TODAY   |  March 19, 2013

Colleges suing graduates unable to pay back loans

Americans owe roughly $1 trillion on student loans, and as college graduates encounter difficulties with high monthly payments, the universities they attended are suing to get the borrowed money back. CNBC’s Scott Cohn reports.

Share This:

This content comes from Closed Captioning that was broadcast along with this program.

>>> a warning this morning if you are still paying back your student loans , americans are roughly $1 trillion and increasingly some schools are suing their former students. here's cnbc's senior correspondent scott cohen .

>> reporter: aaron graf is 30 years old and just getting by.

>> maybe i have $100 spending money a week, spending money means gas and food. i don't go out to eat.

>> reporter: he eechz high school equivalency courses and does remodeling on the side all to pay around $600 a month on his $60,000 in student loans .

>> i'm basically paying rent twice.

>> reporter: now he has a court judgment against him, george washington university where graf earned a degree in 2010 , sued him last year for non-payment of a $4,000 federal perkins loan for low-income students. graf says he is paying his other student loans but something had to give.

>> i guess i could get another job where i'm working 17, 18 hours a day.

>> reporter: the university wouldn't talk about graf's case but says in general litigation is a last resort, a view shared by administrators across the country.

>> by and large most institutions are trying to work with their students.

>> reporter: the problem is that delinquent student loans are growing, passing late credit card payments for the first time and federal law requires schools to collect and sometimes sue. unlike most forms of debt, you can't get out of a student loan , not even by declaring bankruptcy, but with delinquencies rising and budgets shrinking, lenders and colleges are getting more aggressive about collecting, including taking their alumni to court. we found cases filed by yale and the university of pennsylvania which filed some two dozen suits just last year for bad loans and unpaid tuition, a 35% jump from the year before. the university has declined to comment. graff hopes his case starts a dialogue.

>> let's talk about why is college so expensive. what is it we're getting to are our money when we put our money into these institutions.

>> reporter: it's a conversation colleges are willing to have, but they also want their money. for "today," scott cohn, nbc news, philadelphia.