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Finance allah shmoop what is the student loan crisis Well

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simply put more and more and more students have no

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hope of paying back the loans they've borrowed to go

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to college Pick a middle of the road priced university

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good school but state money is fast evaporating so tuition

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and other costs are midway to that of the elite

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private institutions like harvard and stanford On those guys tuition

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twenty grand a year times for room and board Fifteen

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grand a year times four books travel another five grand

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a year times for two green unnecessarily priceless add it

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all up and the total cost to go to a

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middle of the road price university these days all in

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while somewhere around one hundred and sixty grand ouch Some

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of the money can be paid back via summer work

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but it's not easy to find those jobs anymore right

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Certainly in california and a lot of students grumpily have

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tto live in their old rooms back with parents desperately

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hustling artisanal toothbrushes on etsy or moonlighting as a driver

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for uber or lift if you like tips But let's

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say ten grand gets paid back through summer work each

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Summer the interest cost on student loans is high Yeah

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Why Well students or a bad risk How would you

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like to loan money to a student Tons of them

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don't pay back the loans they promised to pay back

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when they signed the paperwork taking them out in the

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first place Five percent interest rate ten percent Twenty percent

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what's the right number Yeah who knows Well all that's

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clear is that some very large number of student loans

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will default and then cost a fortune in lawyer bills

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to collect if they ever get collected at all How

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would you feel being the bank who loaned all those

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bad loans to people who majored in french literature and

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couldn't get a job Well is this fair to the

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non dead beat students who actually did pay back the

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loans they took out They're not responsible for those students

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who were unable to find gainful employment in their field

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study or those who are teo you know preoccupied even

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bother paying loans back in the first place Regardless all

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the goody goodies air left the riding the same skyrocketing

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interest rates is everyone else Why Because you have to

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Charge the non deadbeats mohr interest to pay for the

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deadbeats who didn't pay back their loans Is that fair

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No not at all Is it really life You bet

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isn't that one of the first lessons they teach you

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in college that life isn't fair Well so figure ten

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percent on student loans and here's where things get brutal

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ten percent interest Ah history and english major graduates from

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whatever university with one hundred fifty grand in debt just

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saying they owe fifteen grand a year just in interest

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and the loan packages require them to pay down the

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loan and ten grand a year because they gotta get

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their principal back at some point bringing their total annual

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repayment to twenty five thousand dollars so that after fifteen

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years the loan companies can finally be paid off and

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presumably loan the money to some other deserving student But

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here's Job reality 10:14 history and english majors and we

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know this here It's come up because way hire them

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well Other than its mup there are almost no jobs

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for history and english majors today other than driving uber

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or being a barista may be bartending or you know

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convincing hotties to pay your rent by quoting shakespeare about

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that not a real job and no union and all

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that is said you know until those jobs were taken

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over by driverless cars and robots and artificially intelligent computers

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pitching woo for the shakespeare quote thing and the relatively

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few jobs that do exist don't exactly pay a ton

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of money like think forty grand a year for starters

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So on forty grand you'll pay say make grand in

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taxes and other government fees That leaves you about thirty

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two thousand dollars toe live on and to pay off

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your loans but you're one you owe twenty five grand

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on your loans Fifteen is interest which is not tax

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deductible by the way and ten grand is in principle

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Pay down So that leaves you seven thousand bucks toe

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live on Was that what you spent on haircuts Clothing

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in car insurance alone last year What about eating Is

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that optional How about rent and like anything else Yeah

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you can't afford it So hopefully your parents haven't rented

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out your room yet So why is this thing called

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a crisis Haven't you been listening Because loans of magnitude

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Have continued to flow out of the various coffers that

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loan money to students and the ability to repay those

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loans is getting worse and worse and worse Well eventually

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the system grinds to a halt with massive declines in

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loans made and then what happens Riots What happens when

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students air simply denied the ability to go to college

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altogether What will they do Demand colleges drop tuition costs

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with colleges care colleges are going bankrupt too by the

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way and be nice if they could drop tuition costs

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But other than the top forty or fifty colleges around

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the country Well most schools of higher learning or just

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barely scraping by many you're committed to very high fixed

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recurring costs in the form of tenured professors they and

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not fire expensive building and land maintenance and insurance for

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you know creative student activity and so on someone and

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so on It all adds up such that tuition needs

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to remain high just to pay those bills and keep

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going Could the government step in and just like big

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mama pay all the bills Well your feelings about this

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issue will vary with your political alignment but that still

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doesn't solve the issue of rising costs which will keep

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on getting higher and higher And no matter who's footing

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the bill and why's it fair for the government to

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take money from high earners and give itto low earners

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for something like college that has unclear financial payback Is

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that fair What's our solution but we don't have one

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but it's not how shmoop rolls Our only advice is

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think long and hard when picking a college major and

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taking loans out for school That means keeping your hands

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off ebay and amazon and keeping your nose in the

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books and look really hard at majoring in engineering or

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something Next time you meet a french literature major foreign 00:05:46.295 --> [endTime] coffee for you at starbucks

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