Matt McManus graduated college this past May with $40,000 in student loan debt and not a dime to his name.

By April 2013, the then-junior at the University of Wisconsin-Madison had invested his life savings into starting a sandal company, Bokos, with his brother James. He never really considered his student loans. After all, he had a product he considered a sure thing, so paying off his debt would come--just later. Did he ever consider the risk of defaulting? “No,” the now-23-year-old says. “There’s always that risk, but the way I viewed it was, ‘I’m young. I think I’ve got some flexibility.’”

McManus is emblematic of the legions of startup founders taking a gamble in the face of significant student debt--it’s one of the biggest obstacles to this generation’s entrepreneurial dreams, and while many find themselves able to manage the task, others find themselves defaulting on their loans or opting out of entrepreneurship altogether. A recent report from the Kauffman Foundation, places the overall student debt tally at roughly $1.2 trillion. That’s equivalent to nearly $30,000 of debt per graduating senior, up about $10,000 in the last decade.

To make matters worse, new startups haven’t created as many jobs as they have in previous post-recessionary periods, says Dane Stangler, the Kauffman Foundation’s vice president of research and policy. “We’ve only just reached pre-recession employment,” he notes, adding that the recession after the dot-com collapse in 2001 triggered a similar jobless recovery.

Still, there is a glimmer of hope. Last week, the U.S. Department of Education reported that 13.7 percent borrowers defaulted on their student loan payments in the 2011 budget year, down a full percentage point from a year earlier.

Logically, less debt would lead to a wider pool of potential entrepreneurs--and by extension, new businesses and potentially more jobs. But, Stangler warns, tangible effects won’t be felt for a while. “We know that the ‘peak age’ for entrepreneurs is mid- to late-30s, early 40s,” he says. “I would hope to see an effect within five to 10 years because this huge millennial generation that’s accruing student debt, they’re going to move into peak age for entrepreneurship over the next decade.”

For McManus at Bokos, he’s a year and a half into the business, and all signs are pointing up. His company has a sales team based across the U.S., and consumers can purchase Bokos sandals both online and at a variety of retailers nationwide. As for his student loans, he still hasn’t stopped to consider paying them off. “I’m still kind of like, ‘Wow, am I really done with school?” he marvels. “I haven’t mapped it out yet.”

Published on: Sep 30, 2014