Small Business Ideas for Students

I have two thoughts on the matter of student loans. One is a real problem: President Trump’s budget will raise the interest rate on undergraduate government and private Stafford loans. That’s part of the reason why the bill he signed represents less than a rounding error of a tiny fraction of government outlays. But as much as I’d like to see student loan debt wiped out, even with interest rates on it equivalent to the corporate tax rate, it’s not a matter of practically everything the government does being the equivalent of bribery. The problem is one of incentives.

One reason the federal government can afford to let students borrow more and in longer terms than the states do is that the federal government has done a good job underwriting loans to businesses. As a result, the political incentives favoring private students are much more severe than they are for business students. While the explicit goal of the corporate loan program is to remove market distortions, in practice the benefits have more often than not flowed to big businesses. So at least part of the reason businesses are getting extra financing is that they’re seen as good investments.

It’s also true that business students also get a leg up, in that there’s much less interest in student entrepreneurship. Over the past 20 years, the number of new businesses in the United States more than doubled. But the number of business loans to existing businesses, which declined slightly, suggests that the focus was on traditional corporate investment, and that the effort did not increase the rate of business creation. Which means that student entrepreneurs have a much bigger upside than business entrepreneurs do. And it’s this upside that, of course, should be attracting more students to both study business and start a business.

One reason is that the business world is a vastly more risky place. Many entrepreneurs think that they’ll be able to make money early on, and don’t have to worry as much about whether their idea will even work. Indeed, business students are often hired by corporations before they start and learn from their employers rather than start their own businesses. Moreover, just about all jobs involve a degree that shows that you’ve taken significant risks and have a strong record of learning from that experience. So there are lots of factors (other than the standard jobs discrimination argument) that favor business students over students in the humanities or creative-non-profit fields.

The other thing that helps students in the more risky world of business is a fear that they won’t succeed. I used to joke that the chief disadvantage of being an academic was that you always felt under suspicion by your fellow undergraduates. Today, I think that the advantage is that in business you’re suspected of being just plain good. Which is a good thing, of course, since you’ll outperform most of your co-workers and make plenty of money doing it.