Deferred Dreams: Examining the Effect of Student Loan Debt on American Entrepreneurship

Abstract

Entrepreneurship in the United States has declined over the past two decades causing concern for policymakers and economic researchers. This study is intended to address this concern through an empirical analysis on one of the potential factors driving the decline, student loan debt. Using data from the Survey of Consumer Finances from 1992-2016, this paper looks at the impact student debt has on an individual’s likelihood of starting a business while controlling for demographic and financial characteristics. The findings suggest that student debt has a significant and negative impact on starting a business for the average individual. In addition, this paper utilizes Obama’s 2012 “Pay as You Earn” plan as an exogenous change to student loan repayment laws as an avenue of teasing out causality between student debt and entrepreneurship.