According to analysis on several fronts, the average American now owes more in student loan debt than on credit cards. In an ideal situation, that would be a good thing -- it would mean that people were borrowing for the purpose of improving their lives and refraining from building up massive consumer debt.

Unfortunately, as record levels of insolvency across the board demonstrate, these are not ideal times. While it appears to be true that many U.S. consumers have substantially paid down their credit card balances, the real story is that student loans are increasingly the source of financial trouble for many people.

Mark Kantrowitz, publisher of the financial aid websites FinAid.org and FastWeb.com, calculates that Americans owe a total of $829.785 billion in outstanding student loan debt. For the first time, that total exceeds the total debt owed in revolving credit -- $826.5 in June 2010 (most revolving credit is credit card debt).

Nevertheless, mortgages and credit card debt receive the lion's share of media coverage. The nonprofit advocacy group Student Loan Justice points out that the media prefers stories about credit card debt to student loans "by a factor of approximately 15-to-1 based on unscientific news surveys conducted since 2007."

Perhaps America's astonishing addiction to consumer credit makes sexier news, but the pain inflicted by the student loan burden may actually be worse.

Under the 2005 bankruptcy law, student loans typically can't be discharged in bankruptcy. That means that if anything happens to interrupt the expected income benefits of a college education -- a disability, a poor economy, or another life event -- educational debt can become a millstone that can never be removed.

Student loans -- often made to young people with little financial experience -- are made outside the purview of the basic consumer protection laws that apply to credit cards. The repayment terms can have surprisingly harsh consequences for borrowers who get behind -- such as the garnishment of Social Security disability benefits.

Overburdened Student Loan Borrowers Could Herald the Next Debt Crisis

Kantrowitz describes the growth in the educational debt burden this way: "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."

By his estimate, there is currently about $605.6 billion in outstanding federal student loans and another $167.8 billion in private student loans. Of the federal student loans, about $300 billion was incurred in the last four years alone.

Studies show that people are having to borrow a lot more to go to school today, and they're having to borrow at less favorable rates than in the past. According to the Pew Research Center, 2008 graduates owe an average of 24 percent more than 2004 graduates did -- and nearly double what 1996 grads had to borrow.

The cost of education is soaring -- college tuition is up more than 400 percent in the last 25 years. Post-college unemployment rates are a historic highs, and the percentage of college students able to finish in four years is down. Many are borrowing record amounts of debt only to be forced to drop out before they receive a diploma.

Overall, the average person between the ages of 20 and 29 owes $23,200 in student debt, according to the Project on Student Debt -- a 24% increase from 2004.

Worse, many students build up credit card debt during college. Fidelity Investments estimates that the average member of the Millennial generation has more than three credit cards, and a fifth of them owe a balance of more than $10,000. Juggling credit cards and student loans can be extremely challenging even for those with above-average incomes.

Add to this the fact that student loans have been one of the most profitable sectors in lending, and the outline of a true crisis becomes visible.

Related Resource:

"Student-Loan Debt Surpasses Credit Cards" (Real Time Economics blog, The Wall Street Journal, August 9, 2010)