Unlawful Loan

  

Categories: Credit, Ethics/Morals

When Benny the Loan Shark lets you borrow 30 large to pay gambling debts, that's unlawful. It's a loan, but it's not legally done. There was no filing of the details. No fair practices standards adhered to. It was just a smile and a wink and a "you'll pay us back or else" vibe.

Yeah, you don't wanna go here.

See: Payday Loan.

Related or Semi-related Video

Finance: What is the Student Loan Crisis...24 Views

00:00

Finance allah shmoop what is the student loan crisis Well

00:07

simply put more and more and more students have no

00:10

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

00:14

to college Pick a middle of the road priced university

00:17

good school but state money is fast evaporating so tuition

00:21

and other costs are midway to that of the elite

00:24

private institutions like harvard and stanford On those guys tuition

00:28

twenty grand a year times for room and board Fifteen

00:30

grand a year times four books travel another five grand

00:34

a year times for two green unnecessarily priceless add it

00:38

all up and the total cost to go to a

00:40

middle of the road price university these days all in

00:43

while somewhere around one hundred and sixty grand ouch Some

00:46

of the money can be paid back via summer work

00:48

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

00:51

Certainly in california and a lot of students grumpily have

00:54

tto live in their old rooms back with parents desperately

00:58

hustling artisanal toothbrushes on etsy or moonlighting as a driver

01:02

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

01:05

say ten grand gets paid back through summer work each

01:08

Summer the interest cost on student loans is high Yeah

01:11

Why Well students or a bad risk How would you

01:13

like to loan money to a student Tons of them

01:16

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

01:18

when they signed the paperwork taking them out in the

01:21

first place Five percent interest rate ten percent Twenty percent

01:24

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

01:26

clear is that some very large number of student loans

01:30

will default and then cost a fortune in lawyer bills

01:33

to collect if they ever get collected at all How

01:36

would you feel being the bank who loaned all those

01:39

bad loans to people who majored in french literature and

01:42

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

01:44

non dead beat students who actually did pay back the

01:47

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

01:51

who were unable to find gainful employment in their field

01:53

study or those who are teo you know preoccupied even

01:57

bother paying loans back in the first place Regardless all

02:00

the goody goodies air left the riding the same skyrocketing

02:03

interest rates is everyone else Why Because you have to

02:06

Charge the non deadbeats mohr interest to pay for the

02:10

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

02:12

No not at all Is it really life You bet

02:15

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

02:17

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

02:21

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

02:24

ten percent interest Ah history and english major graduates from

02:28

whatever university with one hundred fifty grand in debt just

02:31

saying they owe fifteen grand a year just in interest

02:34

and the loan packages require them to pay down the

02:36

loan and ten grand a year because they gotta get

02:39

their principal back at some point bringing their total annual

02:42

repayment to twenty five thousand dollars so that after fifteen

02:45

years the loan companies can finally be paid off and

02:48

presumably loan the money to some other deserving student But

02:52

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

02:56

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

02:59

well Other than its mup there are almost no jobs

03:02

for history and english majors today other than driving uber

03:06

or being a barista may be bartending or you know

03:09

convincing hotties to pay your rent by quoting shakespeare about

03:13

that not a real job and no union and all

03:15

that is said you know until those jobs were taken

03:18

over by driverless cars and robots and artificially intelligent computers

03:23

pitching woo for the shakespeare quote thing and the relatively

03:26

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

03:29

of money like think forty grand a year for starters

03:31

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

03:34

taxes and other government fees That leaves you about thirty

03:37

two thousand dollars toe live on and to pay off

03:39

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

03:42

on your loans Fifteen is interest which is not tax

03:45

deductible by the way and ten grand is in principle

03:48

Pay down So that leaves you seven thousand bucks toe

03:51

live on Was that what you spent on haircuts Clothing

03:54

in car insurance alone last year What about eating Is

03:57

that optional How about rent and like anything else Yeah

04:00

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

04:03

out your room yet So why is this thing called

04:06

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

04:09

Have continued to flow out of the various coffers that

04:12

loan money to students and the ability to repay those

04:15

loans is getting worse and worse and worse Well eventually

04:18

the system grinds to a halt with massive declines in

04:21

loans made and then what happens Riots What happens when

04:25

students air simply denied the ability to go to college

04:28

altogether What will they do Demand colleges drop tuition costs

04:33

with colleges care colleges are going bankrupt too by the

04:35

way and be nice if they could drop tuition costs

04:38

But other than the top forty or fifty colleges around

04:40

the country Well most schools of higher learning or just

04:43

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

04:47

recurring costs in the form of tenured professors they and

04:51

not fire expensive building and land maintenance and insurance for

04:55

you know creative student activity and so on someone and

04:58

so on It all adds up such that tuition needs

05:01

to remain high just to pay those bills and keep

05:03

going Could the government step in and just like big

05:06

mama pay all the bills Well your feelings about this

05:09

issue will vary with your political alignment but that still

05:12

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

05:15

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

05:17

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

05:20

take money from high earners and give itto low earners

05:23

for something like college that has unclear financial payback Is

05:26

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

05:29

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

05:31

think long and hard when picking a college major and

05:34

taking loans out for school That means keeping your hands

05:37

off ebay and amazon and keeping your nose in the

05:39

books and look really hard at majoring in engineering or

05:42

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

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