troubling sign for an economy that is still struggling to pull itself out of recession.As America transitions to a post-manufacturing economy, service businesses run by individuals and small groups will become an increasingly important driver of new jobs and economic growth. Ideally, energetic people with good ideas and sound business plans shouldn’t face unnecessary obstacles to building these sorts of enterprises. Instead, many of them are saddled with so much student loan debt that they can’t handle the routine costs of owning a business.[Ball and chain image courtesy of Shutterstock]