I'm fairly young and don't have much experience in the business world. So I'm wondering, why would an employer not hire someone due to them being over-qualified? If they were over-qualified, shouldn't that be a GOOD thing for the company?

It costs money and effort to hire someone and train them. If someone is overqualified, it typically means they're settling for a lesser job than they should in order to bridge a short-term gap in employment, with the intention of moving on when the right job shows up.

So the employer has to go through all the hassle of re-filling the job, losing the productivity of a trained worker, etc. It's actually very expensive.

The ideal employee is someone who is reasonably well qualified by still sees the job as challenging and interesting enough to grow in.

Over-qualified means more money paid out or hiring someone who will be always looking for a better job and most likely will not stay

An over qualified, unemployed person is "generally speaking" looking to use a job to step-up, as in,leave when a better job becomes available in 6 to 8 months. It's just easier to train-up a new, under qualified person, than risk starting over again in 6 months.

They probably think you won't stick around, as soon as you find something better your gone

Employers see an over-qualified person as someone who's likely to become bored, who'll feel like their full range of skills/experiences aren't being utilized, and who will feel underpaid, leaving for a better job.

over-qualified employees will not be content to settle for a job that is clearly beneath them, not for long, anyway. by the time the company has invested time and resources training/familiarizing that employee with their work, the employee will have moved on to a better job. then the company must start all over again, advertising, interviewing, training...you get the idea