Student loans: schooling stays with you

University prices have escalated rapidly in recent years, with some private schools besting $40,000 a year for education, room and board. With prices like these, it's little surprise that student loans are also on the rise.

During 2002, more than 11 million student loans were made, and Sallie Mae reports that 61 percent of students depended on federal loans to get their bachelor's degrees.

Since 1997, the median in undergrad debt has soared 74 percent to $16,500, according to a 2002 Nellie Mae report, the most recent available.

Grad students have also faced off with higher debts, facing a 72 percent increase in their median debt levels, to $23,700 over the period from 1997 to 2002.

About the only thing looking good for students are the interest rates, which have kept payments lower than they might otherwise be -- $182 in 2002 compared to $161 in 1997.

With the Federal Reserve indicating that its upward march of interest rates won't be ending any time soon, the unique debt situation may not last long.

"The raises in interest rates will reduce the willingness and ability of consumers to continue their pace of borrowing," said Hoyt. "This is both directly -- through the cost of debt -- and indirectly -- because it's likely to slow house price appreciation."

Rising interest rates will soon make debt look a lot less attractive -- and induce consumers to initiate a technique that's been little-seen in recent years -- saving.