Graduating Into Debt

(CBS)  For accountant Alex Guzzetta, not a day goes by when he doesn't think about these numbers: $90,000 in student loan debt, $20,000 owed to the federal government and $70,000 to a private lender.

"A third of every hour I work is basically just going towards just maintaining the interest on my student loans. I'm not getting anywhere, they're not getting any lower. I'm just buying time," he tells CBS News correspondent Kelly Wallace.

Guzzetta maxed out in borrowing a fixed low interest federal loan and had to take out a private loan. He says he didn't realize he'd wind up paying 10 percent in interest and a minimum of $535 a month for 30 years.

"They said 'In six months, this is what your payment's going to be,' and when I saw that I nearly had a heart attack," he said.

Just Google student loans and you'll see private lenders promising money hassle-free to cover costly tuition bills.

It's the same story on networks popular with the college crowd.

"We end up with students being drawn into a lot these loans they can ill afford and saddling them with huge debts," Sen. Chris Dodd, D-Conn.

Dodd, chairman of the Senate Banking Committee, says he sees troublesome parallels with the subprime mortgage market: low introductory rates which ultimately go up, limited disclosure of monthly obligations and aggressive marketing directly to consumers.

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Wallace Blogs: Student Debt

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To make sure the private student loan industry doesn't melt down like the mortgage market, Dodd has proposed a bill requiring lenders to provide more details to students about what they'll actually have to pay.

"If banks compete, students win. And I'm going to make them compete for that business here and watch them very carefully and make sure there's a good cop on the beat," says Dodd.

John Dean, special counsel to the Consumer Bankers Association, says most private lenders are acting responsibly, encouraging students to do their homework.

"If you go with a mainstream lender, if you go in with your eyes wide open, you ask the questions, you consult with a financial aid administrator, you are going to avoid these pitfalls. There is not, this is not a jungle," he said.

To help inform students, last year, financial aid administrators at Barnard College started calling every private loan applicant, making sure they had exhausted their less expensive options first.

The result? Before the calls, 98 students were taking out private loans; afterward, just 39 were.

"Nine times out of 10, when I asked the parents and the students, 'What's the rate you got on the private loan?' they did not know, and that really bothers me," says Alison Rabil of Barnard College.

"It feels like I'm just doling out money for nothing," says Guzzetta.

Saddled with so much debt, his hopes for a better car and an engagement ring for his girlfriend will just have to wait.

[lllyadams790]

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[manifester1]

I read your comments and I find myself surprised at the attitudes from much of the public. I am a medical student carrying the traditional medical school loan debt. I do not live an extravagant lifestyle. I pay my rent, buy peanut butter and jelly like many other students. The cost of education has increased steadily over the years while the federal loan amounts have not. To meet the cost of education, just tuition mind you, many students are forced to take out private loans or leave school. The fact that private loan companies, like SallieMae, have lobbied Washington, to provide them with legal tactics that would make the mafia jealous, is disgraceful. These loans cannot be included in Bankruptcy, as one person commented. They are protected even greater than the federal govt. loans. In the event you become disabled an unable to pay, Sallie Mae may garnish your social security benefits as well as any disability benefits you may receive. They can also suspend a physican''s license to practice medicine in the event the physician cannot pay the loans. If the government provided more protection to students trying to attain higher eduction in this country, we wouldn''t be required to go to the equivalent of a loan shark to fulfill our dreams.

[dkhbike]

Wow! A third of every hour just to pay back loans. I myself should be so fortunate, since about a HALF of every hour I work goes for federal, state, local, excise, property, sales, etc., etc., TAXES.

[mem18]

Since these are private loans not bankruptcy exempt government Student Loans many former Student will declare bankruptcy out them, forcing another government bailout.

[dadmanly]

No sympathy here. Any fool who pays $180,000 for college has made a bunch of choices he or she didn''t need to:
1) not working part time or full time during college (cramps the party and after party lifestyle)
2) attending a pricey private college instead of a public one
3) considered fulltime employment with possible breaks in schooling or night school
4) taken the easy way instead of the harder ways, and is now paying the price (literally).

[readerword]

We all make choices in our lives. I chose to not take out a student loan. It meant no cell phone, a crappy car (that I would always park on a hill so I could get a rolling jump start for the dead battery), roommates in college, and most of all working full time until I had enough money for a semester.

Everyone wants to go to heaven, but no one wants to die.

[teddyr56]

I am sure I am not the only parent who cosigned for these student loans, I cosigned for 1 loan, then signed the paper when my son says, oh Mom, they are going to finace at a lower interest rate. I trusted my only son.
When after working only four years after college and with a wife and three kids, he becomes disabled, and can''t pay the loans and I get the horrible dreaded phone call that all cosignors fear.
&quot;Hey, you owe us 33,000.00 dollars, the (two) loans you cosigned are presently 3000.00 past due, we will accept a phone check.
Now people, I am 56 years old, looking forward to retireing from a 30 year job in a power plant, which is not a real pleasant place to work in the first place, but now they will drag my dead body out of that *** place and I will never know retirement, because I will be paying over 100,000.00 dollars back to these people by the time I''m done. I pay 300.00 and maybe 50 or 60 go on the principle.
Where does someone like me turn for help?

[readerword]

This guy is an accountant??? Please tell me what company so I know where NOT to go.

[carjordan200]

The report could have been more explicit. These a loan shark lending insitutions. Their accounting methods are, at best, SLOPPY. There is apparently no true auditing by the DOE. There is fraud from everyone involved, including the schools. They tell you what you can expect to earn with a degree, but it''s not true. The loan sharks consolidate loans without borrowers permission. THERE IS NO CONSUMER PROTECTION for borrowers. You have to remember that LIFE HAPPENS, like cancer, death, hurricanes, and earthquakes. It can happen to ANYone. My &quot;little&quot; loan has now TRIPLED, and carries credit card interest rates. That''s NOT what I signed up for.

[pearbo]

I don''t feel sorry for this idiot. He chose to borrow money. How much more is he earning now that he is an accountant. I bet it is a lot more than his student loan payment. Tell him to hop off the cross; we need the wood.