It’s a bit simplistic to assert that college isn’t worth the money, but add this data point to that debate: A surprising number of millennial small-business owners don’t hold a bachelor’s degree. In fact, that age group is by far the most likely demographic group to have skipped school and gone right into business, according to a study released Monday by credit bureau Experian.
Perhaps even more surprising: Fully 15% of millennial small-business owners have not even earned a high school diploma, the study found, a far higher rate than Gen X entrepreneurs (12%).
Only 16.3% of millennial business owners have completed a bachelor’s degree compared to baby boomers at just less than 19%, Experian says.
Countless studies have found that millennials certainly have an appetite for hanging out their own shingle. A Deloitte study last year found that 70% “might reject traditional business to work independently.”
It might be tempting to imagine these young business owners as a flock of new Bill Gateses or Mark Zuckerbergs — both famously dropped out of school — but the small-business owners in Experian’s research are more likely to work outside of tech, in industries that traditionally haven’t required a four-year degree.
The most popular industries in Experian’s study are: business services (5.9%); cleaning and maintenance (4%); general contractors (3.8%); motion pictures and video (3.3%); and beauty shops (3.2%).
In other words, skipping school to get rich is still very much the exception rather than the rule.
On the other hand, with so many college graduates struggling to find employment, the appeal of entrepreneurship is obvious. As this year’s crop of students graduated this spring, the unemployment rate for young grads was 7.2%, and the underemployment rate was 14.9%, according to the Economic Policy Institute.
“While millennials may have the highest percentage of those never having enrolled in college, it’s important to keep in mind that it could be a result of a tight job market and high tuition costs, especially shortly after the recession,” said Pete Bolin, director of consulting and analytics for Experian Business Information Services. “With technology deeply rooted in today’s younger generation, many have opted for entrepreneurism rather than a college education.”
The Kinds of Businesses Millennials Start
The places where millennials are starting businesses isn’t a big surprise — generally in America’s most populous states — but it is startling that fully 68% opened their doors in three states — California (29.3%), Texas (21.1%) and Florida (18.3%), according to Experian. The other states in the top five were Minnesota (6.2%) and New York (4.8%).
Just like enrolling in college, starting a small business by no means guarantees success. The failure rate among small businesses is a squishy data point — presidential candidate Rand Paul recently claimed 9 out of 10 fail, though the Small Business Administration (SBA) says the number is more like 5 out of 10. By any measure, it’s a tremendous risk.
Meanwhile, plenty of research shows that college graduates earn much more during their lifetimes than those with less education. Last year, the Federal Reserve published a paper saying college grads earned an extra $830,000 by the time they retire.
So skipping college isn’t necessarily a good idea. But starting your own company when other companies are less likely to hire you is certainly a rational response to a tough economy. The SBA found that the Great Recession had inspired a lot of unemployed workers to strike out on their own. In March 2011, 5.5% of self-employed people had been unemployed in the previous year, nearly double the rate from March 2006 (3.6%).
“Considering millennials are now the nation’s largest living generation, they potentially could become the country’s most prolific small-business owner population,” Bolin said. “It’s important to understand what drives this segment.”
More on Student Loans:
- How Student Loans Can Impact Your Credit
- Can You Get Your Student Loans Forgiven?
- A Credit Guide for College Graduates