Students Hooked On Credit

Across America’s college campuses, students are running up mountains of debt on credit cards -- cards banks pressure them into taking. No job or income is required.

University of Tennessee students Josh Nelson and Chancie Prescott were snared by sales come-ons, and today owe thousands of dollars, reports CBS News Correspondent Ray Brady.

Prescott says, "They call non-stop. I can be, it’ll be 8 o'clock in the morning getting out of the shower, phone rings and I’m like, 'I’m getting ready for class, I can’t talk to you.'”

Nelson says, "They set up booths… you hear, here’s a free U.T. T-shirt if you sign up for a credit card. They’re all over the place!"

Their debt is nothing compared to Jennifer Blacksheer’s, who owed $19,000 at one point.

Blacksheer was forced to work full time and go to school part time to pay off her debt. After 11 years, she still hasn’t graduated from Georgetown University.

She says, "I had to file for bankruptcy when I was 25."

Ten percent of college students owe $7,000 or more on their credit cards. But the real shocker is, colleges and universities allow banks to hawk their cards right on campus in return for millions of dollars.

“This is a dark secret that academia has been trying to keep under covers for a while now,” says Georgetown University sociology Professor Robert Manning, who studies student credit card debt.

He says, "The one group that gets truly free money out of the card industry is the university. There are no costs associated other than turning over a list of names or allowing people to come on campus."

The University of Tennessee in Knoxville has one of the most lucrative deals around. CBS News obtained a copy of the school’s contract with credit card issuer First USA. Under the contract, the university gives First USA the names and addresses of alumni, associates and all of its 42,000 students. For that, the university pockets $16.5 million over seven years.

Manning says the credit card companies go after students because they are "an unsophisticated audience."

He says, "This is a market that is wide open."

The university president would not talk to CBS News on camera.

Nor would anyone at First USA, which has contracts with several hundred other schools, and is one of many banks soliciting college students.

The banking industry argues argue 18-year-olds can handle their finances.

But Prescott disagrees. She says, "It’s too much credit for someone that young. You have no concept of what you’re getting into."

Nelson just made the decision not to go to graduate school, because, he says, "I owe so much money and I have to get on my feet."

At least half a dozen states, including Tennessee, are looking at laws that would limit credit card solicitations on campus -- a move that could keep studens from mortgaging their futures.