College Debt Stymies Start-Up Opportunities

New York Times writer John F. Wasik reported recently that, “Saddled with $40,000 in college loans, Catherine Berendsohn, 29, struggled to get a web design business off the ground after graduating from Florida State University in 2010. Ms. Berendsohn, an artist-entrepreneur, wanted to rent a storefront and start a roving studio in Monterey, Calif. Her student loans, however, prevented her from getting the money she needed.

“As she tried to expand her business, Ms. Berendsohn was denied a personal credit card. Her college loan payment was $400 a month at the time. She took on a website project and began to accept other clients in Carmel Valley Village, Calif. But then she lost a commission for a local mural project. Unable to continue to pay her monthly expenses, she shut down her business after three months and moved back home to Miami.”

The Times article noted that, “Because of the corrosive impact of student debt on start-ups, millennials seem to be the new lost generation of entrepreneurs.

Although it is difficult to pin down a direct relationship between college loans and entrepreneurial activity, the weight of student debt appears to be deterring some would-be business owners.”

Mr. Wasik explained that, “Many young entrepreneurs are unlikely to go to venture capital firms or business incubators, preferring to ‘bootstrap’ — finance their companies with their own money or funds from friends and family members. But being in debt for student loans makes self-financing that much tougher.

Even graduates who have begun promising start-ups have found that securing financing when carrying student loans was brutally difficult.”

The article added that, “Still, there are options for budding entrepreneurs facing credit challenges. Crowdfunding sites like and don’t ask for credit reports. Nor is there much, if any, paperwork. Sometimes, simple business concepts can attract thousands of dollars, although getting a lot more than that requires a strong promotional campaign that gets a lot of attention.”

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