Got An Idea For The Next New Thing?

Surprising but true: government money is being freed up to help college students start companies, and possibly unload debt.
October 27, 2011

If so, you are in luck. Not only is there more money being freed up to push young college students into creating their own companies, but the Obama administration might unload some of your school debt, too.

But first, you have to get started.

Enter the Young Entrepreneur Council, a nonprofit that strives to mentor future Steve Jobses and the like. Its latest initiative is the Gen Y Fund, a $10 million early stage venture accelerator fueled with private money.  The fund plans to hand out $15,000 to $50,000 (and in some instances, up to $250,000) for as many as 100 proposed ventures dreamed up by people under 35 years old, says Scott Gerber, co-founder of Gen Y Capital Partners (and contributor to Open Forum).  The investment company also plans to offer a way to pay off some student loans, academic partnerships and a support network of young entrepreneurs in the country, said Scott Gerber.

"We’re looking for America’s most promising entrepreneurs…not just the tech elite," says Gerber, 28, the council’s founder who started his first business as an undergraduate at New York University. "We’re not focusing on any one market. We also want to focus on businesses that use technology. Perhaps companies whose technology develops the product or get to market faster." Applications will be accepted starting Tuesday and the money should start flowing next year, Gerber says.

There are other avenues for seed funding, Gerber notes. “Traditional financing—forget it, it’s almost impossible’’ for young entrepreneurs, he says. Unlike other seed funds, the Gen Y one will offer a few benefits. It will aim to link recipients with academic partners who might guide them through early rough patches. It will provide a support network of successful young entrepreneurs. And the investment company would be the first private-sector partner to link with a White House plan to offer income-based, federal student loan forgiveness.

Historically, people who work in public service and nonprofits can get federal loans forgiven. The fund would do this for startup founders.  “If you build a business with certain income and revenues, you should have your loan forgiven,’’ Gerber says. "Youth entrepreneurship should be considered a public service.  Youth are taking a risk in not going after traditional jobs and in creating their own jobs."

The Gen Y fund was mentioned by the White House as President Obama flew to Denver Tuesday to offer some of his own inducements to encourage young creative thinkers. Before a crowd at University of Colorado, the president announced that his administration would be speeding up plans to lower monthly federal student loan payments, in part, to encourage young entrepreneurs. The plan, which calls for expanding debt forgiveness, is part of a series of executive actions that the administration says will strengthen the economy.

“We live in a global economy, where businesses can set up shop anywhere where there's an Internet connection,’’ Obama told the crowd.

Over the past three decades, the cost of college has nearly tripled, and graduates owe an average of $24,000, Obama said. Current law lets borrowers limit education loan payments to 15 percent of their discretionary income and forgives all remaining debt after 25 years.
The Obama White House wants to let current college students limit loan payments to 10 percent of their discretionary income starting next year. Debt would be forgiven after 20 years. The administration estimates the proposals, including loan consolidation, would help make monthly payments more manageable for an estimated 1.6 million borrowers.

The pitch comes amid continuing protests around the country against corporate business practices and an economy that has left hundreds of thousands of young Americans unemployed.

Gerber says "the White House sees what we’re doing," helping the economy "through entrepreneurship and fostering that through our initiatives."

Gerber says he’s fired up about helping young entrepreneurs because he bankrupted his first company while in college. “I fell into every single pit fall that every entrepreneur falls into,’’ he says. “It sent me on a journey, to learn from failure.’’