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The Single Biggest Roadblock to Innovation in America: Student Loan Debt

There is major activity in start-ups around educational technology. It is estimated that in the first quarter of 2015 alone, half a billion dollars was invested into ed tech start-ups! While we have concerns that some (many? most?) of these start-ups are focusing on the wrong issues, nonetheless it is better to have the start-ups than not: While K-12 is a special case, technology should be able to penetrate K-12 schools and have as big and impact on K-12 as it has on just about every other avenue in our lives! 

But here’s the problem: student loan debt.  

Let’s get the basics on the table: Yes, college is worth it, and it’s not even close. For all the struggles that many young college graduates face, a four-year degree has probably never been more valuable. Indeed, Harvard economists Goldin and Katz argued in their three-inch thick book, The Race Between Education and Technology, that the “United States became the world's richest nation … thanks to its schools.”  The Amazon review notes: “[Goldin and Katz] establish a clear link between the number of high school and college graduates produced in any modern society and its economic growth.”

JPFs (Just Plain Folks) see student loan debt as a real problem: When a recent Wall Street Journal/NBC News poll asked people about a long list of domestic and foreign policy proposals, none received more support — 82 percent — than reducing the cost of student loans. This makes sense, since 7 out of 10 students have an education loan that needs to be paid back.

But economists are less inclined to say the sky is falling. Beth Akers, a Brookings fellow, said, “The evidence doesn’t support the notion that student loan debt is creating a drag on the economy.” Another Brookings fellow, Matthew Chingos, said, “We do think that the data undermine the prevailing sky-is-falling-type narrative around student debt.”

But the various analyses of student debt, like the ones mentioned by Akers and Chingos, don't take into account a key factor: the lost opportunity for innovation! As a professor in a computer science department who teaches college seniors majoring in computer science (CS), Elliot has repeatedly observed over the past seven years that:

  1. Very bright (maybe even the brightest?) students, who have student loans take jobs with established companies rather than take a risk by taking a job at a start-up or creating their own start-up. 
  2. The students report that their parents tell them: “Take a safe and secure job so you can pay off your loans. Don’t  be foolish and try to make  a million starting up a company or working for a start-up.”
  3. Elliot has taken an informal poll every semester for the past seven years or so, asking graduating seniors if they already had accepted a job by the end of their junior year, before the students have taken the really exciting and challenging classes like mobile app development, Web database design and cybersecurity. Big companies prey on the juniors’ fears of not getting a job by giving the students juicy but “exploding” offers that will go away if the students don’t accept them within a limited period of time.  Again, these students hear their parents’ admonitions, and about 25 percent accept jobs by the end of their junior year — before they have had a chance to see what computer science and software engineering is REALLY all about!
  4. Elliot also polls the students about the jobs they are accepting as seniors. Again informally, it appears that 80 to 90 percent of graduating seniors go to established companies. It’s hard to turn down $125,000 yearly starting salary, $50,000 in stock options, a $15,000 signing bonus and $10,000 in travel expense allowance. Yes, CS majors absolutely can pay back their loans — unlike the social work majors, unlike the political science majors, unlike the English majors who struggle to find jobs at a living wage and thus struggle to pay back their loans. But by taking a job that allows them to pay their loans back, these CS majors may well be missing an amazing opportunity.

Okay, there are some caveats to the above analysis. Yes, the sample size for this analysis is one, but we are sure that other faculty at other universities are seeing the same phenomena! Yes, a person can, in principle, innovate at a big company. But big companies don’t really innovate; they buy the start-ups that are doing the innovating. And at a big company, a first-year employee is typically not in a position to create major innovation. At a start-up, innovation is the whole point!

Simply put, because of their student loans, a very significant proportion of CS majors are not involving themselves in the risky business of innovation. With the failure rate of start-ups at 90 percent, and salaries at start-ups at half of what they are at a job in a big company, start-up employees with loans may well find themselves having difficulty paying back their student loans — unlike their friends who took the safe route and took jobs at established companies.

Innovation has a broad meaning. Part of it is inventing a new and better “mousetrap.” Larry Page and Sergy Brin started what was to become Google, now valued at about half a trillion dollars, in their Stanford University dorm rooms because they had the audacity to think they could make a better way to index the Internet. Another key component of innovation is creating new jobs. The National Bureau for Economic Research has argued that start-ups, not big companies, are where new jobs are created.

The New York Times Magazine recently did a whole issue on why the U.S. is the primary source of digital innovation in the world. But just imagine if virtually all the brightest undergraduate CS majors at all the universities in the U.S. participated in a start-up? Imagine what might happen if student loan repayment was deferred if a student worked in an educational start-up. America needs to fix the student loan problem; the innovation that will be unleashed will be beyond — WAY beyond — what we can even imagine!

About the Authors

Cathie Norris is a Regents Professor and Chair in the Department of Learning Technologies, School of Information at the University of North Texas. Visit her site at

Elliot Soloway is an Arthur F. Thurnau Professor in the Department of CSE, College of Engineering, at the University of Michigan. Visit his site at

Find more from Elliot Soloway and Cathie Norris at their Reinventing Curriculum blog at