Former Secretary of State Hillary Clinton wants to give entrepreneurs more cash to take risks and start businesses. Too bad she’s not proposing cutting taxes for young workers (and all workers) or offering tax credits.
Instead, as part of her technology agenda, she wants to dole out federal student loan forgiveness like Oprah gave out cars back when she was on TV. “You get debt forgiveness, and you get debt forgiveness, and you get debt forgiveness.”
The targets of her largess – or more correctly, our taxpayer largess – are would-be entrepreneurs and early joiners in startup companies who would be permitted to forgo payments on their student loans for up to three years.
In addition, businesses which provide social benefits to distressed communities – however that is defined – or provide measurable social impact and benefit would be permitted to apply for debt forgiveness up to $17,500 after five years. How will the latter even be measured? By stray puppies saved from getting hit on the roads or homeless Americans who are fed a meal? It’s easy to see how this can easily be abused.
The Washington Post reports:
“We need more job creators and we need more young people starting businesses,” the presumptive Democratic nominee told a crowd of coders inside a Denver tech training facility and workspace that houses several start-ups. She was on a brief campaign swing through the battleground state of Colorado.
Speaking later in Los Angeles, at a town-hall style meeting with digital content creators, Clinton called student debt a “huge burden” that could hobble young people into their 40s and 50s, blocking them from buying homes or starting businesses.
During the three-year period that entrepreneurs are building their businesses, interest would also stop accruing on the loans as MarketWatch explains. To qualify for the program, you can’t just say you started a business, but must show articles of incorporation filed with state officials. And who would be verifying this information? Likely a new layer of paid bureaucrats.
An aide explained in Mic:
"A smaller proportion of millennials today are starting new ventures as compared to their predecessors," the Clinton aide said. "This is not for a lack of desire — surveys show that America's millennials are aspiring, enterprising, and independent-minded.
The aide pointed to a recent survey finding that 51% of millennials aspire to start businesses. But nearly half of millennials, or 48%, said paying off student loans has "impacted their ability to start a business," the aide said.
They are correct that millennials aren’t starting businesses, but this is not the best way to get there.
This is an effort to show how much of an entrepreneurial cheerleader Clinton is, but wearing a uniform doesn’t mean you’re on the team. Clinton has been a notorious opponent of the on-demand or sharing economy, calling for crackdowns on companies like Uber and Airbnb. She espouses an outdated view of the economy and workforce, where established businesses and unions who have curried favor with politicians lock or chase new competition out of the marketplace by enforcing unfair and unfavorable rules.
Giving a subsidy to some students with debt and not others is a way of picking and choosing among debt holders, especially if these are young people who are likely to be in a better position to repay those loans in the future as one writer notes in Inside Higher Ed:
If Clinton wants to give away money to people who will eventually be wealthy, this proposal is a great idea. People working in tech start-ups will likely go on to earn a fairly high income in life. If a young entrepreneur has a degree from a good school and highly valuable skills, she can still get a high-paying job even if the company fails. If her company succeeds, she will eventually have a lot of money.
That person doesn’t need an interest-free loan. What she needs is a program that allows her to pay a low amount or nothing toward her student loans while she makes little to no money launching her business. Interest will accrue, but once she earns a lot, she’ll be able to pay everything back. If she never makes a lot, the loans will eventually be forgiven.
Of course, that plan is already available to all federal student loan borrowers. It’s called income-based repayment, it is used by many people, and it protects all borrowers, whether they’re “innovators” or not. Clinton’s plan is a giveaway to kids who went to Stanford and attend TEDx talks for the networking opportunities.
Couldn’t put it better.