Intriguingly, the Obama administration is
marketing Income-Based Repayment specifically to potential entrepreneurs as a way to boost
job creation (though anyone can apply). The Small Business Administration's website touts the "Student Start-Up Plan,"
enticing people to "Defer Loans. Not Entrepreneurship." This is quite
smart; even if a small business produces revenue, its owner can easily
have income under $20,000 as she re-invests incoming cash. IBR means she
doesn't have to worry about student loans on top of bank loans or
start-up costs. "It's a perfect setup," says Scott Gerber, head of the
Young Entrepreneur Council and co-founder of Gen Y Capital Partners.How it would work.
if we truly believe, as the SBA claims, that "young entrepreneurs are
key to our economic success," then we can do better than 10% and 20
years. We already do better for some people. The federal government also
runs a program
called Public Service Loan Forgiveness for people who work for
government agencies and certain non-profits. Aside from capping
payments, the government forgives outstanding balances after 10 years — a
major boon if you have $50,000 in loans and earn $30,000 a year. The
recipients are deserving, but why is someone who works for a non-profit
after graduation more deserving of loan forgiveness than someone who
creates the wealth that allows people to donate to non-profits in the
first place? Starting a business "is doing a service to the economy,
going out and creating jobs," Gerber says.