With student loan debt topping $1 trillion--and unemployment still high for 18-to-24 year olds (one out of every two bachelor's degree holders 25 or younger were jobless or unemployed in 2011)--American college students are graduating only to find themselves settling for jobs they never really wanted. From behind retail registers and food service counters, overqualified and optimistic job candidates are living from paycheck to paycheck--or rather, loan payment to loan payment.
But it's taking an even more profound toll on millennials who aspire to create jobs.
How bad is it really? We asked five members of the Young Entrepreneur Council to share their stories of how borrowing affected their ability to start up--and what, if anything, other aspiring young entrepreneurs can do about it.
Help Entrepreneurs Help Lower America's Unemployment Rate
"Student loan debt is one of the largest burdens that I have to bear as an entrepreneur. My MBA education cost me over $60,000 in total, even with scholarships. For me, attending a top-tier university was worth it for the education, the brand, and the network, but the ROI for that investment happens much later for entrepreneurs. Many of my classmates took steady six-figure jobs after graduation, while a small minority decided to take their chances of hitting it big with entrepreneurship. No matter the possibilities, student loan companies still want their money--and my $800 per month payment could go to growing my business and creating more jobs.
I understand that I entered the contract for my education and I should be required to pay, regardless of my career choice. But I wish there was a better alignment between when I have to pay back my loans and how well my business does. Entrepreneurs are the job creators of this society, and multiple new jobs should not be hampered by the diminishing of cash flows from student loan payments during the early days of developing a business. The government should have a program to help mitigate the risk for the student loan provider, and to allow entrepreneurs to do what they do best--innovate."
--Lawrence Watkins, Great Black Speakers
Student Working Could Really Pay Off
"When I graduated with a software engineering degree, I had no debt. I even had money in the bank to fund my new business venture. This gave me the option to turn down a lucrative job on Wall Street which--let's face it--wouldn't have been all that stable after all. How was I able to have money in the bank by graduation time?
I went to school at the University of Waterloo in Ontario, Canada, where the norm is to have students study for four months and work at paid internships for four months over five years. This not only gives us valuable work experience, but it allows us to have a cushion when we graduate. I have no doubt that if I had been in debt upon graduation, then I would have taken a job instead of starting my own business.
Now I run a six-figure business from my home office, and I've provided jobs to other young women fresh out of college. One solution to our current conundrum might be to add more work-study options at more colleges and universities, and also to change the perspective that starting a business is a bad move. Once young adults learn what they are capable of without the burden of debt, they are bound to thrive."
--Nathalie Lussier, Nathalie Lussier Media
Current Short-Term Solutions Buy Us Too Little Time
"'This $10,000 loan is coming due, are you going to pay?' These were the words of my father shortly after graduation and several months into my new start-up venture.
I'm incredibly grateful for my family's help in paying down my student load debt; I know I'm more fortunate than most. But student debt constrains your ability to get a company going. Plus, many private lenders are economically predatory, which can lead to a non-virtuous cycle of being comfortable with debt.
In the early months of bootstrapped businesses like my Web design company, debt can place a substantial amount of added pressure on an entrepreneur to quickly find additional sources of recurring income. More importantly, it can force the entrepreneur to forgo investing those funds marked for debt payments into marketing or product development.
There are a few short-term solutions to this problem that aspiring entrepreneurs can take. First, consider speaking with the company that provided the loan, tell them about your new business, and ask for a year-long deferment. Another easy solution: live at home with Mom and Dad until sales are strong enough, then put aside enough cash for the monthly debt obligations for the next year--and don't touch it except to make payments!"
--Matthew Ackerson, PetoVera
College Entrepreneurship Can Make a Dent in Debt
"I was actually still in college when I started my first company. I didn't have much of an income back then, so I funded a large part of my first company with money from my student loans. I also took the maximum I could out the next semester and threw quite a bit of it into development of another additional company.
Was it an insane, risky, ill-advised move? Maybe, but I didn't see it that way. I needed money to do something I believed in, and that's the only access to capital I had. No bank would touch a college student with no business background and no collateral, no matter how much they believe in their concept and their ability to pull it off.
Avoid Loans and Debt Altogether by Crowdfunding Early
"Given the soaring costs of college tuition, student loans have become a necessity to pay for higher education; in fact, national student loan debt in 2011 averaged over $25,000 per graduate, according to CNN Money. Repaying the tens of thousands of dollars borrowed can delay, and even extinguish, a young entrepreneur's dreams of owning their own business. It's especially tough with the little room for error in today's economy; if your entrepreneurial efforts don't pan out, there may not be a job immediately waiting for you.
But there are ways to still conquer the world with student loan payments. When I left the corporate world, I received a subsidy from my university through a special program for entrepreneurs, as well as negotiated with my student loan lender for a better payment plan. Probably one of the best ways to avoid borrowing large loans is to begin by saving early.
The latest company I co-founded, GradSave, aims to 'crowdfund' college tuition, allowing young people to receive monetary birthday and holiday gifts over the years that directly deposit to college savings plans. Friends and family can contribute directly to their savings in lieu of other temporary gifts. With the cost of college expected to double over the next nine years, it is becoming more crucial to save for college from an early age so less student loans are borrowed. College graduates will be able to focus more on accomplishing dreams of entrepreneurship rather than on paying back loans."
--Marcos Cordero, GradSave, LLC