WASHINGTON -- As the first in her family to attend college, Lucia DiPoi said she had few clues about financing her college education. So when financial aid and low-interest government loans did not stretch far enough, DiPoi applied for $49,000 in private loans, too. "How bad could it be?" she recalls thinking.
When DiPoi graduated from Tufts University in Boston, she found out. With interest, her private loans had reached $65,000 and she owed an additional $19,000 in federal loans. Her monthly tab is $900, with interest rates topping 13 percent on the private loans.
DiPoi, 24, quickly gave up her dream to work in an overseas refugee camp. The pay, she said, "would have been enough for me but not for Sallie Mae," her lender.
The regulations that the federal Education Department proposed this month to crack down on payments by lenders to universities and their officials were designed to end conflicts of interest that could point students to particular lenders.
But they do not address the fact that more students are relying on private loans, which are so unregulated that Attorney General Andrew M. Cuomo of New York recently called them the "Wild West" of lending.
Banks and lenders face negligible risk from allowing students to take out large sums. In the federal overhaul of the bankruptcy law in 2005, lenders won a provision that makes it nearly impossible to discharge private student loans in bankruptcy.
While federal loans also allow borrowers myriad chances to reduce or defer payments for hardship, private loans typically do not.
Many private loan agreements also make it impossible for students to reduce the principal by paying extra each month unless they are paying off the entire loan.
Dozens of students interviewed said when they signed for their loans they were unclear on what interest rate they were getting and that financial aid counselors discussing repayment failed to include interest that students were compounding while in college.
Members of Congress are looking at ways to tighten oversight of private student loans.