Is Student Loan Debt Hindering America’s Entrepreneurs?

Posted By Terri Williams on December 21, 2015 at 9:53 am
Is Student Loan Debt Hindering America’s Entrepreneurs?

Entrepreneurship is the backbone of American business. While some startups may not succeed, for 30 years, there have been approximately 120,000 more business births than deaths. However, that trend appears to be changing.

According to recent Gallup research, while an average of 420,000 new businesses are birthed each year, 450,000 die yearly. In addition, Gallup notes that recent college graduates are burdened with so much student loan debt that they are delaying the launch of their new business. So how bad is it? Gallup reports that more than 2 million graduates have stated that they are delaying starting a business because of student loan debt.

So what does this mean for the spirit of American entrepreneurship in particular, and the country in general? And what, if anything, can be done to reverse these startling statistics? GoodCall posed this question to several experts and entrepreneurs.

The Experts

Entrepreneurs are already under a great deal of stress trying to launch a business, according to Howard Dvorkin, CPA, Chairman of “We’ve heard stories of successful entrepreneurs launching new technologies and products from their garages, while eating ramen noodles every night for dinner – and that bought them the time they needed to hone their inventions and innovations.”

However, Dvorkin wonders what will happen when the next generation of entrepreneurs won’t have the luxury of time because they have large monthly student loan payments. “What student loans will be to this generation is what the Great Depression was to the WWII generation — a traumatic event that instilled frugality in millions of Americans for the rest of their lives.”

But don’t hold your breath waiting for the government to intervene, warns Andrew Josuweit, the Austin, Texas-based CEO of Student Loan Hero. “Unfortunately, the government has a strong financial interest in providing student loans, which some argue should be a private sector business.” Josuweit explains, “The Congressional Budget Office projects a profit of $149 billion on new direct loans to students through 2024.”

When entrepreneurs don’t launch new businesses, David Bakke of, says that the country suffers. “Small businesses account for close to 100% of companies who employ workers, and well over half of the new positions created in the private sector,” says Bakke. “And when nearly 2 million entrepreneurs fail to launch, Bakke warns, “These delays can translate into a higher than necessary unemployment rate, less tax revenues for the government, and a slower economy overall.”

However, not all of our experts think student loan debt hinders would-be entrepreneurs. According to Bob Hirth, Ph.D., J.D., Assistant Professor of Management at High Point University in North Carolina, “Student loan debt as a reason not to start a business is a crap excuse – the real reason is lack of good financial management.”

Professor Hirth says he’s taught entrepreneurship classes and also knows many entrepreneurs. And he says that several of their start-ups were actually financed with student loan debt. “Who else is going to give a 22-year-old kid, with no experience or collateral, a $20,000 loan at a reasonable interest rate?” says Hirth. “Student loans probably help create more businesses than they prevent.” He concludes that it is poor financial planning that prevents businesses from getting started.

The Entrepreneurs

Ryan Carrigan, founder of moveBuddha in Athens, Georgia, says student loan debt is the biggest roadblock to getting his business off the ground. “A thousand dollars per month in student loan payments makes it impossible to not have a full-time job,” says Carrigan. He explains, “If I didn’t have student loans, I would be able to get by with a part-time job and really focus on my business.” Carrigan says high levels of student loan debt are killing the entrepreneurial growth engine that fuels the country.

Indeed, many would-be entrepreneurs are choosing safer routes. Certified Financial Planner Rob Shultz of Encino, California-based NWF Advisory Services, Inc., says he works with many physicians entering the workforce who prefer to work with larger groups, instead of starting their own practice. “They’re already $200,000 in debt, so they don’t want to take on additional risks,” says Shultz. He notes that even the physicians that are electing to start their own practice are choosing concierge medicine and other options that don’t require as much borrowing as a traditional practice that includes an office and staff.

The solutions

Bakke warns fledgling entrepreneurs who are in or about to be in college to decrease costs as much as possible. “It is unlikely that higher education institutions are going to lower prices on their own, especially considering the ease with which folks can finance
 school with federal student loans.” Bakke recommends attending community college for the first two years, buying used instead of new textbooks, and living at home to cut costs.

For entrepreneurs who are already burdened with excessive student debt, Josuweit says there are a few options. He says that some private loan refinancing organizations can help borrowers reduce their interest rates, which helps them pay off their loans faster. “Borrowers can also choose to defer payments if they can prove financial hardship, though this does not help eliminate the debt that often prevents them from obtaining traditional funding for new business ventures.”

Deborah Sweeney, CEO of, says it’s not an impossible situation. “If you crack down, work hard and save everything you can, it’s definitely possible to pay off your loans within a couple of years as opposed to dragging the process out.”

And Sara Marie Brenner, Principal of Brenner Insurance Group, LLC in Dublin, Ohio, is currently using student loans to pay for her MBA. She says that entrepreneurs don’t need thousands upon thousands of dollars before they launch a business. “If you have an idea and lack the capital, work it yourself for awhile with what you do have – maybe it’s a modified version of your idea, and you do all of the hustling.” For example, she recommends starting a business that allows you to work from home, so you can save on overhead and other expenses. “That’s what I did and then I grew it as I had the capital.  Determined people will find a way — it just may take a little bit longer.”

Terri Williams
Terri Williams graduated with a B.A. in English from the University of Alabama at Birmingham. Her education, career, and business articles have been featured on Yahoo! Education, U.S. News & World Report, The Houston Chronicle, and in the print edition of USA Today Special Edition. Terri is also a contributing author to "A Practical Guide to Digital Journalism Ethics," a book published by the Center for Digital Ethics and Policy at Loyola University Chicago.

You May Also Like