Starting a Business Despite Student Debt

The following is a transcript from a “Growing Your Business” segment interview with Back Yard Gaming founder Mathew Holmes.  It is also part of an ongoing series on student debt.

Mathew Holmes is a 24-year-old entrepreneur trying to start his own business called Back Yard Gaming. He is also a recent graduate of Johnson and Wales University, paying off nearly $25,000 in student debt.

Holmes: A buddy of mine and I have similar mindsets in terms of being entrepreneurs and starting our own company. It all started with this game that we used to play a few years back called Washer Toss and we played it all the time in high school and we brought it to college with us (at Johnson and Wales). When we graduated, we said, "We love playing this game. Everyone we have introduced it to so far loves playing this game, so let’s try to see if we can make it for everybody."

Scotti: This is after you graduated from college…. You came back home, you had student debt but you decided to start a business anyway, why is that?

Holmes: Well, the main reason actually, because my co-founder has more student debt than I do, is because we thought if we started our own business maybe we can get out of debt faster and basically all the profits and proceeds that we get go back into the company right now but the goal long-term is to use those profits to certainly pay down our loans first and then get started on our debt-free life.

Scotti: You got your degree in accounting, now you’re going back for your MBA. The accounting degree is when you had those student loans that you needed to take out – but you’re now deciding to start your own business, why is that?

Holmes: I’ve discovered that starting your own business is your way to financial freedom and freedom in general. You’re not locked up and at someone else’s disposal from 9-5 for 40 hours a week and we thought, if we put the work in now and build the company, maybe we can retire early and let the company run itself down the line.

Scotti: Do you feel free right now with the student debt that you've incurred?

Holmes: No, no, I don’t feel free at all. I feel like I’m at the liberty of my bills and it’s not even bills that I’ve put on myself. I suppose it is bills that I put on myself to take out the loans but it’s not like I racked up a large credit card debt or something like that. So you know, I don’t feel free at all and it’s just this big weight over my head just paying back this student debt and really can’t be free and live the life I wanted to live at 24-years-old – moving out or going on vacations.

Scotti: The U.S. is based on the fact that you can be your own boss, you can be an entrepreneur. [The government] also pushes education as a really important step in your life, how do you think they work together?

Holmes: They kind of contradict each other. As you mentioned before, the American dream – you can be your own boss, you can build your own company and your own business but there are a lot of loopholes and hurdles that you’ve got to go through to start your own business. You’ve got to pay a lot of money upfront; you’ve got to pay your taxes and you need to hire people and get licensed to do things and be able to legally sell things. But also the education – they push education – and what does education tell you? Get good grades and get a good paying job and really, that’s kind of contradictory to the American dream, you know? The country was really built on small businesses and businesses in general and now it’s really hard to start up your own business – and sustain that and make enough money on your own, on your small business to support yourself and be able to live the standard of living that’s required in today’s world.

Scotti: And it’s even harder when you have student loans that you need to pay back, especially with interest rates as high as yours? [Holmes’ interest rates are 6.8%]

Holmes: Definitely. It limits the amount of risk that I can take with my company. If I didn’t have this debt, I’d have a lot more money to put into the company and we’d have a lot more flexibility, a nicer website or maybe we could have more money for our marketing budget which really builds your company in the first place, so certainly restricted on all phases of my life because of this debt.