I recall with fondness both of the graduation ceremonies that I attended while going through school--receiving my BS at West Georgia College (now University of West Georgia) and my PhD at Indiana University. In each instance, I was both excited and apprehensive about the future, and was full of ideas about research areas I was going to pursue in geology and paleontology. Sure, I had other ideas in subsequent years after graduation, but those two times in my career marked points where ideas and boundless enthusiasm (perhaps equivalent to the lack of perspective that sent explorers off to distant shores so many centuries ago) meshed to make me feel like the world of invertebrate paleontology was there for me to conquer--at least my little corner of it.
Because I get to know quite a few of the students at Oregon Tech, and because, as president, I get to award each one of them that walks at graduation a diploma, I see that same excitement, trepidation, commitment, and enthusiasm on the faces of each graduating student as I congratulate them. As a STEM-focused university, Oregon Tech graduates do quite well in the job market, and many of our students graduate with job offers awaiting them, mainly in major metropolitan areas (usually, for our graduates, the Portland Metropolitan Area in Oregon, Bay Area in California, Seattle-Tacoma Area in Washington, and Reno-Sparks Area in Nevada).
However, not all of our graduates want to leave rural Oregon to live in an urban area. Granted, there are many career opportunities in major metropolitan areas, but Oregon Tech produces many graduates that should, and would under different circumstances, parlay their knowledge and enthusiasm into businesses in their hometowns, many of which are small and rural. So why aren't we seeing this entrepreneurial spirit being applied as start-ups of small businesses in rural parts of Oregon, California, Washington, Nevada, and elsewhere in the US? And what can we do to stimulate more of that entrepreneurial response from our graduates in the years to come?
I'm convinced that one of the recent barriers to entrepreneurism is the overall amount of student debt and its steady increase over time. At Oregon Tech, the average student-loan debt is ~$28,500, which is close to the national average of $26,600 in 2011. I'm also convinced that the percentage of graduates with student debt is at least as important as the actual amount of debt owed. In the State of Oregon, 63% of the student population that graduated in 2011 had student debt. So nearly two out of every three graduates in Oregon start their post-graduate careers with debt.
Almost all of us have some form of debt, so what makes student debt different and why do I think it is a barrier to entrepreneurism? Simple--graduates must start repayment six months after graduation, and if they try to create a business and it fails, their student debt is not erased if they go bankrupt. There is no guarantee of income when starting your own business; indeed, there is a likelihood of no income for the first year or more until the business is established. For graduates, the prospect of having the federal government after you for potential non-payment on your student loan is disconcerting at best and intimidating for many. There is a genuine fear of not being able to meet those monthly payments, which become a Damocles Sword hanging over their heads. And don't forget--this all is occurring in the first year after graduation during a time when graduates often are at their most creative and most enthusiastic.
A great way to stimulate entrepreneurism, especially in small towns across the nation, would be to remove the fear factor associated with student-loan repayment for recent graduates. A simple, easily implemented way to do that would be for towns, counties, economic development districts, chambers of commerce, and other government or business-promotional entities to provide funds for the first two or three years of student-loan repayment in exchange for starting a particular type of business in the area.
Surprisingly, this does not require a huge investment of local funds, yet the potential payoffs are significant. As an example, given the average student-loan debt for Oregon Tech graduates with student loans ($28,546), the repayment amount over the ten-year life of the loan would range from ~$300/month to ~$332/month, depending on interest rate (4.5% to 6.8%, respectively). That's ~$3,600 to $4,000 per year (no more than $12,000 over a three-year period), which is an extremely modest investment for an opportunity to stimulate entrepreneurism and the establishment of a small business.
I'm not advocating a free ride; I'm simply suggesting that fronting the money to incentivize local entrepreneurism by removal of short-term loan-repayment fear could pay tremendous dividends locally. Once a business is established, the local money could be repaid. Some local governments may even want to forgive that debt, depending on business size, income, number of local employees, etc., much the same way that governmental entities establish tax incentives to entice businesses to move to a state or city.
Graduates with degrees in engineering, computer science, health professions, manufacturing, and similar fields, would be especially desirable candidates for this type of entrepreneurial stimulation (but note that graduates with other specialties, such as agriculture, tourism, etc., may fit better with local economies).
Yes, I truly believe it really is that simple. What's not to like? Everyone has a chance to win. This approach is straightforward to implement, scalable at all levels of government, NGOs or the private sector, and could provide a way to stimulate recently graduated, private-sector entrepreneurs in areas of our states and nation that really need an economic boost. What I like most about this is that by removing the Damocles Sword of a loan-repayment timeline, future entrepreneurs can ascend to and remain on the thrones of economic development--unlike Damocles himself who chose to abandon the throne after a short time out of fear for his life.