Young entrepreneurs are far more likely than their peers to earn incomes at the extremes
Press Release – WASHINGTON, D.C. — Young Invincibles, the nation’s leading research and advocacy non-profit focused on economic opportunity for young adults, today released a new issue brief, At the Extremes: Student Debt and Entrepreneurship. The report uses Department of Education survey data to examine the potential effects of student debt on entrepreneurship among young adults with college degrees.
While the analysis does not demonstrate causality, it does show higher student debt corresponding with lower levels of entrepreneurship. This trend reverses for borrowers with the highest debt loads, suggesting the relationship is more complicated than previously thought. YI’s analysis also revealed that college-educated young entrepreneurs with student debt are more likely to come from opposite ends of the income spectrum, and generally less likely to come from middle-income backgrounds. The data has broad potential implications for economic growth and job creation.
“We know that a majority of Millennials currently own or are interested in owning a business, yet we’ve seen them shrink from the largest cohort of new entrepreneurs to the smallest over the last two decades. That should be cause for concern as our nation’s small business create the majority of new jobs in our economy,” said Tom Allison, deputy director of policy and research at Young Invincibles and co-researcher on the report. “Student debt has now reached 1.3 trillion dollars nationally, and our latest analysis found that higher student loan debt generally corresponds with lower rates of young adult entrepreneurship.”
“We found in our analysis that more than half of young entrepreneurs are women, a quarter are people of color and more than a quarter are children of immigrants or immigrants themselves, debunking a number of myths about young adult entrepreneurship today. While we found some connection between lower rates of entrepreneurship among young adults from middle-income families, we need more student-focused data tracking to truly understand the impact of student debt,” added Laura Checovich, policy fellow at Young Invincibles and co-research on the report.
During a briefing on the results at Young Invincibles’ national headquarters in Washington, attendees also heard from two young entrepreneurs who shared their stories and talked about the role student debt has played in their entrepreneurship journey.
Rahama Wright is founder of Shea Yeleen, a social enterprise empowering women in Northern Ghana through the sale of shea butter beauty products distributed across the world offered, “I know a lot of people struggle with student debt. I avoided that for the most part by attending a less-costly state school back home. Even so, I took risks to build my company. I deferred the loans I did have for about a year so I could take the money I saved, leave my job and pursue a path to social entrepreneurship.”
Trevor Witt of Kansas, president and founder of Witt Tech LLC, a FAA-approved company providing quality aerial photography to meet the needs of individuals and businesses, joined the event by phone.“I developed my aerial photography company while pursuing a degree in Unmanned Aerial Systems (UAS) at Kansas State University. It has been an incredible environment to nurture my desire to be an entrepreneur,” said Witt. “My wife and I are expecting our first child, and I’m excited to continue to build Witt Tech, LLC and watch it grow. While I am taking on some student debt now to complete my certifications, I view it as an investment in my business and in my family’s future.”
Some additional key findings in the report include:
Young entrepreneurs are somewhat more diverse than the Silicon Valley myth of young, white men with technology start-ups suggests.
Student loan debt corresponds with lower rates of young adult entrepreneurship (except, paradoxically, at the highest levels of debt, where the trend reverses.)
Nearly half of young entrepreneurs feel that student debt impacted their employment plans in some way.
Young entrepreneurs are far more likely than their peers to earn incomes at the extremes.
Looking ahead, the report calls for the development of a dataset that can help more clearly define the relationship between student debt and entrepreneurship. Currently, a lack of student data hinders understanding of the diverse experiences of young entrepreneurs, the potential long-term effects of student debt on entrepreneurship, and its impact on job creation. Further, understanding whether or not potential entrepreneurs are able to plan their borrowing accordingly will also help policymakers create better policies to support aspiring young entrepreneurs with student debt.