Will student debt be the death of small business?

Will student debt be the death of small business?

According to the latest Australian University Student Finances Survey, students are now leaving university with a personal debt averaging $37,217. The situation is even worse in the UK where graduates commonly owe as much £50,000.

It’s not great a great position to be in when you’re looking for your first job especially when that job may not be so easy to find. One alternative for many young people has been to start a business of their own but when you’re so debt-ridden and, as a consequence, have very limited access to funding, you may never be able to afford to get a business off the ground.

In the Independent, David Prosser points out that this is not simply a question of spare cash. “A key ingredient in entrepreneurship is a willingness to take some risks. But anyone with that sort of debt hanging over their head is very likely to be more risk-averse,” he writes. “Nor do young would-be entrepreneurs have access to assets with which they might be able secure business funding. With home ownership at its lowest level in the UK since the mid-1980s, and young first-time buyers in particular locked out of the market, securing the new business against a property is not an option for the vast majority of young entrepreneurs.”

Apparently. US policymakers are also increasingly worried that their further education graduates are so indebted that there may be an impact on small business formation.

In Australia, small businesses make a significant contribution to the Australian economy, accounting for almost half of industry employment and contributing over a third of industry value added. And some, of course, grow into very big businesses. As more baby boomer business owners are moving on, we need to be thinking very carefully about where the next generation of innovative start-ups is going to come from.


  1. That is so true! My daughter did a Bachelors degree in Fashion Design and now has a HECS debt of over $70k. She doesn’t think she’ll ever pay it off.

    • I’m working on an article about exiting a business at the moment and it seems we’re heading for the perfect storm of baby boomers wanting to sell when no-one apart from listed companies and private equity firms can afford to buy – and they’re cautious, highly selective and more interested in the mid-range. There’s so much money and human capital tied up in small businesses that could simply disappear. Scary!

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