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Tech’s real role in student debt

TechCrunch TechCrunch 29/06/2016 Kate Conger

Hillary Clinton’s campaign advisers sought to explain the student debt deferment portion of her tech agenda on a call with reporters today, after the item generated criticism that the plan would provide financial benefit to wealthy members of the tech sector.

Clinton announced her technology agenda yesterday in front of a gathering of entrepreneurs and startup founders. Almost immediately, the proposal began to generate criticism.

The controversial portion of Clinton’s proposal isn’t the section on encryption, net neutrality or any of the other divisive policy issues that plague the tech industry. Instead, it’s the section on student debt that’s drawn the strongest critique. During a conference call with reporters this morning, Clinton staffers attempted to clarify the tech agenda and quell concerns about the campaign offering a benefit to already-wealthy tech founders.

The presumptive Democratic nominee for president plans to allow young entrepreneurs to defer their federal student loans for three years while they get their businesses up and running. Individuals who qualify won’t have to pay interest or principal on their loans during the deferment period, and Clinton says she is considering extending the benefit to the first 15-20 employees of new companies, as well.

The agenda will also give young founders who are working in “distressed communities” or providing “measurable social impact and benefit” the chance to have up to $17,500 of their student loan debt forgiven after running their business for five years. During a conference call with reporters this morning, Clinton staffers clarified that the student debt portion of the agenda would be a part of Clinton’s plan for her first 100 days in office.

The backlash was instant.

Student debt is a delicate subject in the Democratic primary. Clinton has clashed with her nomination opponent Bernie Sanders over his plan to make higher education tuition- and debt-free, criticizing his plan as financially unviable and proposing tuition based on family income as an alternative.

But the reaction to Clinton’s proposal has more to do with societal disgust for startup culture than the intricacies of higher education funding. The sexism, racism and unaccountability of Silicon Valley are exhausting, and people are understandably unhappy to hear about startup founders getting yet another leg up on the average person.

Because Clinton’s announcement was packaged with her technology agenda, the debt deferment and forgiveness portion was perceived as a benefit for members of a vastly privileged and wealthy industry: tech founders who don’t need any more financial incentives than they already have.

Clinton staffers clarified today that debt deferment would be made available to entrepreneurs across sectors of business, regardless of whether those founders would refer to their company as a “startup.”

“The idea of the entrepreneur is somebody who starts a new venture under state law,” Clinton’s domestic policy adviser Sara Solow said. The entrepreneur could be starting her own farm or bookstore — and yes, even her own app.

The policy is intended to foster business growth and is based on polling that shows young people want to start businesses but are afraid to take the risk because of their student debt, Solow explained. “The rates of entrepreneurship are down, even though when you ask people, 50 percent of them say they want to start their own business,” she said.

Sarah Audelo, the campaign’s millennial vote director, said that Clinton isn’t trying to award a benefit to entrepreneurs that isn’t already available to students who enter the workforce. Audelo pointed to the Public Service Loan Forgiveness Program, which grants debt forgiveness to former students who take jobs at nonprofits and in government and make 120 on-time loan payments, as an example.

Solow also said that Clinton didn’t envision an age cutoff for participation in the debt deferment and forgiveness program, so that entrepreneurs who are 10 or even 20 years out of school could still participate.

It’s certainly painful to imagine the founders of the next Yo playing ping-pong in a trendy startup office and coasting on loan deferment while their less fortunate peers work minimum-wage jobs and scramble to make their loan payments. But it’s also worth remembering that studies have found black women are the fastest-growing group of entrepreneurs in the United States, and that this plan — if Clinton clinches the Democratic nomination, and then the general election — could benefit them, too.

Criticizing Clinton’s plan because it could enable “tech bros” comes from valid anger about the industry’s culture. But since the campaign plans to provide deferment to entrepreneurs outside of tech, that critique seems a bit hollow.

Yet, questions remain about Clinton’s broader plans to reform student debt. Trying to counteract student debt after graduation through deferment or forgiveness is a modest proposal, but the cycle of ever-rising tuition (and the federal dollars driving that increase) needs to end.

Clinton’s answer so far has been to invest $350 billion over the next decade into lowering the cost of education at state and community colleges. The plan relies on student and family contributions as well as Pell Grants to fund tuition, but it’s not yet clear how family contributions will be calculated. It’s also unclear where the $350 billion will come from — the Clinton campaign says it will be generated by “limiting certain tax expenditures for high-income taxpayers,” but hasn’t specified the particular tax expenditures or taxpayers to be targeted.

Perhaps that’s where some of tech’s high-income taxpayers can help.

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