Clinton’s tech plan defers student loans for risk takers
Hillary Clinton, the presumptive Democratic presidential nominee, released a proposal Tuesday as part of her tech policy agenda, to make it easier for recent college graduates to start a business. It does so by tackling one of the impediments to a new venture: student loan debt.
To get around this problem, Clinton proposes allowing entrepreneurs to defer student loan payments while they try to get their new business operating. The plan would defer payments for up to three years and with no penalty: zero interest and zero principal growth.
The proposal also calls for exploring a defferal of student loans for "early joiners," or initial employees, for up to many as 20 people.
The plan would provide forgiveness of up to $17,500 for those who launch a business in a "distressed" area or who create a businesses that "provide measurable social impact and benefit." How that works isn't clear. What Clinton proposed is largely an outline of an idea.
But Clinton's proposal did not arrive out of thin air. A study last year by researchers at the Federal Reserve Bank of Philadelphia found that student loans can indeed hold back investment.
Small businesses, which account for approximately 60% of the net employment activity in the U.S., rely on personal debt for startup capital. Student debt thus becomes a barrier, the Federal Reserve Bank paper found.
"Unlike other forms of personal debt, student debt is difficult to discharge via personal bankruptcy and thus limits a person's access to future debt until it is eliminated," the Bank's researchers wrote. "As a result, individuals with significant amounts of student debt may find that they are unable to access the capital markets to finance the startup of new business ventures."