 What's happening guys? So everybody knows the obvious problems with student loan debt. According to the student debt clock, there is $1.75 trillion, yes trillion with a T, dollars in student loan debt. And that's just the flat amount owned at this time. That doesn't count the insane amounts of interest that people rack up as many end up paying twice as much as the original loan was worth. I took out nine different loans totaling $107,000. However, over the course of these loans, it has grown to over $154,000. But there's other things that they don't tell you about that are just as bad as the things that you commonly hear about. And these are important because knowing about these traps will save you a lot of time and money in the future. And as someone who went through all the way undergraduate, grad school, got my doctorate, these are the things that I wish I knew. Now as usual, don't forget to smash the like button on this video because these take me a long time to make and it really does help with the YouTube algorithm. Jumping right in, the first thing that people don't realize is that the default rate on student loans is much higher than people think it is. So according to the government, the default rate on federal student loans is about 7%. But when you dig a little bit deeper into the data, you find that that 7% is only the student loans that were defaulted on during the first two years. And then another thing is that student loans that are being deferred aren't counted into the data. Now, student loans can be deferred for many different reasons, but one of the main ones, probably the most common one is because of financial hardship. And many of those borrowers will end up defaulting as soon as the student loans are due again. And because of this, a lot of the data won't be available over the long term for many years to come. What is known is that default rates right now are much higher than they were in the past and it'll take a long time for us to figure out just how much higher that is. So we don't know how high the default rate is now, but what about say 30 years ago in the 90s? Well, according to report by CBS News and the Education Department, it's 20 to 30% for bachelor degrees and over 40% for two year degrees. And as expected for profit schools are even worse than that at around 40 to 50%. And if 40% of people taking out loans back then when tuition was much lower than it is now or facing default rates, it's probably going to be over 50% for people taking them out now. Now the second thing is that student loans can compound ridiculously fast if you miss a payment or you default on your loan. A friend of mine couldn't get a job after graduating from college and so she ended up defaulting on her loan. Now after defaulting, a collection agency owned her loan and instead of charging the 4 to 5% that it was before, they bumped up the interest rate to over 10%. Now long story short on one of her loans, she ended up paying nearly double what it was originally worth because of this ridiculously high interest rate. And this isn't just my friend. Reading some of the horror stories on sites like studentloanjustice.org is extremely illuminating. For instance, there's a story of a $40,000 undergraduate loan that ballooned to over $150,000. And this is because of various rescue programs such as forbearance, loan consolidation, payment deferrals and loan rehabilitation. When a student loan goes into default and ends up going into collections, they have the right to mark up the price of the interest on the loan by up to 25% of the principal. And thinking back on this when I was a teenager and I was thinking about taking out loans, none of this was told to me. I mean not a single person, not a counselor, high school counselor, college counselor or any of the stuff that I read online told me that they could do this. And doing the research on this video for hours, I scoured different government websites as well as student websites looking for a warning about this and I really couldn't find anything concrete. Now they do say that there are consequences for defaulting on your loans but there's no actual numbers mentioned. And hey, if I'm wrong about this and you can find something out there, please link it down in the comments and I'll check it out. Now the third thing that I want to talk about is how student loans can't be discarded in bankruptcy. Now I think a lot of people are aware of this one, but the government basically made it almost impossible for student loans to be discharged in the case of bankruptcy. So unlike almost any other type of loan out there like a business loan or a mortgage on your house, you can't get rid of it if things go south, like if your business goes down or for some reason you can't pay for the mortgage on your house. In very rare cases, we're talking probably less than 1% of the time judges can forgive student loans if the person is like a quadriplegic and they lost like all four of their limbs and they really can't make any money at all, they can forgive them. But if you choose to play the game of loans like a Lannister, you'll always have to pay your debt. Now number four on this list is kind of related to the last one but student loans have less consumer protection laws than any other type of loan out there. If you don't pay your student loans the way they want you to, they can take you to court, they can garnish payments from your work, they can even take money out of your social security checks, they can seize disability payments and all of these things by the way, they don't even need a court order to do. In many states, they can even take away your professional licenses like you would have if you were a doctor or a lawyer, which to me doesn't really make sense because that would obviously prevent you from being able to pay back your loan but they do it anyways. And the fact they can do all these things to you means whatever business or collection agency that owns your loan basically they have a ton of leverage over you, more leverage than they would have with any other type of debt. So for a moment imagine that you're some rich jerk on Wall Street in the loan servicing business. What type of loan would you want to take on in your business? Loans that have consumer protection, low interest rates and people are able to get rid of them with bankruptcy or loans that have almost none of those protections you can't get rid of them in bankruptcy, they're guaranteed by the government and on top of all of that they have ridiculously high interest rates. And then if that wasn't sweet enough the cherry on top is that if they can't pay off those loans you can actually increase the interest rates as a way of punishing them. Of course you're probably going to go for option number two and the way the current system is set up this kind of predatory behavior is not only allowed you could argue that it's rewarded. And honestly you could make a very good argument that it's unconstitutional to not have consumer protection laws on student loans but that's a topic for a completely different video. Number five on this list is your cosigners or parents for the loans can also be affected. So all that same treatment that I just talked about if your parents cosign your loan or you have somebody else that's a cosigner all of those things can happen to them as well. And if for whatever reason god forbid something happened to you and you passed away your parents or whoever cosigned the loan would still have to pay it off. And this is especially bad for middle class families. These are families where they don't make enough to be able to pay the full cost of college and so they do end up having to take out loans however they make just enough to where they probably don't qualify for as many scholarships and they still have to pay off those loans. The number six thing that they don't ever talk about is the middlemen that are in the loan process. So your student loans can be run through so many different middlemen that all take their cut. Your loan can be originated by one agency serviced by another collected by another sold to another and guaranteed by yet another. And your loan can also be traded or sold and you don't really have much say in it. Now these are supposed to be semi-governmental agencies whatever the heck that means but what they really are is cash cows and they're going to do everything in their power to drain you of every penny that you have. And this whole system is so needlessly complicated that I'd have to make an entire video just to explain how it works. Number seven on the list is going to be graduate loans. Now one thing I hear from students who are pursuing certain majors like psychology for instance where you're probably not going to be able to find a job with a four-year degree but there's a lot of good jobs out there apparently with a six-year degree is that they plan all along to go to graduate school and that's why they're going for a degree in undergrad that maybe isn't necessarily one of the best. Well I have some really unfortunate news for you and this is something you need to consider before you go down that road. First of all graduate school is usually much more expensive than undergrad. Second of all there's usually way less options for getting graduate school paid for like you'd have an undergrad such as scholarships grants and essay contests. And third the grad plus loan that most people take out in order to pay for grad school has a 4.2 percent servicing fee and a seven percent interest rate and on top of all of that it starts compounding the moment you take it out whereas undergraduate loans don't start compounding until after you've graduated. So imagine a situation where you're trying to become a medical doctor, you get into med school, you take out your grad plus loan and it's going to be probably seven to ten years before you actually start making good money and that's seven to ten years of your loan compounding at seven percent. So there's a good chance that by the time you start paying it off it's going to be double what you originally took out and this is why one of the big messages of my channel is that if you do choose to go to college you need to make sure to think of it as an investment because if you're going to go deep in debt in order to get an education you need to make sure that that is going to lead to you getting into a good job or starting a really good career and I really like this YouTube comment that one of my viewers left which kind of explains why you need to be a little bit more practical when you're thinking about college decisions. If you want to follow your passion do not study your passion study something valuable make that your primary source of income and then do your passion on the side that's how you do it and you can still go for your passion this is not what I'm saying I get all kinds of comments in my comment section saying I'm saying you should not go for your passion you should just purely chase the money that is not what I'm saying at all I'm saying that you should take a holistic view and be well rounded and think about more than just your passion when it comes to your college decision. So for instance if you're passionate about film instead of getting a $100,000 film degree you can buy a camera and then take a course on Skillshare that will teach you the basics of filmmaking and then you can just start practicing and I can almost promise you that you'll learn so much more from actually making films than listening to theory on how to make them. So if you're passionate about history for instance instead of spending $80,000 to get a history degree what you can do is you can just take the classes on your own and the best schools in the world like Harvard University offer lots of these classes online for completely free and if you want to make history into your career you're going to have to get a little bit creative you're going to want to you know start a YouTube channel or start a blog something along those lines. The big thing here is don't be one of the hundreds of thousands if not millions of suckers that fall for this trap. I think that every generation has something really bad that they do just because everybody else is doing it you know if you think back to the 50s it was smoking cigarettes you know it was super cool because all the stars were doing it and there were so many advertisements and if you didn't smoke cigarettes you basically were not cool and the 60s maybe it was like doing too many drugs or something like that I don't know. I think you get the point here every generation has their weaknesses and I think one of the biggest if not the biggest traps right now is going deep into debt to get a useless college degree that's not going to help you in life whatsoever in fact it's going to put you into a hole. For overall check out my other videos right here I made them just for you go ahead smash the like button hit the subscribe button ring the little notification bell and then comment down below any thoughts on this video or other videos that I should make thank you so much for watching and bye for now