Under Hillary Clinton’s presidency, young small business owners could get some relief from their student loans.
The Democratic leader unveiled a plan on Tuesday afternoon that would allow young entrepreneurs to defer federal student loan repayments for up to three years while they set up a business. During this three-year period, interest would also stop accruing on the loans. To qualify for the program, borrowers would need to prove that they have started a new business, possibly by showing the articles of incorporation they have filed with state officials. Borrowers starting new businesses in struggling communities would be eligible for a student loan forgiveness of up to $ 17,500 after five years under the Clinton plan.
The entrepreneurship initiative is part of a larger tech agenda that Clinton announced Tuesday in Denver, which includes investing in science, technology, engineering and math education and connecting d more Internet households.
“Let’s make it easier for young people to become entrepreneurs,” Clinton said during a speech at Galvanize, a chain of co-work and education facilities, according to prepared remarks. “I’ve spoken to a lot of people in the business and getting started can be intimidating. There is a lot of risk, even if you have a good idea – how you translate it into a business, how you grow that business, how you make a living from it. ”
While the rise of wunderkind startup founders like Facebook (FB) CEO Mark Zuckerberg has given today’s young people a reputation for entrepreneurship, the reality is that many have had to. hard to start a business. In 1989, 10.6% of households headed by a person under 30 held stakes in private companies, according to a Wall Street Journal analysis data from the Federal Reserve. In 2013, this share fell to only 3.6%.
“At a time when we have witnessed such an incredible proliferation of new technologies that should make entrepreneurship easier for young people, we are seeing that the financial barriers these young people face outweigh these new tools that should unleash entrepreneurship. , ”Said Colin Seeberger, Strategic Campaigns Advisor at Young Invincibles, a non-partisan millennial advocacy organization.
Student debt may be partly responsible for the fall in the creation of small businesses. A 2015 study by the Federal Reserve Bank of Philadelphia found a correlation between rising student debt and declining entrepreneurship. This data is saved by millennials themselves. Almost 40% of young people who want to start a business say their student loan payments affect their ability to do so, according to a survey conducted by Young Invincibles earlier this year.
Critics of the Clinton proposal say using the student loan system is a misguided way to support young entrepreneurs. Matthew Chingos, senior researcher at the Urban Institute, a non-partisan think tank, written in a blog post On Tuesday, Clinton’s plan would end up giving a larger subsidy to borrowers with the highest loan amounts because they would save the most on deferral of interest. He also noted that government programs, which allow borrowers to pay off their loans based on their income, could be a way for small business owners to manage their payments while getting their businesses started.
“There is nothing inherently wrong with subsidizing certain sectors of the economy, whether they are struggling nonprofits or Silicon Valley startups,” Chingos wrote. “But policymakers should do it directly, for example through tax credits, rather than through the student loan system.”
Clinton’s announcement comes as she is courting the young supporters of her Democratic rival, Sen. Bernie Sanders (I-Vt.), Many of whom have been drawn to the senator because of his support for the free college. Clinton also used his stance on student debt to differentiate himself from Republican candidate Donald Trump. In a recent speech, Clinton said of Trump, “The self-proclaimed ‘King of Debt’ doesn’t really have any ideas for making college more affordable or solving the student debt crisis.
While Trump has yet to announce a formal college affordability plan, campaign staff suggested that as president he would not adopt free college or debt cancellation plans. Instead, it would reduce government involvement in student loans and the affordability of colleges.
Clinton unveiled a $ 350 billion college affordability plan last year, which would allow all students to attend public university debt-free.