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Student loan debt limiting entrepreneurship; Wisconsin takes aim

September 17, 2020
By: Kevin Michel

A recent brief shows the troubled relationship between student loan debt and entrepreneurship. The report, Student Loans and Entrepreneurship: An Overview from the Ewing Marion Kauffman Foundation, found that of those student borrowers who currently own or plan to own a business, nearly half reported that their student loans affected their ability to start a business. Additionally, among those who did start businesses, higher levels of student loan debt were negatively related to business income and employment.

The issue brief also notes that student loan debt affects entrepreneurial decisions for individuals both directly and indirectly. Repayments reduce the amount of cash for individuals to invest directly in entrepreneurial activities while debt can also indirectly affect their decision to start a business because of having to focus on other income-generating activities without a savings buffer that may be necessary in entrepreneurship activities. Additionally, while student debt continues to rise, the share of new entrepreneurs aged 20-34 dropped from 34 percent to 27 percent between 1996 and 2019, the brief notes.    

Wisconsin is just one of the states working to address the student loan situation. Gov. Tony Evers’ task force on tackling student debt recently released its recommendations for combating the student loan crisis and helping the more than 700,000 borrowers in the state. The task force noted that the problem extends beyond the young, with 35 percent of student loan balances held by borrowers over the age of 40. It also sought to address disparate impact of student loan debt on vulnerable populations.

The final, 120-page report details eight recommendations:

• Create a Borrower Bill of Rights and Student Loan Ombudsman;

• Enhance proprietary school regulations and reinstate the Educational Approval Board;

• Financial literacy education;

• Increase need-based, targeted aid and create a statewide promise program;

• Loan counseling;

• Loan forgiveness;

• Refinancing; and,

• State student debt relief tax credit.

Wisconsinstudent loans