• December 5, 2022

Where’s Kering As Apologies From Balenciaga And Demna Fall Flat?

It’s been nearly three weeks since Balenciaga got embroiled in a public relations crisis involving ads many accused of explicitly and implicitly conveying messages about the exploitation of children. It threatens …

‘Hidden’ Leverage Poses $65 Trillion Economic Challenge As Experts Worry What Could Trigger Next Market Collapse

Topline The growing load of hidden leverage has swelled to a massive $65 trillion in a largely obscure corner of the foreign exchange market, economists at the Bank for International Settlements …

5 Student Loan Forgiveness Updates Borrowers Should Know About

With so many fast-moving developments impacting Biden’s student loan forgiveness initiatives, it can be hard for borrowers to keep track of updates. Here’s where things stand. Biden’s One-Time Student Loan Forgiveness …

A few weeks ago, the Biden-Harris Administration announced its plan to provide student loan relief to working class families as they prepare to resume student loan payments following the pandemic. While this move has been of some debate, A Department of Education analysis shows that it could provide a lifeline to tens of millions of Americans and Main Streets across America.

Under this plan, the Biden-Harris Administration will provide up to $20,000 in debt cancellation to Pell Grant recipients and up to $10,000 in debt cancellation to non-Pell Grant recipients to borrowers who earn less than $125,000 per year or households earning less than $250,000. It also extends the federal student loan pause through December 31, 2022, and makes the system more manageable by adjusting loan payments based on income.

These actions could have an important impact for business owners, their employees, and the overall state of entrepreneurship. Here are three reasons to consider:

1. Student loan debt is holding back entrepreneurship: A recent survey found that 30% of small business owners and 31% of Millennial small business owners who have or had student loan debt said it has impacted their ability to grow their business. In addition, a Ewing Marion Kauffman Foundation survey found that 47% of small business owners who have student loans say that the collection pause during the pandemic has enabled them to invest more into their business.

Since 1980, the total cost of four-year tuition has nearly tripled and federal support has not kept pace. Pell Grants have gone from covering over three-fourths of the cost for students from working families to only a third. This has led to them having to take on more debt. A Department of Education analysis found that the typical undergraduate student with loans graduates being nearly $25,000 in debt. This type of debt makes it hard to not only start a business, but also seek the capital to do so.

“Student loan debt has held back the ability of young people under the age of 40 to start or grow their business. In some cases, it has locked them into a job rather than pursuing more entrepreneurial opportunities,” said Eddie Monroy, Executive Director of the NextGen Chamber of Commerce.

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2. This decision is important as we move towards a more equitable economy: The Biden-Harris Administration’s efforts are targeted towards middle- and low-income families, as well as communities of color, which are hit the hardest of the 45 million borrowers carrying the burden of $1.6 trillion in cumulative federal student loan debt. Of those borrowers, a Department of Education analysis shows that nearly one-third have no degree. The burden is disproportionately harder on Black borrowers, whose median debt 20 years after graduating college has been found to be 95% of their original student debt. This certainly impacts entrepreneurship, as only 2.3% of all U.S. businesses with only one employee in 2019 were Black-owned.

The White House’s debt relief program will help borrowers who need it most, as almost 90% will go to borrowers earning less than $75,000 per year. In addition, the repayment restructuring will save the average borrower more than $1,000 per year on loan payments.

3. This is an investment in the working and middle class – which is what most small business owners are for: A common myth being circulated is that this is a handout for the affluent or a tax giveaway (unlike the Tax Cut and Jobs Act which gave a large hand out to multinational corporations and the wealthy, but disproportionately did not help small business or working class). In reality, this is going to help people who need it the most. For example, a typical nurse making $77,000 a year who is married with two kids would see her monthly undergraduate payments drop from $295 to $61, with an annual savings of more than $2,800. This type of relief, which could be felt by up to 43 million borrowers, will positively impact communities and strengthen consumers’ ability to support Main Streets across America.

As President Biden said when he announced the student debt relief, “It’s about opportunity. It’s about giving people a fair shot. It’s about the one word America can be defined by: possibilities. It’s all about providing possibilities.” This effort will give more current and future entrepreneurs a greater opportunity for success. To learn if this applies to you, visit The White House’s Student Debt Relief Plan Resource Center.

In addition to these actions by the Biden-Harris Administration, it is important to acknowledge there is much more work to do as it relates to the cost of higher education and value. Finding solutions to ensure students and families have understandable information on enrollment, completion, and post-college earnings across colleges and majors, as they consider higher education opportunities could be a start that has some bipartisan support.

As the economy changes coming out of the pandemic through lessons learned and public policy, higher education will need to do the same. The Biden Administration’s enactment of the American Rescue Plan, the Bipartisan Infrastructure Law, and CHIPs will transform the U.S. economy to be more competitive for the next century. That will also require our educational system to look at what hasn’t worked in the past and make sure they are preparing our workforce for the future.

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