Today, Hillary Clinton announced her “Initiative on Technology & Innovation” proposal. A big part of this announcement: student loan deferment and forgiveness for entrepreneurs.
Here are the key details of her proposal:
No interest on new entrepreneurs’ student loans for three years
Clinton’s proposal points out that fewer millennials are starting businesses today compared to previous generations and suggests that student loans may be to blame. A potential fix: allow entrepreneurs to defer student loans interest-free for up to three years.
This proposal may include not only the company founder but also the first 10-20 employees. However, it’s not yet clear from her proposal exactly how this would work.
Why this matters
While it’s currently possible to put student loans in deferment or forbearance for a variety of reasons, simply being an entrepreneur isn’t one of them.
Additionally, deferment doesn’t currently cover interest charges for unsubsidized loans. But according to Clinton’s proposal, her program would, in fact, allow interest-free deferment to prevent student loan balances from ballooning.
Overall, the goal seems to be to give entrepreneurs the freedom to focus both their time and financial resources on their business rather than student loan payments. Millennial borrowers currently pay on average around $351 per month for student loans.
Student loan forgiveness for social businesses
In terms of student loan forgiveness, Clinton’s proposal would forgive $17,500 of debt after entrepreneurs spend five years in business.
Clinton’s student loan debt forgiveness proposal for entrepreneurs centers around social enterprises and “new businesses that operate in distressed communities.”
While a bit narrow in scope, Clinton’s proposal looks to bolster ventures that aren’t simply motivated by money but rather a desire to have a social impact.
Why this matters
Currently, the fastest any borrower can achieve any form of student loan forgiveness is 10 years through the Public Service Loan Forgiveness Program. This initiative is slated to forgive debt starting in 2017.
Clinton’s proposal would bring borrowers faster relief in five years. This would be especially helpful to borrowers who might have to wait 20+ years to get forgiveness on Pay As You Earn or Income-Based Repayment programs.
Although $17,500 in student loan forgiveness might only cover a portion of a borrower’s debt, the current average student loan debt is $37,000. That means Clinton’s proposal would forgive about half the average borrower’s debt.
It could also equal what the average borrower would expect to pay over the course of five years of repayment if enrolled in the standard 10-year student loan repayment plan. In other words, pursuing a new business wouldn’t set back entrepreneurs in terms of student loan repayment.
One potential hurdle: businesses must operate for five years before becoming eligible. However, many startups don’t survive this long. A potential concern is what happens to entrepreneurs’ debt when their business falls short of this milestone.
But, since this is simply a proposal, we can expect more detail and clarification should this ever be enacted. This proposal also requires both Clinton winning November’s presidential election as well as the passage of any law changes that require Congressional approval.
This is in addition to Clinton’s $350 million college proposal that she’s already announced. That plan would include increased aid for students, a refinancing option, and more to help bring down the cost of a college degree.
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.50% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
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3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.49% effective March 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.50% – 7.27%1||Undergrad & Graduate|
|2.50% – 7.12%3||Undergrad & Graduate|
|2.53% – 8.79%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.55% – 7.12%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|