One of the best ways for the small business sector to improve is by having increased competition among similarly-sized companies, which can lead to greater innovation. However, it seems the student loan debt epidemic being felt by millions of consumers nationwide could now be impacting many people's ability to start their own enterprises, which may be stagnating growth.
Many people who may have designs on starting their own companies are now being held back from doing so by the fact that they owe massive student debt loads that make them far less financially capable to get such a venture off the ground, according to a new report from the Wall Street Journal. In some cases, though, even those who do have the money to start their own small business may not be in the best position to help it grow as a consequence of the sizable balances and monthly payments they may have to deal with.
The reason for this is relatively simple: College students are now required to take on massive amounts of student loans to cover the costs for their degrees, and that can put them significantly behind the 8-ball when it comes to building up the seed money that's often necessary to start a company, the report said. Today, the average student loan debt carried by those with only bachelor degrees is approaching $40,000, and for grad students, it's closer to $55,000. That kind of impediment would set even many current owners back, and in some cases is actually doing so.
As a result of this problem, some states are now trying to find a little more wiggle room for would-be entrepreneurs to both deal with their student loans in an appropriate fashion while also having the flexibility to start a company if they want to, the report said. California, for example, recently made changes to its rules that would reduce costs for those in the middle class (who may be more likely to start their own company) when they attend a public university in the state. Likewise, Rhode Island is now investigating whether it would be possible to introduce student loan forbearances or at least slash payment requirements for college graduates who either start their own small business or go to work for one.
Another way to look at it
On the other hand, some Americans are taking their major student loan debts in a different way, the report said. Instead of letting them hinder their small business ownership dreams, they are using them as motivators; the massive balances they carry and have to pay into every month may serve to push them toward as much early success (or failure as the case may be) as they can possibly find.
"We are under the clock to get our product out there and make sales," Andrew Torba, co-founder and chief executive of social media management tool Kuhcoon, who carries $30,000 in student loan bills, told the newspaper. "[The balance is] pushing me forward. I'm making sure that I make every single day count."
Of course, this isn't possible for all potential owners, as some people carry hundreds of thousands of dollars in student loan debt that may give them far less flexibility when it comes to finding money to contribute to their startups.
Owners who are in the same boat and want to free up some money for their companies may want to look at their small business insurance costs. Finding more affordable general liability insurance, or other types of coverage, can be a major help to a venture's overall economic picture.