The Big Story: Administration action easing student loan debt could spur entrepreneurship
With student debt forgiveness back in the news, policymakers have an opportunity to ease the tough road to entrepreneurship, especially for underrepresented founders. Last week, the Biden administration indicated an intent to enact student loan forgiveness in the coming weeks, as millions of borrowers continue to struggle with high federal student debt balances. While the details are still unclear on what exactly forgiveness would look like and who would be eligible, one thing is clear: excessive student loan debt serves as a barrier to entrepreneurship for many.
Over 43 million borrowers have student loan debt, including one in three adults between 18-29 years old. And while new business formation has rebounded from the pandemic, the share of young adult entrepreneurs has dropped since the 1990s; in 2016, the Small Business Administration deemed millennials the least entrepreneurial generation. The burden of student debt falls disproportionately on those already struggling with barriers to entrepreneurship, especially underrepresented founders. Reports indicate that Black women are the most likely to have student loans and that they graduate with the highest average amount of debt. Considering Black women face other considerable obstacles to entrepreneurship—from shouldering childcare burdens, to diminished access to capital in the form of venture capital, personal funds, and access to credit and loans—that when coupled with student loan debt, could make launching a startup impossible.
As we noted in a recent blog post, experts largely agree that student loan debt can be tied to a decline in entrepreneurship for those that hold the debt. Launching a startup is inherently risky, often with little financial benefit in the early stages. And borrowers have indicated that their student loan debt has limited access to needed loans and is a barrier to growing their business, including by limiting the ability to hire employees.
The Biden administration has already taken some steps to ease the federal student debt burden—including reforms to income-driven repayment programs and the public service loan forgiveness program and a pause on payments and interest amidst the pandemic—there isn’t yet a clear path forward on the broad forgiveness promised by the Biden presidential campaign. A range of proposals exists—from the Biden-backed $10,000 per borrower, possibly with income restrictions, to the $50,000 per borrower proposal that some congressional Democrats support, to easing the burden through payment caps and forgiveness for qualifying borrowers that choose to launch or work for a U.S. startup. If the U.S. wants to continue to prioritize innovation, entrepreneurship, and competitiveness policymakers must advance the policy conversation around easing the student loan burden.
Policy Roundup:
Senators dig into Internet platform transparency. During a hearing this week, members of the Senate Judiciary Committee’s subcommittee on privacy, technology, and the law heard from Internet content policy experts about the consequences of requiring large social media companies to make internal data available to government-vetted independent researchers. While the conversation was largely focused on creating more transparency around large social media companies—and a proposal from Sen. Chris Coons (D-Del.), the subcommittee’s chair, applies only to companies with more than 25 million monthly active users—Stanford University’s Daphne Keller warned in her testimony that onerous transparency requirements would burden smaller companies with fewer resources, in addition to expressing concerns about the consequences for user privacy, including from government surveillance.
Online seller raises concerns with SHOP SAFE Act. In a recent op-ed, a woodworker who sells his work online reflected on the SHOP SAFE Act—a bill that would amend trademark law to place high compliance burdens on e-commerce companies with the goal of deterring unsafe counterfeits. In it, he discusses how small businesses that rely on e-commerce platforms to make a living would have a lot to lose if SHOP SAFE became law because it would force them through subjective screenings and open up privacy concerns. Engine has raised related concerns, with a focus on startups that offer e-commerce related products and services—all of which lawmakers will hopefully take into account as they consider pro-innovation, pro-competitiveness legislation.
Engine sends letter on startup priorities for competitiveness legislation. Engine recently sent a letter to Congress as it begins to negotiate final, pro-innovation legislation based on the Senate’s United States Innovation and Competition Act (USICA) and the House’s America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act. As that conference process gets underway, the letter highlights how the legislation could significantly boost the startup ecosystem, including by creating a startup visa and other high-skilled immigration reforms and regional technology hubs. But the letter also points out—and urges Congress to remove—problematic provisions like the SHOP SAFE Act, which would have an outsized, negative impact on e-commerce startups, and language implementing onerous SEC disclosure requirements that would burden startups without justification.
Over 50 former gov’t officials, academics voice support for balanced SEP policy. Last week, a group of former antitrust enforcers and competition and patent law scholars sent a letter to the Department of Justice (DOJ) about standard essential patents (SEPs)—supporting a draft policy that DOJ, the Patent and Trademark Office, and the National Institute of Standards and Technology issued last year. That policy would unravel changes the previous administration made that favored certain large patent holders over other innovators, technology implementers, and customers. The letter commends the agencies for seeking to restore balance in SEP policy, which protects consumers and promotes competition. The letter echoes principles Engine noted in comments to DOJ about how and why startups need balanced SEP policy.
Startup Roundup:
#StartupsEverywhere: San Francisco,California.Nixsheets is an innovative workflow and automation platform for accounting teams. By combining several software categories, Nixsheets simplifies accounting and reduces manual work. We spoke with Founder and CEO Sal Abdulla about how his varied background in finance and politics led him to launch his own company, the gap Nixsheets fills in the current market, the burdens of a state-by-state patchwork of privacy laws, and how policymakers can help facilitate (or at least not frustrate) critical interoperability.
