Entrepreneurship has declined while student loan debt has increased, Kauffman reports

Nearly 1 in 6 adults carrying outstanding student loan debt (1 in 3 among 18 to 29 year olds), with both the number of borrowers and the debt amount increasing in recent decades. Meanwhile, the share of new entrepreneurs aged 20 to 34 declined from 34 percent to 27 between 1996 and 2019, and a new issue brief from the Ewing Marion Kauffman Foundation notes that among individuals who start businesses, higher levels of student loan debt are negatively related to business income and employment. Noting that the debt can directly affect an individual’s overall personal financial resources, and indirectly affect ability to start a business, the brief extends some considerations for decision makers who seek to respond to those challenges.

The brief cites research revealing that college graduates of universities that eliminated student loans from their financial aid policies were found more likely to start a firm and more likely to receive venture funding within five years of graduation when compared to those graduating from universities that did not take that action. But the paper stops short of doing more than pointing out such considerations.

The brief does not make recommendations on solving the debt and entrepreneurship problem, and it points out that the relationship between the two “isn’t necessarily linear or direct, and we need additional research on the specific levers that can affect this relationship.”

More information from Student Loans and Entrepreneurship: An Overview is available here.