College graduates who exercise their entrepreneurial spirit and start-up a new business would be able to get their student loans into an interest-free deferment for up to three years while the business gets up and running.
The 2016 Presidential election has been a wild ride so far and it is far from over. Trump may call Clinton crooked but her recent proposal may have 43 million Americans seeing her as Wonder Woman. Hillary Clinton has recently proposed a solution for young borrowers with student loan debt. Under the proposal, college graduates who exercise their entrepreneurial spirit and start-up a new business would be able to get their student loans into an interest-free deferment for up to three years while the business gets up and running. For those entrepreneurs who locate their business in “distressed communities” or start a social enterprise would be able to ask the government to forgive up to $17,500 in loans after the business survives for five years.
John Lettieri, co-founder of the Economic Innovation Group, said in his testimony before the US Senate in July that, “Millennials are on track to be the least entrepreneurial generation in recent history.” In the 2016 Small Business Administration report, Lettieri cited under 4% of today’s 30-year-olds are self-employed, compared to last generations 5.4% and the 6.7% of the Baby Boomers. Lettieri also cited the severe drop in startup launches of 35% in 1996 to 18% in 2014. On the surface, this looks like a case of lazy millennials but once you take a look at the student loan debt compared to past generations the picture becomes so much more clear.
The number of student loan borrowers is up a massive 89% from 2004 to 2014, not to mention, the average loan balance has also increased by a staggering 77%. With the increase of people in debt and the amount of debt they’re in creating a wealth gap which is straining not only on an individual but the economy as a whole it is easy to see why the number of startups has begun to plummet. Fewer startups mean fewer businesses being established which leads to fewer jobs. Clinton looks to nip this in the bud with her proposal – but there are other options.
Chances are that young people graduating from college will have low or no income. Even if they are launching a startup they will most likely be taking a loss in the first few years. While Clinton’s proposal puts a band-aid on the problem for the few starting businesses, there are other options for low-income-earners to start settling their student loan debt. The Income-driven repayment plans help borrowers pay back loans based on their current income. For new graduates who have low or no income, they should apply to one of these programs to help alleviate the strain that is student loan debt.
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