Clinton Proposes Loan Forebearance Program for Young Entrepreneurs

clintoAs part of her bid to become the first female President of the United States, Hillary Clinton has announced a new education plan that could relieve student loan strains for thousands of college students and graduates.

On Tuesday, the Democratic front-runner unveiled a plan which would let young entrepreneurs defer their federal student loans for as many as three years after graduating college, so they can focus on building their business. In the plan, she details that while in this three-year deferment period, the loan would not accrue interest.

Now, to qualify for this program, a borrower would need to, first of all, prove that they have started a new venture. This could include providing articles of incorporation filed with state officials. Furthermore, Clinton says that those student loan borrowers who start their new business in a distressed community will also be eligible to receive $17,500 in student loan forgiveness after five years.

Of course, none of this has really been detailed, yet, as Clinton reports this is still just an outline for the bigger plan.

The American economy has always relied on small and independent business. Currently, roughly 60 percent of the net employment activity in this country rely on personal debt—a bank loan—for startup capital. Having student loan debt, of course, can make it much harder to get one of these capital loans to start a business that could make a great contribution to the American economy.

“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,” says Federal Reserve bank researchers. “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.”

Apparently, this entrepreneurship initiative is actually only a part of a much larger, and broader, technology program. It likely includes improved investing in science, technology, engineering and math education (STEM) as well as successfully connecting more households to the internet.

In a speech, then, Clinton rallied: “Let’s make it easier for young people to become entrepreneurs. I’ve talked to a lot of people in the field, and starting out can be daunting. There’s a lot of risk, even if you’ve got a good idea – how you translate that into a business, how you grow that business, how you make a living from it. “

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