This video was made possible by Hover Student debt has crossed 1.5 trillion dollars
this year, making it the second highest debt just behind Mortgage debt.
It has even passed credit cards and auto debts.
And it seems like this number is only going to rise because tuition fees are growing every
single year.
So the main question is, why?
(why colleges are expensive)
When students decide what college to get into, they first look into the rankings.
So colleges do their best to rank themselves higher.
That's why they try to get the best professors, build the most attractive buildings and get
the nicest facilities.
And all that costs money, in fact, a lot of money.
For example, the salary of a professor ranges from 130 thousand dollars to several hundred
thousand dollars.
So hiring even 10 professors will cost the college several millions.
Building attractive campuses, getting nice facilities is just one side of the story.
Because maintaining such a gigantic campus with huge stadiums isn’t cheap at all.
But without them, colleges understand that they won't get many students.
But it does not end there.
Most colleges have a big marketing budget to convince the 18-year-olds.
Who think they know everything but really understand nothing.
Why they should borrow a ton of money to get into their college.
Why their nice buildings and big stadiums worth every dime they are going to pay.
In other words, colleges are run exactly like businesses.
But what sets them apart is that they aren’t ordinary businesses.
First of all, colleges or universities aren’t obligated to pay any taxes.
Even if they earn more than some of the biggest companies in the country.
But that's not a big deal.
Because the real problem is that, the government is making it easy for every high school graduate
to get a student loan.
And most of these students borrow huge debts without understanding how these debts work.
And what separates student debt from other types of debts is that there is no way around
it.
Even if you declare bankruptcy, you still have to pay it.
And that's what creates the problem.
So when colleges know that these kids who just graduated from school can borrow huge
loans to study.
And their debt is going to be paid for sure sooner or later.
They will build even fancier campuses, bigger stadiums, more facilities and will spend even
more money on marketing to attract these students.
Which will keep driving the cost higher.
In the 1980s, per year tuition fees used to cost 3400 dollars or 10200 adjusted to inflation.
But the exact same year today costs over 34 thousand dollars.
Schools are getting more expensive not because they are improving the quality of education.
But rather they are spending more and more money on things that don't really matter to
persuade the 18-year-olds to take large loans that will hunt them for the rest of their
life.
The problem with student loans is that.
Banks usually recommend you to make the minimum payment once you graduate and start paying
back your debt.
But that minimum is too small to make any difference because it doesn’t even cover
the interest.
And in a matter of few years, you will find yourself paying hundreds of dollars every
single month.
But your debt is still growing.
And now there are 44 million young people all across the United States with an average
debt of 37 thousand dollars.
The educational system suppose to be the mechanism that lifts people out of poverty.
But it seems like in the last few decades, it has been serving a different purpose, dragging
people into the loans that they cannot afford.