4 ms·

What Paul ignores is the fact that most people out of college are faced with seemingly insurmountable debt as a result of having to pay for an education - esp.

What Paul ignores is the fact that most people out of college are faced with seemingly insurmountable debt as a result of having to pay for an education - esp. in America (and to a lesser extent in Canada). This is one problem that will prevent startups from happening at such a rapid pace as he anticipates. In fact, most graduates want to find stable jobs to pay off their debt -- startups are not really on most graduates' radar. On a somewhat related note, Businessweek had a survey of the top ten desirable places to work for new graduates -- three were govt. agencies, one accounting firm, google, etc.

iamelgringo 19y ago
[quote] What Paul ignores is the fact that most people out of college are faced with seemingly insurmountable debt as a result of having to pay for an education [/quote] Yeah, but you get a 6 month grace period after school's over before repayment begins, and you usually have several financial hardship forbearances you can take to postpone repayment. Even then, you can go back to school for one semester, and reset the grace period and financial hardship forbearances. So, you have at least 18-24 months of forbearance/deferment before you have to begin repayment, and that can be hacked indefinitely by taking 6 credits at your local community college.
- vlad 19y ago
  I don't know why this was modded up. That's like saying if one can't pay the $20,000 credit card balance, American Express will delay charging interest as long as the user charges up $2,000/year more. I think one would be better off just paying the interest than adding $2,000 of classes that they will have to attend. Also, free interest or low interest as "aid" is a joke. You still have to pay the entire amount you borrowed. I think the only time your strategy makes sense is if you can pay $1,000 to enroll in community college for one semester in order to stay on your parents' health insurance from June to December, which comes out to $140/mo, and the quotes you received for health+dental+vision were $500 a month, therefore saving approximately $2,500 per semester, or $5,000 a year. (And I believe if you're from Massachusetts, you can stay on your parents insurance as long as you're a dependent in income level even if you're not a student.)
byrneseyeview 19y ago
So wouldn't those people drop out earlier? If you strip out the emotional content of your post, it's quite banal: the price of a product (college) is going up, so people who buy the product (students who pay full tuition) have less money, and since money is a transportable, transferable form of freedom, they're less free. " In fact, most graduates want to find stable jobs to pay off their debt -- startups are not really on most graduates' radar." That's irrational. If they're already way in debt, shouldn't they want to take more risks? Why the hell would you do something boring for ten years to pay off your debt, when you could do something fun for one year and have a 10% chance of more than paying off your debt. Also, employers are impressed by people who start their own businesses. " Businessweek had a survey of the top ten desirable places to work for new graduates -- three were govt. agencies, one accounting firm, google, etc." Right, because Businessweek can't say "The best place for you to work is that company you start in your apartment with your pals," because 1) that doesn't appeal to BW's audience, and 2) startups are small and varied, so it wouldn't make sense. It's like taking a survey of the most popular restaurants (McDonalds, Burger King) and using that as proof that the swanky new sushi place down the street is an awful place to eat.
- electric 19y ago
  "So wouldn't those people drop out earlier?" No those people would not drop out earlier, because they likely did not know they wanted to be startup founders until they had enough technical knowledge and/or more importantly built those relationships with students around them which led to the creation of a startup in the first place. Perhaps your experience has been different in which case I cannot argue with that. "when you could do something fun for one year and have a 10% chance of more than paying off your debt" For precisely that reason -- that the likelihood of success is only 10%. And it often takes more than a year to build something meaningful. "Also, employers are impressed by people who start their own businesses." This is not always true. It depends on the role the employee is being hired into.
  - byrneseyeview 19y ago
    So you're saying that college, while expensive, is still worth it? I don't get your argument. For a given student, either college is too expensive to be worth it, and people will drop out early, or it's cheap enough to be worth it, and people will finish. Only one of these things can be true, and there are obvious conclusions depending on which you pick. So which is it? "For precisely that reason..." Did you miss what I said above? If you're already broke, why is getting broker a problem? What do you have to lose if you have less than nothing? Can you give me some detail on your 'depends on the role' comment? I didn't realize this; when I recruit people (IT/quant finance), employers respond more favorably to entrepreneurs than to people who worked for someone else. Where did you hear otherwise?
paul 19y ago
One solution is to avoid accumulating a huge debt. I went to a school that gives out scholarships based on SAT scores (CWRU).
- rms 19y ago
  This might be a recent policy change, but now at CWRU you need to be in the top 10% of your high school class to get the SAT scholarship. I had a high enough SAT score to qualify for one of CWRU's standard scholarships but didn't get it because I was in the top 12% of my high school class.
Goladus 19y ago
I wish I'd thought to consider a startup during my grace period. If I was graduating today, rather than right after 9/11, that's almost certainly what I'd do.
far33d 19y ago
This is one of those ways in which being a rich kid is a huge advantage. I'm not sure if most young startup founders have rich parents, but it wouldn't be particularly surprising. Then again, maybe having rich parents makes it too easy to just coast in a cruddy job (or grad school)...
- stuki 19y ago
  Another big advantage for Silicon Valley: Rich (from tech or real estate) parents supportive of playing around with computers instead of getting a real job.
pg 19y ago
From what I remember, college debt payments are not usually more than other expenses like food and rent. I'd bet they're rarely more than 30% of the expenditure of someone considering a startup, and thus shouldn't be a deciding factor.
kashif 19y ago
I believe that more high-schoolers than before will evaluate an alternate option to college. It is these folks who will add strength to the startup numbers. The people who decide to get into college and pickup big debts have already made a decision of not wanting to do startups. Additionally,this debt seems insurmountable in the current scenario, but as things change loan financiers will factor in such changes and perhaps even build in options for doing a startup or allow for repayment to start much later than it currently does. While Paul focuses on web based startups, I think this phenomenon will apply to more areas as technology enables individuals to create their own niche. This is already true for some sports and certain types of businesses. Like you correctly mentioned, the debt problem is more pronounced for Americans and some other nationalities, most developing nations do not have this problem and their entrepreneurs will start startups especially in developed and lucrative markets such as the US. This inturn will force the US mechanism to adapt. This effect of globalization has already had effects in many other industries.
danw 19y ago
In the UK you graduate in June and have to start repaying your loan the following April as a percentage of your income if you earn more than GBP14,000/year. I've found that you can survive for GBP6,000/year so this shouldnt be an issue. No idea what the situation is like in the US however

iamelgringo 19y ago

[quote] What Paul ignores is the fact that most people out of college are faced with seemingly insurmountable debt as a result of having to pay for an education [/quote] Yeah, but you get a 6 month grace period after school's over before repayment begins, and you usually have several financial hardship forbearances you can take to postpone repayment. Even then, you can go back to school for one semester, and reset the grace period and financial hardship forbearances. So, you have at least 18-24 months of forbearance/deferment before you have to begin repayment, and that can be hacked indefinitely by taking 6 credits at your local community college.

vlad 19y ago
I don't know why this was modded up. That's like saying if one can't pay the $20,000 credit card balance, American Express will delay charging interest as long as the user charges up $2,000/year more. I think one would be better off just paying the interest than adding $2,000 of classes that they will have to attend. Also, free interest or low interest as "aid" is a joke. You still have to pay the entire amount you borrowed. I think the only time your strategy makes sense is if you can pay $1,000 to enroll in community college for one semester in order to stay on your parents' health insurance from June to December, which comes out to $140/mo, and the quotes you received for health+dental+vision were $500 a month, therefore saving approximately $2,500 per semester, or $5,000 a year. (And I believe if you're from Massachusetts, you can stay on your parents insurance as long as you're a dependent in income level even if you're not a student.)

byrneseyeview 19y ago

So wouldn't those people drop out earlier? If you strip out the emotional content of your post, it's quite banal: the price of a product (college) is going up, so people who buy the product (students who pay full tuition) have less money, and since money is a transportable, transferable form of freedom, they're less free. " In fact, most graduates want to find stable jobs to pay off their debt -- startups are not really on most graduates' radar." That's irrational. If they're already way in debt, shouldn't they want to take more risks? Why the hell would you do something boring for ten years to pay off your debt, when you could do something fun for one year and have a 10% chance of more than paying off your debt. Also, employers are impressed by people who start their own businesses. " Businessweek had a survey of the top ten desirable places to work for new graduates -- three were govt. agencies, one accounting firm, google, etc." Right, because Businessweek can't say "The best place for you to work is that company you start in your apartment with your pals," because 1) that doesn't appeal to BW's audience, and 2) startups are small and varied, so it wouldn't make sense. It's like taking a survey of the most popular restaurants (McDonalds, Burger King) and using that as proof that the swanky new sushi place down the street is an awful place to eat.

electric 19y ago
"So wouldn't those people drop out earlier?" No those people would not drop out earlier, because they likely did not know they wanted to be startup founders until they had enough technical knowledge and/or more importantly built those relationships with students around them which led to the creation of a startup in the first place. Perhaps your experience has been different in which case I cannot argue with that. "when you could do something fun for one year and have a 10% chance of more than paying off your debt" For precisely that reason -- that the likelihood of success is only 10%. And it often takes more than a year to build something meaningful. "Also, employers are impressed by people who start their own businesses." This is not always true. It depends on the role the employee is being hired into.
- byrneseyeview 19y ago
  So you're saying that college, while expensive, is still worth it? I don't get your argument. For a given student, either college is too expensive to be worth it, and people will drop out early, or it's cheap enough to be worth it, and people will finish. Only one of these things can be true, and there are obvious conclusions depending on which you pick. So which is it? "For precisely that reason..." Did you miss what I said above? If you're already broke, why is getting broker a problem? What do you have to lose if you have less than nothing? Can you give me some detail on your 'depends on the role' comment? I didn't realize this; when I recruit people (IT/quant finance), employers respond more favorably to entrepreneurs than to people who worked for someone else. Where did you hear otherwise?

paul 19y ago

One solution is to avoid accumulating a huge debt. I went to a school that gives out scholarships based on SAT scores (CWRU).

rms 19y ago
This might be a recent policy change, but now at CWRU you need to be in the top 10% of your high school class to get the SAT scholarship. I had a high enough SAT score to qualify for one of CWRU's standard scholarships but didn't get it because I was in the top 12% of my high school class.

Goladus 19y ago

I wish I'd thought to consider a startup during my grace period. If I was graduating today, rather than right after 9/11, that's almost certainly what I'd do.

far33d 19y ago

This is one of those ways in which being a rich kid is a huge advantage. I'm not sure if most young startup founders have rich parents, but it wouldn't be particularly surprising. Then again, maybe having rich parents makes it too easy to just coast in a cruddy job (or grad school)...

stuki 19y ago
Another big advantage for Silicon Valley: Rich (from tech or real estate) parents supportive of playing around with computers instead of getting a real job.

pg 19y ago

From what I remember, college debt payments are not usually more than other expenses like food and rent. I'd bet they're rarely more than 30% of the expenditure of someone considering a startup, and thus shouldn't be a deciding factor.

kashif 19y ago

I believe that more high-schoolers than before will evaluate an alternate option to college. It is these folks who will add strength to the startup numbers. The people who decide to get into college and pickup big debts have already made a decision of not wanting to do startups. Additionally,this debt seems insurmountable in the current scenario, but as things change loan financiers will factor in such changes and perhaps even build in options for doing a startup or allow for repayment to start much later than it currently does. While Paul focuses on web based startups, I think this phenomenon will apply to more areas as technology enables individuals to create their own niche. This is already true for some sports and certain types of businesses. Like you correctly mentioned, the debt problem is more pronounced for Americans and some other nationalities, most developing nations do not have this problem and their entrepreneurs will start startups especially in developed and lucrative markets such as the US. This inturn will force the US mechanism to adapt. This effect of globalization has already had effects in many other industries.

danw 19y ago

In the UK you graduate in June and have to start repaying your loan the following April as a percentage of your income if you earn more than GBP14,000/year. I've found that you can survive for GBP6,000/year so this shouldnt be an issue. No idea what the situation is like in the US however