Every person working in this country is an entrepreneur. Whether we talk about Mark Zuckerberg or a 22 year old with a newly minted B.A. in economics individuals take risks driving one’s career through this changing world. No longer will that first job last ten years let alone twenty or thirty. Moreover, the skill set one has at 22 will need to transform over the subsequent fifty years in order to have a chance at the success that America has always offered.
Gathering the tools needed to build a career costs more than most people can afford. Even the cost of a two year program is beyond the reach of most students. Therefore, the problem with student debt and how to work with people trying to move forward in their lives. Barton Kunstler and Ron Miller summarize the student loan bill currently in congress: “Democratic Representative Hansen Clarke of Michigan proposed a Student Loan Forgiveness Act with provisions for capping payment versus discretionary income, debt forgiveness, a 3.4 percent cap on interest rates, and rollover of private loans to federal so they can qualify for the Act’s provisions.” They further believe the Republicans will never pass this bill.1
I propose the following to account for those people who were not able to save enough for undergraduate and postgraduate education. Why not extend current 529 plans as a means to pay off the current debt of today’s entrepreneurs? Employees/entrepreneurs can deduct a certain percentage of the total debt from their adjusted gross income. An employer can also match a percentage of the deduction. Rather than funding a 401k or an IRA the former student can pay down his debt. With unemployment of recent grads well above 10% this proposal should lower that rate. Rather than sitting at home bemoaning his debt, the student will realize that any job is worth more because of the tax deduction. In addition, employers have more to offer the job seekers with any available match. Of course much work is needed by lawmakers in deciding the percentage of the paydown allowed each year, protecting taxpayers from borrowers rolling up other debt into student loans to take advantage of the tax deductions, figuring out a plan for private student loans, and working out all the other details. I believe this plan would tend to have more acceptance with Republicans, since it can be spun as a tax deduction instead of loan forgiveness. Moreover, many entrepreneurs get in over their heads before they figure the best way to make their business work. When they fail, workouts and bankruptcy help that individual get back on his feet. Why not give a student building his skill set the same opportunity. 1.Barton Kunstler, Huffington Post, Sept. 5, 2012, http://www.huffingtonpost.com/barton-kunstler-phd/college-student-loan-bill_b_1850224.html
Jonathan Falk
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