By YOUNG MONEY Staff
10 August 2010

New figures from reveal that in aggregate, Americans owe more money in federal and private student loans than they do in revolving credit, reports the Wall Street Journal.

The Federal Reserve says that Americans owe a total of $826.5 billion in revolving credit debt, most of which is on credit cards. Outstanding student loans, meanwhile, total around $829.8 billion, reports the Journal, which got its figures from Mark Kantrowitz of FinAid.org and FastWeb.com.

The majority of those student loans - $605.6 billion - are held by the federal government, with another $167.8 billion held by the private loan industry.

Part of this seismic shift in consumer borrowing comes from households paying down their credit cards faster to get out of debt, as the recession continues to take its toll. Workers are earning less, working shorter hours and losing their jobs, creating an atmosphere where people focus on reducing their liabilities and saving more.

For those households with both student and credit-card debts, the latter usually take priority because of the higher interest rates typically associated with credit cards.

The soaring cost of college represents another part of the story. According to the Journal, the average cost of four years of tuition at public and private American universities hit $26,000 last year. At the same time, more and more and more Americans are going to college, many of them driven back into education by the awful job markets.
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"The growth in education debt outstanding is like cooking a lobster, Kantrowitz told the Journal. "The increase in total student debt occurs slowly but steadily, so by the time you notice that the water is boiling, you’re already cooked."

Despite the rising costs, most studies show that a college education - in the right fields - is still the most reliably way to increase lifetime earnings, despite the cost.

However, with college costing more, high school and college students should carefully assess what they want to study and what the demand for their skills may be. When college was cheaper, it was easier to justify taking out loans to study an interesting, but low-earning field like theater or music. Now, when a top-notch education could cost $160,000 - plus interest - prospective students need to make sure they'll be able to pay those bills.

And unlike credit card debts, auto loans or mortgages, student loans cannot be discharged in bankruptcy - you will be paying them for the rest of your life.