What a Drag. High Tuition Stifling Start-Ups

When tuition rises, fewer take the risk of starting their own businesses.

That’s the conclusion of a new working paper by Harvard Business School economist Gareth Olds, who takes a look at the career decisions of parents about to shell out big bucks for their kids’ education.

Olds finds that a 10 percent rise in the average price of in-state college tuition corresponds with a 13.9 percent drop in the number of parents with college-age children who go into business for themselves.

“Just like would be entrepreneurs hesitate to leave their jobs for fear of not being able to afford health insurance, it makes sense that looming tuition bills might depress a parent’s appetite for career risk,” writes Walter Frick in the Harvard Business Review. “Is starting a business really worth jeopardizing your child’s education?”

For many, it appears the answer is “no.”

New and young companies are the primary source of job creation in the U.S. reports the Kauffman Foundation. The additional drag high tuition puts on the economy is troubling to see.