The burden of paying student loans hinders the new graduates to start their own businesses.
From millions of students graduating and/or have graduated this year, those who are hoping to become entrepreneurs are usually putting their plans aside because they still have to pay their student loans. The burden of paying for this said debt prevents them from immediately starting their own company.
Gallup and Purdue University 2014 Index [PDF] found that about a fourth of recent graduates are indebted by over $25,001 and that the high cost of student loans inhibit entrepreneurial plans, especially those who graduated after 1990. The same study also showed that these students also have poorer well-being.
The Federal Reserve Bank of Philadelphia conducted a study [PDF] in 2015 that revealed bigger student loans significantly reduce creation of startups with one to four personnel.
A 2014 research [PDF] of The Institute for College Access & Success, an advocacy group that studies college attendance and its financing, has revealed that about 70 percent of public and private college graduates of 2014 carry a debt of $30,000 in average.
Sadly, these loans increase in parallel with rising tuition fees.
Since loans can amount to several hundreds of thousands of dollars, these individuals do not buy homes and delay starting their families as well. The government acknowledges that these student loans, now running at $1.3 trillion, are creating a dent in the economy — the reason for the formation of relief programs and debt forgiveness by the state and some schools.
About 50 percent of the private economy and almost 99 percent of businesses in the United States are small businesses. Without these small businesses, job creation is significantly hampered as well.
Arnobio Morelix, a research analyst from Kauffman Foundation, which studies the association of education and entrepreneurship, said paying thousands of dollars of student loans would take several years, and it is highly likely to cause long-term effects.
The money they have is not being used to start a company — they use it to pay off these debts, Morelix said. These debts also do not reflect well on their credit scores. An existing student loan is one reason why many are not granted business loans.
This is one of the main reasons people go to Kickstarter to help people fund their dreams. But oftentimes, those pledges go down the drain because existing loans hinders continuous cash flow to run the business.
Instead of becoming entrepreneurs, these dreamers end up taking desk jobs to get by.
