Deferred Dreams: How Student Loan Debt Disproportionately Affects Entrepreneurs Of Color

By Nicole Castillo


As a 35-year-old single mom and first-generation student preparing to put herself through law school, Ramona Ortega needed student cash advances for more than just an education; she required them “just to survive.”. However nine years later, she still holds what she describes as “extreme student debt” of over $200,000. Though astronomical, that number didn’t deter her from beginning her dream firm, which she founded to help young people facing similar situations.


because the founder and CEO of the personalized financial management platform My Cash My Future, she works to help millennials of color understand what their financial options are while in their lives, and then select the options that will best align them with achieving their objectives. “It’s due to the financial hardship that I've Been through, [that] I began this company,” Ortega told MTV News. “I was solving my own problem.”


Ortega isn’t the only recent college graduate with a drive to begin her own agency, yet she’s still among a certain minority. Millennials and Gen Z graduates of color are entering the job market with a “entrepreneurial spirit” — they have the vision to upend agency as typical, they value mission over profit alone, and so they are solutions-focused and idealistic. However fewer are pursuing entrepreneurship in comparison to older generations. The desire is there, as is the know-how. It’s the financial burden that is holding several innovators back.


This is in no small part due to overwhelming student cash advance debt, which in 2019, reached $1.56 trillion, sending ripple effects across the economy. Students are graduating and stepping into the workforce with financial burdens that are causing them to delay getting wedded, having children, saving for retirement, and buying a home. While young folks are more likely to work non-traditional jobs like working for rideshare and tutoring agencies and freelancing in tech and media, few take the entire plunge to be entrepreneurs — the key difference being that entrepreneurs create an entirely new organization model, while those in the gig economy work in the confines created for them.


This is frustrating for any collection of reasons, and undoes core tenets of American capitalism that have been sold to us for decades: That we can, one day, begin organization, design a firm, and become our own boss. What’s more, entrepreneurs would be one of the strongest antidotes to a sluggish economy. New organizations drive innovation, improve productivity, and create more jobs.


Yet not each person can take the entrepreneurship leap, which is why political heavyweights are introducing plans that would chip away at student debt, and create more possibility for entrepreneurs of color. Legislators on the left have offered a tax on the richest Americans and Wall Street and argued that if we can bail out big banks as we did in 2008, and other bastions of corporate America, we should be prepared to bail out student debtors, too.  Senator Elizabeth Warren’s student cash advance forgiveness plan would eliminate up to $50,000 based on household revenue up to $250,000, while Senator Bernie Sanders wants to cancel all debt including undergraduate and graduate loans. Warren has also put together a plan specifically targeting entrepreneurs of color, by delivering $7 billion in funding to underserved groups. Mayor Pete Buttigieg’s Douglass plan aims to invest $10 billion in entrepreneurs from underrepresented backgrounds, and defer some student cash advance repayment for those who determine to begin a business. Senator Kamala Harris has suggested forgiving up to $20,000 of student cash advance debt for Pell Grant recipients who begin firms that operate in underserved communities.


Carlos Vera, the 25-year-old Founder and CEO of Pay Our Interns, a national advocacy corporation working to make sure that legislative interns are paid and diverse, believes that forgiving student cash advance debt isn't only “the moral thing to do,” however makes the most economic sense.


“People ask, ‘Where are we going to get this money?’ We just passed a tax cut of over a trillion dollars for the super prosperous last year. If we can do that for them, why can’t we do the same for millions of hard-working Americans?” Vera told MTV News. “Especially because we know this is dragging down our economy. People are not buying homes and beginning corporations because of their student loans.”


The main factors stopping young people from becoming entrepreneurs — access to startup capital plus a lack of financial stability to weather the initial few years of entrepreneurship — are intensified for millennials of color. Black students carry more student cash advance debt than any other racial group, a fact compounded by the racial wealth gap. In the U.S., the average white family member has seven times more wealth than Black families and five times more wealth than Latinx families. While Latinx students carry much less debt, they are more likely to drop out because of financial barriers; have lower wages post-graduation; and are thus, more likely to default on their student loans. And the idea that a college education is a surefire route toward economic prosperity for Black and brown students must be reconsidered. The Economic Policy Institute reports that a college degree or more will not decrease the Black-white wage gap.


Several of those young people feel that student cash advance debt limits options in terms of jobs they can take, so graduates often opt to pursue much less risky forms of employment and take whichever jobs they can to pay their costs on time. Even so, millennials of color are leading the conversation once it comes to diversifying entrepreneurship, and then some visualize self-employment because the perfect alternative for building wealth. Millennial Black ladies, in particular, believe that beginning one’s firm is the ideal road to prosperity.


Rica Elysee is a first-generation Haitian American who began BeautyLynk, a firm that creates possibilities for aesthetics professionals to connect directly with consumers, along with build their own brand and reputation. Because the company’s founder and CEO, 33-year-old Elysse understands that these possibilities are indispensable for her clientele to pay back their debt — but she is still quick to admit that college debt can be “stifling.”


“It’s changed the way people think about building organizations or maybe if they have a shot at building one,” she told MTV News.


That was definitely the case for Katia Alcantar, the 29-year-old co-founder of the legal suggestions app Text A Lawyer, who carries $85,000 in student loans.“With one of my student cash advances, I have paid 20 percent of the cash advance and none of that has been on the principal,” she told MTV News. Faced with $1,000 monthly payments, her debt is so significant that it has prevented her from investing in her own agency, which connects attorneys with customers 24/7 by way of the text for legal advice.


Because Alcantar wasn’t alone in her task to undertake, she was able to take some risks: Her co-founder had the financial means to bootstrap the project, thus enabling her to quit her job and move her family member from Texas to Oregon to join the firm. Not each person can afford to prepare those kinds of decisions, though, and for those still strained by their student cash advances, debt forgiveness proposals have become a beacon of hope.


The burden of student cash advance debt, nevertheless, isn't simple because the government eliminating your balance from Sallie Mae or Navient; it’s also about reforming the whole cost of college and predatory cash advance systems and ensuring livable wages for all.


Several of those issues, 32-year-old Omama Marzuq believes, can be solved by investing in entrepreneurs.


“Being your own agency owner, you are creating possibilities and growth for your community,” the entrepreneur and mentor for E for All: Entrepreneurship for All told MTV News. “Entrepreneurs can hire people in their communities, create internships, and fund scholarship opportunities.” It’s a cycle that can supply young entrepreneurs with the aim that their work is worth the toil, and proof that while risks can feel solitary, success isn't obtained alone.