Graduating Into Debt

Costly private loans are saddling students with debt.
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.

Wallace Blogs: Student Debt

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.