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Has Student Debt Placed a Burden on Young Entrepreneurship?
Sburlati, Natacha
Sburlati, Natacha
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Palagashvili, Liya
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2020
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4392_natacha.sburlati.pdf
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The amount of federal student loans in the United States is roughly 1.5 trillion dollars, which does not do not account for private student loans. Private loans are an extra 119 million dollars of student debt. As of 2018, 44.2 million people have outstanding student loans. Even though, it is estimated that 40% of federal student loans are taken by minorities, compared to 60% which are taken by white students, minorities have been reported to default 4 times faster than white students. Due to the high risk of student debt ballooning after graduation, graduating students might find it safer to pick a lower risk, reliable career rather than picking a higher risk career such as becoming an entrepreneur. Using the Federal Reserve’s Survey of Consumer Finances that tracks student loan debt and the Kauffman Center’s data on rate of new entrepreneurship and rate of new young entrepreneurs (age 20-44), I explore how student debt is associated with student career options as entrepreneurs from 1996- 2010. My results indicate that there is a negative and significant correlation in the rate of younger entrepreneurs compared to the amount of outstanding student debt; as student debt keeps growing, the number of entrepreneurs pursing ventures has dramatically declined.
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