What's the Smarter Move, Start My Business or Stay in School?

For a majority of college students, there’s a serious problem -- student loans.

In fact, the Class of 2014 was the most indebted graduating class ever. Sadly, the Class of 2015 will most likely take that honor next spring. So, wouldn’t it just make more sense to get out while you can and start a your own business? After all, Bill Gates, Steve Jobs and Mark Zuckerberg dropped out. That worked out pretty well for them. Before you make a final decision, I feel there are three factors to consider first.

Related: The Changing Economics of Student-Loan Debt: How to Pay It Off and Startup

Business Loans vs. Student Loans

Perhaps the most influential factor comes down to loans. Does it make sense to come out of college with a degree in something you’ll never use or take out a business loan for something you’ve always been passionate about?

For example, you’ve always been computer wiz and can easily build apps. Does that college degree really help secure you a job? Then again, you could apply that degree to helping launch your startup. Let’s say you go to a university to get a degree in finance, land a decent job after graduation and use your knowledge and paycheck to start a business.

While weighing out the pros and cons of each, the deciding factor could come down to the cost of loans.

There a a number of business loans from the Small Business Association (SBA) that can range anywhere from $10,000 to $1 million. The interest rates from loans are around 4.7 percent for 10 years and 5 percent for 20 years. That last loan that I got for my latest hosting startup was at 4.8 percent interest.

The average student graduates with roughly $33,000 in student loans. However, that depends on the educational institution they attended and for how many years. Because of this, it’s not surprising for many college grads to walk away with a six-figure debt. As for loan rate, they range between 3.86 percent to 7.21 percent.

Whether you go to school or start a business, you’re going to have to take out loans. If you want to be a lawyer, then obviously you need to stay in school. If you wanted to run your own bakery, then maybe you’re better off taking a business loan than accumulating student loan debt.

Related: How to Start a Business With Student Loans and Not Go Broke


Another consideration will be the connections you can make in school versus those you make in the business world.

Colleges and universities are great places to launch a business. Dell started in a dorm room, for example. It’s also a the perfect time to meet new people and expand your network. You never know where those connections may lead. For example, Bill Gates met his successor Steve Ballmer while at Harvard. Furthermore, schools offer some incredible resources to students.

Everything from competitions, incubator-accelerator programs to access to technology are available for college students. That doesn’t mean that they real-world doesn’t offer the same advantages. Jared Allgood, an entrepreneur who started Juxta Labs and sold the Yearbook app to United Online, made many connections in college but his biggest connections came after college. He argues that had he not gone to college, he potentially could have started his startup much sooner.

If you remain in school, you have a number of opportunities to expand your network and access the wide-range of resources provided for you. There are just as many connections and resources outside of school. You will just have to work to reach out to them.

Learning Experiences

Finally, how’s the learning experience different between starting your own business or graduating?

Some would argue that the better learning experience is when you’re actually doing. You can read a book and sit in an art class to learn how to draw, but you’re not going to actually know until you give it a try. The same can be said about starting a business. Taking some business courses doesn’t make your business more likely to succeed or fail.

On the other hand, if you don’t understand the fundamentals of accounting or how to budget your business, you’re going to have a difficult time making the numbers work in your favor.

Again, both options have advantages and disadvantages. There are definitely times when you don’t need to sit in a classroom. But, there may be the times when it’s to your advantage.

Deciding to start a business or remain in college ultimately comes down to which offers more benefits in the long run. Which will pay for itself, a student loan or business loan? Which gives you more opportunities to network or get your business noticed? From which will you learn more? Is it possible to do both?

Answering these questions for yourself will help you make that final decision.

Related: Guess What: Going to College Still Pays