Hillary and Student Loans

Yesterday I read over Hillary's briefing on her initiative on Technology and Innovation.

A lot of it sounds good but, at least for the education piece, I have my doubts. My feeling is that she's pretty much aligned with the current administration education wise and the current administration has been as bad if not worse than the previous with respect to public education.

While I have issues with some of the education pieces and very much like some of the others, I don't want to get into that today. I want to focus on one specific part of her plan. The part that defers college debt for up to 3 years for founders and entrepreneurs. This sounds great but is this really a good thing?

Some initial responses from the education community is "what about young teachers, don't they deserve some help on college debt? What about nurses?…" and of course they're right. On the other hand, I don't want people to go into teaching for 2 or 3 years just to get some debt relief benefit and then jump ship. That's the Teach for America model that I feel has become so harmful.

But again, that's not where I'm going with this.

Let's start with "who are these founders?" I don't have any hard data but I have read a couple of recent pieces that indicate that founders right out of college are typically from well to do backgrounds. This of course makes sense. A kid up to his or her eyes in debt from a poor background. No savings, no property, likely a family, that is siblings and parents who are also treading water can ill afford to take a big financial risk. A kid from a monied family? Much more so.

This alone makes Hillary's plan a boon for the wealthy but not so much for the people we need to give a hand up.

Next, this plan talks about the founders and only says it will "explore similar incentives" for early employees, citing "10 to 20." This doesn't seem right to me.

Now let's look further into the benefits. I don't know what the success and failure rates are for startups. I've seen a bunch of figures including:

  • 90% of startups fail within the first three years
  • Three out of four startups fail
  • Of 10 startups, 3 or 4 totally fail, 3 or 4 break even and the others turn a profit.

I don't know where the truth lies but I'd imagine that the success rate for startup by a recent college graduate, wet behind the ears is probably higher than for a more season professionals.

Hillary's plan defers debt for up to three years. If any of the failure numbers cited above are near correct it means that these kids will have burned through up to three years with the experience of a failed startup to show for it.

I've always advised my students, all things being equal, start at a big or mid size company, develop your chops, learn how they do it, further build out your network, and then go out and do your thing. Most kids are better served not going directly from college to their first startup.

So there it is. A plan that makes for great "press release" but is it really addressing the issues?

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