scorecardresearch Skip to main content

R.I. may defer loans for young entrepreneurs

Education financing agency sees a way to boost economy and keep graduates in state

Rhode Island’s Student Loan Authority is considering a novel proposal that would defer loans for graduates who go to work for start-ups or launch their own entrepreneurial ventures in the state.

The quasi-governmental nonprofit is currently researching the proposal, and if it eventually adopts the idea, it would be the first such program to defer loans as a way of encouraging entrepreneurship.

Specifics of the plan are still taking shape, but the authority is currently considering lowering loan repayments to under $100 a month for a period of two years for qualifying students.

“That should give them a little breathing room while they try entrepreneurship,” said Charles Kelley, executive director of the student loan authority. “We are trying to mitigate brain drain, and looking at this as a way to help the Rhode Island economy.”


Kelley said he got the idea while volunteering at an entrepreneurship center at Brown University. While there, he encountered several students who were leaving Rhode Island for high-paying jobs elsewhere so they could more easily pay off their student loans.

“If they didn’t have these student loan burdens, they might have stayed and worked with their friends in start-ups in Providence,” Kelley said.

The proposal is part of a broader effort by Rhode Island to tap into the groundswell by graduates to join technology start-ups and other young businesses, or start their own companies, that has become such a big part of the Boston-area economy. The state’s most celebrated effort to attract start-ups, a huge tax subsidy to ex-Red Sox pitcher Curt Schilling’s video game business, ended with the company’s collapse in May 2012, bringing with it an end to hundreds of jobs in Providence.

Rhode Island also has one of the highest jobless rates in the nation, 8.9 percent.

The authority’s staff is researching the feasibility of Kelley’s proposal, and it would require approval by his board. The idea also surfaces as President Obama is making college affordability a major issue in his second term.


Obama last week promoted a broad national initiative to lower the cost of going to college and challenged states to do more to reduce rising tuition costs.

“The system’s current trajectory is not sustainable,” the president said during a speech in Buffalo. “And what that means is state legislatures are going to have to step up. They can’t just keep cutting support for public colleges and universities.”

Obama’s new plan calls for the creation of a system to rate colleges based on affordability and value. His administration will also begin a public awareness campaign this year to promote existing ways that students can reduce their loan burden. Today, a typical student who borrows money to attend college graduates with $26,000 in debt.

The federal government already has a program similar to what Rhode Island is considering — the Income Based Repayment Plan, which allows graduates who pursue entrepreneurship, or other low-paying fields, to limit their loan payments to 15 percent of their discretionary income. Some 2.5 million students have taken advantage of the program, according to the White House.

Debt forgiveness and deferment programs have existed for years as a way to encourage college graduates to enter public service fields such as teaching, or to work for nonprofits.

In Rhode Island, the loan authority already offers a reduced-payment plan for students who enter nursing, and for students who complete college internships.


Andrew Yang, founder of Venture for America, a nonprofit that places graduates with start-ups, said student debt is not the primary reason why graduates steer clear of working at a start-up.

“These opportunities are obscure, high-risk, and difficult to evaluate,” said Yang.

Moreover, start-ups don’t do a lot of on-campus recruiting and can’t compete with big corporations when it comes to starting salaries and long-term stability, he said.

Since the organization started about two years ago, Yang said, he’s only heard of a few cases in which students decided not to participate in the Venture for America program, or pursue start-ups in general, because loans were an obstacle.

The Rhode Island loan authority’s counterpart organization to the north, the Massachusetts Education Finance Authority, does not have any deferment programs for student entrepreneurs or offer any other career-based loan abatement plans, but said it “is always considering good ideas.”

A growing community of start-ups could help revive the Rhode Island economy and make Providence a magnet for new ventures, said Melissa Withers, who helps run the start-up accelerator program Betaspring and cofounded RallyRI, an initiative to connect entrepreneurs in the state with mentors and training.

“Even though our economy is in duress, start-ups can thrive here,” Withers said. And offering a break on student loans for budding entrepreneurs can’t hurt. “We are never going to get anywhere unless we try some things, and take some risks.”

Michael B. Farrell can be reached at michael.farrell