I agreeto Idea Entrepreneurial Deferment Loan Program
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Entrepreneurial Deferment Loan Program

Problem: Student loan payments prevent many would-be entrepreneurs from being able to afford the attempt to be an entrepreneur.

Solution: Provide an "entrepreneurial deferment" loan program. In a deferment program, allow a recent graduate to make interest-only payments or defer all payments for some period of time, should they elect to pursue entrepreneurship. In order to continue the benefit beyond two years, the entrepreneur must provide evidence of job creation within the United States.

This would make it easier for would-be entrepreneurs to pursue entrepreneurship. Prevents "crushing" loan repayment requirements right out of school. Allows entrepreneur to take low income/high potential reward route, by freeing them from the burden of monthly payments.

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Submitted by SUA Moderator 2 years ago

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Comments (6)

  1. Greg Hering

    Students are relatively poor when they are in college which makes them live inexpensively. When they get a job out of college, those cost-of-living expenses rise and former students get "comfortable." By starting right out of college, students have an easier time bootstrapping and living within an entrepreneur's means.

    I'm doing it right now, living at home on $125/wk.

    2 years ago
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  2. Aaron Houghton

    Couldn't agree with this more. I had the luxury of leaving UNC Chapel Hill with no student debt thanks primarily to scholarships and a low cost of living as a student. It was relatively easy to live on $700/month that I earned from a tech consulting business while I worked for two years with no salary to launch a startup immediately following my graduation in 2003.

    That startup I launched now employs 300 full time high tech workers in North Carolina. I never even considered getting a real job out of college and I was able to take the level of risk I did because I had a top level education that wasn't a financial burden on day-on as I headed out into the real world. I wish it were this easy for everyone but that is not currently the reality.

    And god-love big companies but they sure have a way of taking really smart/creative people and turning them in to cogs in a wheel. The paychecks can become addictive and I've seen many people go down this route never to come back. Don't get me wrong, they drive really nice SUVs now. But is that the end goal?

    This country can do better with our recent college grads and instead of turning them into numbers they can become great entrepreneurial leaders. Remove their student loan financial burden at graduation if they start a company and let them set their ideas loose without fear of bankruptcy in their early to mid twenties.

    2 years ago
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  3. Liz DeBagara

    Deferments allow interest to compound, and on most student loans it compounds and is capitalized DAILY. This creates a huge burden when payments are resumed. Think about how fast even a $100 loan would grow (and unfortunately most loan calculators compound interest monthly, because most loans are not like student loans). In one year, you would easily have increased the loan by between 20% and 30% of the original amount borrowed, just by deferring payments. This is risky for the borrower.

    I like the idea, but if you're going to defer payments, there needs to be a rule limiting the interest and fees that can be added to the loan - otherwise the debtor will be in very bad shape when the loan resumes.

    2 years ago
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  4. keegan.f

    LOVE this idea. My loan payments are around $550 a month, with the largest loan scheduled to be paid off in 2024. I consider this my biggest financial burden, as it is usually more than rent and gas expenses combined in my case. I feel that I need to know the right people who will invest in an idea of mine to be able to even consider starting a business and investing the time required to do so. Without a steady paycheck, I must defer further. And this combined with the risk involved in any start-up is crippling.

    2 years ago
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  5. jives

    I found this idea to be initially attractive, but not after I thought about it for awhile. Deferment is a mark of greed on the entrepreneurs position. The entrepreneur is asking taxpayers to accept the increased risk of default so that the entrepreneur does not have to raise more cash from investors. The effort to police the deferment criteria, which is easily gamed, will turn this into an expensive idea.

    It would be better to focus on reducing the cost of capital to allow the entrepreneur to raise more cash for less dilution to ownership.

    2 years ago
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  6. Elizabeth Kudner Kraus

    The two main issues I have with this are:

    1) What do students have to do to be considered an entrepreneur? Anyone can register a business or put up a website. How do you make sure this is not abused.

    2) I am not sure it is in the best interest of the student to encourage them to be an entrepreneur without working for someone else first. I started my own business when I was 25 and I actually wish I would have worked a little bit more before going out on my own, but there is no way I could have been successful if I didn't learn a few things from the working world before I started my own venture.

    Solution: Instead of offering deferment for students to be entrepreneurs themselves, require that the students work for an established entrepreneur. Not only would this foster student mentoring, but it would also increase access to affordable, qualified labor for entrepreneurs. As long as the entrepreneurs had to go through some sort of an approval process to be eligible hire these students, I think it could benefit everyone involved.

    2 years ago
    0