Young People Are Starting Fewer and Smaller Businesses

According to the Small Business Administration (SBA), student debt is rising and self-employment of young people is declining. Source here.

That means that young people coming out of college are starting fewer businesses because of their crushing student loan debt. Don’t hold your breath, the figures only get worse.

In the same study done by the SBA, young business owners with student loan debt employed only 2 people. By contrast, young business owners without student loan debt employed 9 people on average. Those of the same age group, defined as “young”, in this case were those under 25 years old.

Student loan debt also factors into career choices.

In the same SBA study, it was found that 40% of young graduates took a job in a different career field than their degree. Of those without student loan debt, only 20% differed from their degree when accepting a new job.

This tells me that the mentality of the students graduating from college with loans might be “Get the first job you find!”, where their debt-free counterparts might be more patient and get jobs in the domain of their degree.

Overall, student loan debt has increased dramatically since 1995, shown by the graph below.

In 1995 only 12% of families had student loan debt. By 2013, 20% of families had student loan debt.

I will look for broader historical context regarding this specific figure. It would be very interesting to see differences between 2018 and say, 1960. I’m sure the difference would be even more of a contrast.

This study put together by the SBA is really quite revealing.

If students come out of college with debts, they are less likely to not only start a business and become self-employed, they are also less likely to have a larger business, defined as employing at least 9 people, as mentioned earlier.

The moral of this story is to avoid ALL debt, not just student loan debt if you would like to start your own business coming out of college. Being debt free gives you sense of calmness, the ability to be patient when building your business and more options in life.

Avoid debt like the Plague.