- President Joe Biden could cancel $10,000 worth of student-loan debt for certain borrowers.
- 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, an expert said.
President Joe Biden’s loan-forgiveness plan could include $10,000 in relief for federal borrowers who made under $150,000 in the previous year, three people familiar with the matter told The Washington Post last week.
As part of his presidential campaign, Biden pledged to enact widespread student-debt forgiveness. In 2020, borrowers had $1.5 trillion in federal student-loan debt, three times the total of about $516 billion in 2007, according to the Ewing Marion Kauffman Foundation, an education and entrepreneurship nonprofit.
Biden hasn’t made an announcement, but loan forgiveness could provide more disposable income for entrepreneurs with student-loan debt, said Philip Gaskin, the foundation’s vice president of entrepreneurship. After all, some entrepreneurs have had to slow or stop their business operations because of debt, while others have found it difficult to secure business loans because of their credit scores.
“Paying back student-loan debt requires a steady and predictable income, and starting your own business is inherently riskier than taking a job that already exists,” Gaskin said.
Here’s what Biden’s plan would mean for young people looking to scale or start their own businesses, according to Gaskin.
Student debt affects entrepreneurs
survey found that about one in three Americans between 18 and 29 reported having student debt.
Gaskin said this is a hurdle for entrepreneurial hopefuls, especially Gen Zers and millennials.
“The concern around paying off student-loan debt can both potentially dampen hope or future confidence in starting a business and impact a person’s ability to infuse capital into their business,” Gaskin said.
It’s one of the best times to open a business thanks to virtual work and online platforms that reduce startup costs. Gaskin said this means that reducing student debt for borrowers could make it easier for them to get a business up and running.
Reduced debt could free up income for entrepreneurs
If Biden were to cancel $10,000 in student debt for certain borrowers, those borrowers would have more disposable income to put toward current and future businesses, Gaskin said, adding that the creation of more businesses could help the economy.
“Providing more opportunities to encourage entrepreneurship can have incredible impacts 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 business isn’t the only factor in success. Young people need to assess their risks and access to capital before committing to a new venture. Gaskin said they should also first gain some professional work experience.
Having less student debt “has the potential to take a small amount of risk out of starting a new business for aspiring entrepreneurs, but it doesn’t remove the risk entirely,” he said.