TOPSHOT – US President Joe Biden announces a reduction in student loans in the Roosevelt on August 24, 2022 … [+]
A few weeks ago, the Biden-Harris administration announced its plan to provide student loans to working-class families as they prepare to resume student loan payments after the pandemic. While this move has generated some discussion, A Ministry of Education analysis shows it could be a lifeline for tens of millions of Americans and high 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 earning less than $125,000 a year or households earning less than $250,000. It also extends the federal student loan pause until December 31, 2022 and makes the system more manageable by adjusting loan payments based on income.
These actions can have a significant impact on entrepreneurs, their employees and the general state of entrepreneurship. Here are three reasons to consider:
1. Student Loan Debt Inhibits Entrepreneurship: A recent questionnaire found that 30% of small business owners and 31% of millennial small business owners who have or had student loans said it affected their ability to grow their business. In addition, an Ewing Marion Kauffman Foundation questionnaire found that 47% of small business owners with student loans say the debt collection break during the pandemic has allowed them to invest more in their business.
Since 1980, the total cost of four-year college tuition has nearly tripled, and federal aid has not kept pace. Pell Grants have risen from more than three-quarters of the cost for students from working families to just one-third. This has resulted in them having to take on more debt. An analysis by the Department of Education found that the typical undergraduate student with loans graduates has nearly $25,000 in debt. This type of debt makes it difficult not only to start a business but also to seek the capital to do so.
“Student loans have hindered the ability of young people under 40 to start or grow their businesses. In some cases, it has locked them in jobs instead of pursuing more entrepreneurial opportunities,” said Eddie Monroy, executive director of the NextGen Chamber of Commerce.
2. This decision is important as we move towards a more equitable economy: The Biden-Harris administration’s efforts are targeting middle- and low-income families, as well as communities of color, who are hardest hit of the 45 million borrowers who bear the burden of $1.6 trillion in cumulative federal student loans. Of those borrowers, an analysis by the Ministry of Education shows that almost a third have no diploma. The burden is disproportionately heavier for black borrowers, whose median debt Twenty years after graduation, it turns out that 95% of their original student debt is. This certainly has implications for entrepreneurship, as only 2.3% of all American companies with only one employee in 2019 were Black owned.
The White House debt relief program will help borrowers who need it most, as nearly 90% goes to borrowers making less than $75,000 a year. In addition, the repayment restructuring will save the average borrower more than $1,000 a year in loan payments.
3. This is a working- and middle-class investment – and that’s what most small business owners are for: A common myth that circulates is that this is alms for the wealthy or a tax gift (as opposed to the Tax cut and job law who gave a big hand to multinational corporations and the wealthy, but who disproportionately helped small businesses or the 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 and married with two children would see her monthly undergraduate payments drop from $295 to $61, with annual savings of more than $2,800. This kind of relief, which can be felt by as many as 43 million borrowers, will positively impact communities and strengthen consumers’ ability to support Main Streets across America.
As President Biden said when he announced student debt relief, “It’s about opportunity. It’s about giving people a fair chance. It’s about that one word by which America can be defined: possibilities. It’s all about providing opportunities.” This effort will give more current and future entrepreneurs a greater chance of success. To find out if this applies to you, visit Resource Center of the White House Student Loan Plan.
In addition to these actions by the Biden-Harris Administration, it is important to recognize that there is much more work to be done regarding higher education costs and value. Finding solutions to ensure students and families have understandable information about enrollment, completion, and earnings after college for colleges and majors, as they believe higher education opportunities can be a start that has some bipartisan support.
As the economy changes as a result of the pandemic through lessons learned and public policies, higher education will have to do the same. The Biden administration’s adoption of the US bailout, bipartisan infrastructure bill and CHIPs will transform the US economy to be more competitive in the coming century. That also requires our education system to look at what has not worked in the past and ensure that our workforce is prepared for the future.
