The Student Debt Economy

Getting a college degree was once synonymous with academic excellence and employment readiness for people across the globe. But that was before the economy took a dive. However, now, it has become a debt instrument and a financial burden that has compelled many graduates to either drop out of their educational institutions or look for jobs straight after high school! This doesn’t bode well for the economy as a whole either.

The reason for this crisis lies in the affordability level of the college education and the students’ inability to pay its fee. Sadly, the recent increase in tuition amounts has discouraged many high school graduates from pursuing higher education opportunities or applying for loans. The crisis has taken on epic proportions if we take the stagnant income growth and highly competitive job market into account. In other words, even if students manage to graduate with honors, they find themselves amused with exorbitant college loans which cannot be satisfied with an entry level job.

Student Debt

Current Situation

The loan debt has overwhelmed a majority of college hopefuls and graduates due to a still struggling economy. For people in their 20s and 30s, collecting enough funds to see them through their personal debts is proving difficult. Many take years to pay off their loans either because they cannot find jobs or work that pays enough to allow them to pay their debt in full quickly. Even if they go bankrupt, they will still be in debt since student loans cannot be liquidated. Total outstanding loans have exceeded more than $1 trillion since 2011 compared to the credit card debt, which amounts to $798 billion.

That is one of the reasons why this segment of the credit industry is deemed to be larger than the credit card and auto loan segments. In fact, according to FinAid, the total student loan debt is increasing by about $2,853.88/second. In a similar survey conducted by FICO Labs in which the company analyzed several bank risk managers in 2012, it was discovered that 60% of respondents believe that more and more people are going to ignore their loans in the first half of 2013. As a result, students or those who have pending student loans will face difficulty making ends meet due to their bad credit score. Additionally, since the survey does not take people who cannot afford to pay their loans into account, the actual numbers may be even higher.

In order to address this crisis, serious amendments need to be made in the lending industry. This includes a loosening of the terms and repayment regulations for such loans and a possibly new lending model to nip this issue in the bud before it gets worse.

How did we get here?

For one thing, the government did not take any action to curtail this catastrophe. Secondly, graduates tend to return for higher studies without acquiring employment that can aid them in paying off their loans or that can facilitate their future employability. In other words, students find themselves stuck in a never ending loop caused by a weak economy and lack of lucrative job opportunities. All of these factors amalgamated and resulted in a loan crisis that the country cannot seem to shake off.

According to Patrick Kandianis, the co-founder of SimpleTuition, due to the recurrent increase in college tuitions each year, borrowers tend to borrow more than they can pay off; if the economy falters, they end up borrowing more in order to pay off pending payments. Students with good credit history who cannot pay their loans or have stopped making payments can witness their credit score lower by almost 100 points, but such individuals are few and far between.

Future implications are not so bright either. College grads who find themselves burdened with unpaid loans also tend to put off marriage or raising a family. In fact, even if they do get married, most of their income goes in their mortgage and car payments.

Additionally, since students are finding it difficult to find and hold down decent jobs, their parents are delaying their own retirements in order to support them. So, it’s kind of like a vicious cycle that refuses to abate due to the perpetual economic strife.

Even experts have a hard time deciphering the magnitude of this crisis. According to the Vice President of the Institute of College Access and Success, Pauline Abernathy, there is a dire need for accurate student loan data if there is any hope of curbing this issue before it gets out of hand.

What can we look forward to?

The good news is that this mismanaged industry can still see a turn around, thanks to start-ups. These have been cropping up in the student loan space and have already been responsible for creating and implementing innovative business models. One of their innovations include Crowdfunding, which is a concept that has been responsible for providing lenders straight access to students who require additional funds for their college tuition.

Lenders (or Backers) also have the privilege of hand picking the individuals they believe deserve their loans and who can pay them back in time. Organizations such as SoFi and Upstart are taking part in this practice in order to enhance the selection for such promising borrowers who in turn can manage risks by pooling in smaller amounts per candidate.

Unfortunately, things are going to remain the same until and unless the labor market undergoes a change. This involves creation of opportunities for new graduates actively searching for jobs that can provide them a steady paycheck. There are some organizations that offer loans to students with a bad credit history, but unless the economy stabilizes, such companies may start to dwindle in number. Personal businesses or start-ups can aid in stemming the tide, which the recently passed JOBS Act might facilitate if the owner has sufficient venture funds.

The App Economy

Introduction

The mobile app revolution arrived in the industry in 2007, and five years down the road, it has managed to grab the attention of customers and investors the world over because of the tremendous development and enhanced functionality.

The idea of the smart app was born out of the need to bring anything and everything on the finger tips. The innovation and growth of social media platforms fueled the need of app development, and so far, there has been no looking back for the industries that are working in this genre.

The Evolution of Apps Industry

As users started to recognize the appeal of carrying their personal life and business with them while on the go, the natural progression from desktops – laptops – tablets and then smart phones came into motion. The leap that the smart phone market has taken in the last few years increased the need and demand of the app market as well.

With mobile subscriptions increasing at a rapid pace and smart phones becoming a usual hype in personal and business circles, apps have become a part of our daily life. Whether you want to manage your schedule at work, count your calories at home, or interact with clients creatively, mobile apps have conquered it all. The journey from being a luxury to a commodity is the main reason behind the success of the apps industry, and the effects that it has had on the job market has rightfully taken the industry by storm.

The Appeal of Mobile Apps vs. Mobile Websites

Mobile apps have not only redefined the way people use the internet, but also how they access it. The effect is remarkably evident in the most popular segment of the internet- social media websites. Studies show that the social app time increased to around 76% this year as compared to the last, which implies that people now spend seven times more minutes on mobile apps as compared to using mobile web.

Accessing social content through mobile apps now accounts for more than one third of the total time spent browsing the internet! This is a major breakthrough, and will definitely continue to be profitable and appealing for both consumers and developers of these amazing apps.

The App Economy

Enter iPhone – the Masterstroke from Apple that Changed Everything!

It was the introduction of the Apple iPhone in 2007 that kick started the mobile app industry with a bang. Today, Apple claims that it has earned a whopping $6.5 Billion through the app store, and the medium is responsible for creating over 300,000 jobs in America alone. Android joined the ranks with its Google Play store in 2008, and the app industry has just seen a constant rise in its graph since then. Many popular apps, including those of games like Angry Birds and Temple Run, and social media platforms like Skype and Twitter have emerged as major money-spinners for their inceptors.

The App Economy and Its Effects on the Job Market

The app economy is being touted as the next big thing in re-establishing the declining job market. TechNet came out with a survey implying that almost half a million jobs in the US markets are connected to the growing app economy, and the future holds even more opportunities for developers and techy hopefuls.

According to Michael Mendel from South Mountain Economics, who conducted this research, the app economy has generated around 311,000 app related jobs directly and another 155,000 opportunities have been created indirectly. The big wigs in this regard include major companies like Playfish, Zynga and Electronic Arts, along with social media giants and many other smaller companies that have been steadily growing because of the appeal of app economy in the past few years.

The Financing and Marketing in the Background of App Economy

App economy is growing at a fast and rapid pace, giving many new entrepreneurs and business novices a chance to enter the market and earn big bucks.

In this area, the names of Tandem, Flurry, AppBrain and Appbackr are regarded as buzzwords to make your own presence felt in the competitive app economy and smart phone market. With thousands of creative ideas coming out in the front, these websites have proved to be highly beneficial in raising the quality graph. Individuals with app ideas can now leverage the platform offered by Appbackr to get validation and the required funding for moving from concept to prototype/product. Investors are basking in the appeal of the economy, consumers are enjoying the added benefits and the new job opportunities have proved be good news for a large number of hopefuls. Thus, it is all in all, a win-win situation at the moment.

Conclusion

In a slow yet steady pace, mobile apps have taken hold of everything in our life, from organizing your tasks to providing entertainment. Though there has always been the speculation that customers do not like to pay for apps and prefer the free ones over their paid counterparts, it is still a booming and growing industry, with many new opportunities and advancements expected in near future.

The app economy can definitely be relied upon as a major money spinner for the declining US markets. In the words of Peter Farago, the Vice President (Marketing) for Flurry, “There is unprecedented opportunity for America to capitalize on exploding international market.”

It is no wonder that mobile app technology is rapidly becoming a ‘remote control’ of the market, and smart phones are being touted as the rebuilding blocks of our tattered job economy. For now, it is safe to say that the dominance of the app economy in the industry is definitely on the rise and may bring safer and more profitable pastures for investors in the future.

An Entrepreneurial Economy

Dried up Access to Capital

The world is still reeling from the recent economic crises. Businesses, particularly start ups, are struggling to support themselves in a time when the credit crunch makes lenders cautious of lending funds by asking for an arm and a leg in exchange for investments.

The housing bubble contributed significantly to this catastrophe. High interest rates and a tight credit crunch indicated a rocky future that compelled many to re-think their goals. Combined with stringent loan standards that are worth less than their price and collapse of corporate culture these conditions leave the common individual in a bind.

On the other hand, this has made potential small time entrepreneurs sit up and take notice. Rather than risk being left behind or seek employment in a corporate set up, many are vying to gain exposure for their own businesses. Additionally, events such as the 2008 corporate struggle, the dot-com bubble, lack of opportunities, etc has forced many to come up with innovative ideas that can allow their own start ups a leg up in new markets.

For the sake of convenience, let’s discuss what entails a start-up. Not to be confused with small businesses, these are typically based on revenue and employment and are also considered to produce more job opportunities. Between 2009 and 2010, over 394,000 start ups were responsible for creating 2.3 million jobs alone!

In this day and age however, most small business ventures or start-ups run the risk of collapsing before they have a chance to make headway in their chosen markets. Less than 10% of startups may result in a useful product, but just 0.5% will generate enough profit to sustain operations.

This paints a bleak picture of the future, but there is still hope for future entrepreneurs who refuse to bow down to adversity. In April of 2012, President Barrack Obama and the Congress passed their JOBS (Jumpstart our Business Startups) Act that has given potential entrepreneurs a reason to celebrate.

The Act was created to allow startups a chance to succeed by relieving compliance costs that such operations were obliged to pay in the past. For instance, before the Act was signed, it was essential for a startup to allow an auditor to attest and report on their internal controls and management. The Act also excuses a company from paying approximately $1 billion in revenues from section 404(b) for the first few years (typically 5 years) of operations. Not only does this allow small start ups to avoid debt, but it also paves the way for other potential entrepreneurs to launch their own businesses. Furthermore, this flexibility has encouraged established businessmen/women to invest in such setups. In the past, the law required them to have a pre-existing relationship with the business owner if they wanted to invest in the latter’s business. They were also required to meet specific net worth requirements to be eligible as investors.

However, since the JOBS Act allows entrepreneurs to solicit the general public for funds, they now have a much wider pool of investors to choose from. Known as ‘crowd funding’, this allows the startup owner to appeal to the American public for funds whether they are family, friends, clients or complete strangers. Typically, entrepreneurs prefer crowd funding websites to ask for funds due to the availability of a larger number of potential donors. This ‘leeway’ has encouraged massive investments in the startup world and allowed entrepreneurs room to avail emerging opportunities without fear.

Entrepreneurial Economy

Significance of Business Incubators and Platforms

Business incubators are programs that are designed to support start ups or small businesses during their development stages via a number of resources, services and influential contacts. Successful ‘incubation’ projects can increase a startup’s longevity as well. In fact, studies have found that 87% of incubator graduates persisted in their businesses. This is a significant difference compared to the 44% who did not opt for an incubator program. The same goes for programs that allow fledgling business owners to share their ideas and attract investors to their cause. Some of them are mentioned below:

AngelList

Located in Silicon Valley itself, AngelList is a platform that provides startups a chance to sustain their business by connecting them with relevant investors and to get their name out. This allows start up owners to reduce time and energy that would be otherwise spent on pitching and/or responding to people who may or may not be able to help them reach their business goals.

General Assembly

Even though innovation in information technology in the last few decades has cut down the costs of online products, designing still holds an important role in determining their effectiveness. This is where General Assembly comes in. The company is responsible for creating new modes of learning via top practitioners and real time experience.

Students are taken through a task oriented curriculum that provides a multi faceted and pragmatic approach to real world issues. In other words, the center teaches the importance of merging new tech solutions with business models that can inspire a fledgling entrepreneur to create their own business solutions.

Tech Stars

Considered to be the foremost startup accelerator, Tech Stars is always on the lookout for tech companies they think have potential to succeed. Typically, they keep their selection to 10 organizations per program and have selection rates that are even lower than the Ivy League. The company is invested in by approximately 75 different enterprises that are considered to be the cream of their industries.

Tech Stars also provides 3 months’ worth mentorship program. Each goes deep into a company to weed out and analyze a startup’s potential and how its owner(s) can ensure favorable conditions for their enterprise for the future.

The Boston Startup School

As the name so obviously implies, the Boston Startup School takes young graduates and unseasoned professionals and provides them the skills necessary to create, manage and sustain their own enterprise. One of their famed specialties includes lining up skills and capabilities with professions that can aid students overcome their financial issues and take the next step in their career path. The school allows students to locate employment opportunities in the technological industry that can allow them to leverage their own startups once they are ready to launch them.

Startup Groups and Meet-ups

Not every startup business owner has the resources or income to invest in expensive mentorship programs. This necessity is what gave startup and Meet-up groups their popularity. Seasoned and inexperienced business owners gather in one place to pitch their business and relate experiences that allowed them to overcome obstacles in their path. 5 minute pitch presentations allow them to get their message across potential investors. Such groups are great platforms for untested entrepreneurs who need all the help they can get to launch their startups on favorable ground.

Conclusion

Entrepreneurs play a key role in the development of a nation. It is their innovative abilities, and determination to see them through that can pave the way for future entrepreneurs. The JOBS Act may not promise investments, but it can help start-up owners gain access to the same quickly. After all, allowing seed money to flourish and grow is the best way to see a country overcome hardship and strengthen its economy for future sustenance.