After President Obama announced the new student loan forgiveness plan, there’s been quite the buzz over whether or not it will succeed and who it will actually help. With support from the White House and the Obama administration, however, there’s a young entrepreneurial crowd who might be able to receive some relief.
The Young Entrepreneur Council announced the launch of a new startup accelerator and investment company, Gen Y Capital Partners. Through the program, seed capital will be provided for those under the age of 35 who are trying to start their own tech-enabled companies. Yet, what will separate this accelerator from the others is that getting into the program could mean getting rid of student loan debt.
Under Obama’s Income-Based Repayment (IBR) plan, college graduates are allowed to cap federal student loan payments at 10 percent of their discretionary income. Gen Y Capital plans to push the incentives further, though, by paying founders’ student loan debt until it reaches zero, for up to three years. Through the assistance, young entrepreneurs will be able to focus solely on their business during, what Gen Y Capital calls, “the crucial startup phase.”
The company will also offer founders the opportunity to live on college campuses across the country for up to two years, eliminating living expenses. And because they’ll be part of the program, founders will be given access to peer-to-peer mentoring from the hundreds of the Young Entrepreneur Council members, along with advisors from the Gen Y Capital team.
After learning about the program, and its potential effect on budding startups, I was curious as to what those working in Greater Boston’s higher education system would have to say. With such a high, local entrepreneurial spirit, this could mean big things for the city’s young and under-funded.
“Student debt is definitely something that causes students to think twice about taking the plunge into entrepreneurship when they graduate,” said Gordon Adomdza, an assistant professor of entrepreneurship and innovation at Northeastern University, and a faculty advisor of the Northeastern Entrepreneurs Club. “Because entrepreneurship requires a lot of gut, anything that causes students to think twice about pursuing their idea will probably slow them down.”
Adomdza recalled having a student in his office last week who came to ask whether or not he should take an offer from Microsoft or start his own venture. He decided to reject the offer, because “he didn’t want to work for a large corporation, but also because he didn’t have any debt.” Through the Gen Y Capital program, students on the fence may decide to take the plunge and start their own businesses sooner if they know they won’t have to deal with debt later on down the road.
“Many would-be entrepreneurs claim that lack of funding is a key discouragement for them,” said Edward Roberts, founder and chair of the MIT Entrepreneurship Center. “Tying the money to specific payment of the student federal loans seems to me to be a very attractive additional term of the investments.”
Although Larry Meile, an associate professor of operations management at Boston College and an advisor to the Boston College Venture Competition, said he doesn’t think the Gen Y Capital funding would encourage more people to apply specifically to the College’s program — because student loans have never played much of a factor — he does still think the program has potential.
“It still seems to me that the Obama IBR plan and programs such as those offered by the Gen Y Capital Partners make good sense if they actually do reduce a barrier to a budding entrepreneur being able to start a viable business,” Meile said.
But, what do you think? Do you think this new accelerator program could spark more startups and fuel growth? Could this be just the thing we needed to start something bigger?