Mar 04

Student Debt And Poor Savings Hold Back Millennial Entrepreneurs – US News

Massive student debt and lack of access to retirement savings are stifling young innovators.

 Reduce barriers to entrepreneurship.
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Youth unemployment has fallen significantly over the last two years, but many young workers continue to face strong headwinds to achieving economic security. Wages have declined roughly twice as fast for younger workers as they have for workers over the age of 35, and high unemployment has driven more millennials to find work in industries that routinely fail to set workers up for careers. With the nature of work changing dramatically, it’s not surprising to see so many millennials ready to build a business that works for them.

But starting a business as a member of the millennial generation can be an uphill battle. Recent pollingwe released finds that young people blame exploding student debt and lack of an employer-sponsored retirement savings plan are making it harder for millennials to become entrepreneurs.

A majority of millennials are or would like to become entrepreneurs, clearly embracing innovation and desiring to own a business, according to the survey. But a recent analysis by the Wall Street Journal found the share of young entrepreneurs under the age of 30 who own a private business just fell to a 24-year low. This election year, we’re calling on candidates from the state house to the White House to remove barriers to entrepreneurship for millennials, including student debt and lack of access to retirement savings programs.

Millennials have stepped up where they can to start businesses. Entrepreneurs like Amanda Golden, co-owner of Designing Local in Columbus, Ohio, have used loan deferments to launch a business, but student loan debt remains a deep concern. “Millennials deserve a fighting chance to start small businesses but student loans are holding us back. It’s hard to grow a business when your monthly student loan payments exceed your monthly mortgage bill,” she says.

Golden is not the only millennial entrepreneur struggling to bring her business to scale. In fact, 43 percent of millennials who are still paying off student loans and currently own a business say their student debt has hampered their ability to invest in growing their business or hiring new employees. Forty-eight states are spending less on higher education per full-time student than they were prior to the Great Recession. This has helped lead to exploding college loan debt, with more than 43 million Americans holding roughly $1.2 trillion in student debt obligations, more than doubling in just the last eight years.

There are practical steps we should take right now to reduce the burden of student debt and unleash the ingenuity of young entrepreneurs. First, we have to make it easier for student borrowers to actually pay off their debt. Treating student borrowers like any other type of borrower and allowing them to refinance their loans at today’s lower rates could save roughly 25 million borrowers thousands of dollars over the life of their loans. Second, we should enroll all borrowers into an income-based repayment plan to cap the monthly amount they owe on their loans as a proportion of their income. This would provide borrowers with additional flexibility and help them avoid defaulting, which could significantly hamper their credit and ability to start a business. It would also lower payments for those receiving little income in the throes of launching a business.

But even for those who do not have student debt or have student debt but can still access startup resources, savings considerations are essential to millennials’ economic well-being. And with millennial savings rates low, even with this generation demonstrating they are committed to saving, it’s no surprise that millennials cite access to retirement accounts as a barrier. Our poll found that three-quarters of millennial entrepreneurs and would-be entrepreneurs say that the lack of an employer-sponsored retirement plan is a barrier to starting a successful business.

Thankfully, we have seen promising solutions put forward. New retirement savings programs like myRAand other state-facilitated retirement accounts are allowing small business owners to save on some of the administrative costs associated with offering a retirement plan.

American ingenuity has enabled our nation to survive the worst boom and bust economic cycles and reshaped our communities for the better. But too many external barriers are holding this generation of innovators back, and it’s time for policymakers and candidates to get serious about solutions.

Source: Student Debt And Poor Savings Hold Back Millennial Entrepreneurs – US News

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