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The Impact of Student Loan Debt on Small Business Formation

37 Pages Posted: 31 Mar 2014 Last revised: 21 Jul 2015

Brent W. Ambrose

Pennsylvania State University

Larry Cordell

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Shuwei Ma

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Multiple version iconThere are 2 versions of this paper

Date Written: July 15, 2015

Abstract

This study examines the impact of growth in student debt on net small business formation. We find a significant and economically meaningful negative correlation between changes in student debt and net new businesses employing one to four employees, the firms most dependent on personal debt for financing. Based on our model, an increase of one standard deviation in student debt reduced the number of businesses with one to four employees by 14% between 2000 and 2010. The effect on larger firms decreased with firm size, which we interpret to mean that these firms had greater access to outside capital.

Keywords: Student Loans, Small Business, Debt

JEL Classification: D12, I22, I25, I28, H31, R2

Suggested Citation

Ambrose, Brent W. and Cordell, Larry and Ma, Shuwei, The Impact of Student Loan Debt on Small Business Formation (July 15, 2015). Available at SSRN: https://ssrn.com/abstract=2417676 or http://dx.doi.org/10.2139/ssrn.2417676

Brent Ambrose (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

Larry Cordell

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Shuwei Ma

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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