- President Joe Biden could forgive certain borrowers $10,000 in student loan debt.
- This would free up income for current and aspiring business owners with debt.
- But people considering starting a business still need to consider other factors, one expert said.
President Joe Biden’s loan forgiveness plan could include $10,000 relief for federal borrowers who made less than $150,000 in the prior year, three people familiar with the matter told The Washington Post last week.
As part of his presidential campaign, Biden promised to waive sweeping debt relief for students. According to the Ewing Marion Kauffman Foundation, an education and entrepreneurship nonprofit, borrowers had $1.5 trillion in federal student loan debt in 2020, three times the total of about $516 billion in 2007.
Biden made no announcement, but loan forgiveness could give entrepreneurs with student loan debt more disposable income, said Philip Gaskin, the foundation’s vice president for entrepreneurship. Eventually, some entrepreneurs have had to slow down or shut down their operations due to debt, while others have struggled to get business loans because of their credit ratings.
“Paying off student loan debt requires a stable and predictable income, and starting your own business is inherently more risky than taking on a job you already have,” Gaskin said.
Here’s what Biden’s plan would mean for young people looking to scale or start their own businesses, Gaskin said.
Student debt affects entrepreneurs
Young people are drawn to entrepreneurship, in part because some successful influencers earn more than America’s top CEOs. A Pew analysis of a 2018
Survey finds about one in three Americans ages 18 to 29 say they have college debt.
Gaskin said this is a hurdle for entrepreneurial hopefuls, particularly Gen Zers and Millennials.
“Worry about paying off student loan debt can both dampen hope or future confidence in starting a business, as well as impair a person’s ability to bring capital to their business,” Gaskin said.
Thanks to virtual work and online platforms that reduce start-up costs, this is one of the best times to start a business. Gaskin says this means reducing student debt could make it easier for borrowers to get a business up and running.
Lower debt could free up income for entrepreneurs
If Biden forgiven $10,000 in student debt for certain borrowers, those borrowers would have more disposable income to invest in current and future businesses, Gaskin said, adding that starting more businesses could help the economy.
“Providing more opportunities to foster entrepreneurship can have an incredible impact on local economies,” Gaskin said. “More new businesses mean more opportunities to create jobs and help communities build generational wealth.”
But he added that having more money to invest in a company isn’t the only success factor. Young people need to assess their risks and access to capital before embarking on a new business. Gaskin said they should also get some work experience first.
Having less student debt “has the potential to take a little risk out of starting a new business for aspiring entrepreneurs, but it doesn’t completely remove risk,” he said.