The current student debt in the United States totals $1.747 trillion. The average borrower owes $37,113, and there are 43.4 million people who have federal student loan debt. What’s more, as student loan debt has increased, so too has the amount of time it takes for individuals to pay off their loans. A growing body of research has begun to point to student loan debt as a contributing factor to depressed rates of entrepreneurship, especially among younger generations. To avoid a lost generation of entrepreneurial talent, policymakers can address the burden of student loans. Policymakers should:
- Forgive student loan debt.
- Provide entrepreneurs who maintain residence in the state an exclusion from state income tax equal to the amount of student loan payments made in a year up to a capped amount.
- Allow entrepreneurs to deduct a portion of student loan payments made in a year against business income.
- A survey of 800 individuals between the ages of 18 and 34 found that among those with student debt who currently own or have plans to own a business, nearly half reported that their student loan payments affected their ability to start a business.
- It also found that approximately four in 10 young adults believe that student loan debt has already impacted or would impact their ability to invest in an organization or hire new employees, suggesting that they think beyond whether to start a business and consider the additional decisions they may face in the future if they were to start a business, such as hiring.
- Black students must overcome larger student loan debt and are five times more likely to default on their student loans compared with their white peers.
- One-third of Black borrowers use income-driven repayment to pay down their student loans.