“The Effect of Student Loans on Entrepreneurial Firm Risk-taking, Performance, and Access to Venture Capital with Implications for the Biden Administration’s Student Loan Forgiveness Program”
by Karthik Krishnan
Northeastern University
Place: MA-202
Abstract
We empirically analyze the effect of student loans on entrepreneurial firm risk-taking and access to venture capital. We develop testable hypotheses assuming entrepreneurial risk-aversion declining in net wealth. Using the natural experiment of some universities’ adoption of “noloan“ financial aid policies, we find the following. Students graduating under no-loan financial aid policies start more entrepreneurial ventures, that are riskier (higher IPO or failure likelihood); more likely to be VC-backed and with larger VC investment; and with greater sales, employment, innovation, and trademark numbers. Using our empirical results, we estimate the entrepreneurial benefits of the Biden Administration’s student loan forgiveness program.
Bio
Karthnik Krishnan, with 25+ years in machine learning and a foundation in academic research, he bridges theoretical knowledge and practical applications across various domains. His work encompasses both modern AI technologies and established ML methodologies. His research focuses on Corporate Finance, Household Finance, Innovation, and Entrepreneurship.
He has taught courses in Corporate Finance, Venture Capital and Startup Funding, Financial Management. For the past 4 years, he has taught an Applied Machine Learning Course in Finance. He co-founded and led a Fintech organization for over 6 years that deployed more than $20 million in workforce development financing. This experience encompassed:
- Operations in regulatory environments
- Capital structure development
- Technology implementation and data analytics approaches in financial services
During this time, the organization received certification as a Community Development Financial Institution (CDFI) from the U.S. Treasury Department.
