In the past decade, Steele added, income across all sectors has remained flat or is declining. Even the wealthy, though better off than others, have taken a hit she said, which equals less in college savings.

The news isn't all bad though, according to the College Board, based on data from the U.S. Department of Education, for the 2007-2008 academic year, 41% of students that completed a degree graduated with no debt. For two-thirds of those that did graduate with debt, the median debt amount was $20,000.

"It's relative if $20,000 is a lot of money. For some it's not a lot, and they pay it off after graduating easily; for some it's their financial demise. It also depends, too, if they go on to graduate school and continue to add to that debt. The issue is that there is a growing minority of those that are borrowing excessively," Steele said.

Approximately, 10% of all bachelor degree recipients in 2007-2008 borrowed $40,000 or more, and 25% borrowed $33,000, according to the College Board.

"It's pretty extreme. It's a big public policy issue because it deters people from working in public policy where they won't be making as much money because they are graduating with this huge debt they need to pay off. It has important implications for our society," Steele said.

Another area that has been growing is the private-loan sector. Private loans make up 25% of total loan volume, Steele said, and have had massive exponential loan growth over the years.

Tim Ranzetta, founder and president of independent research and advisory firm Student Lending Analytics, called the time period of 2003-2007 the "lending bubble." During this time, the private student loan market experienced significant growth and was a $23 billion market. When the bubble and economy burst in 2007, so did the private lending market. It is now a $7 billion to $8 billion market.

"I say the lending went from subprime to super-prime," Ranzetta said. "Bad loans were being made and lenders pulled back. Research and studies have shown that lenders were suggesting private loans before consumers had maximized their federal loans. It was clearly excess."

In a recent press conference, Ranzetta said that Sallie Mae admitted that it had generated $6 billion in student loans and were going to write off 40% of those loans. The average FICO score for the loans Sallie Mae was distributing during that time was 623, he said, the average FICO score for Sallie Mae loans now is 750.

"It was easy capital. Lenders were originating loans, flipping them into the asset-backed security market and making new loans. They weren't managing risk," he added.

Looking at the numbers, the decline in a market from $23 billion to $7 billion to $8 billion shows a market that should be avoided, but 2007 was when credit unions started to take interest in offering a student lending product.

"This is a saying I took from Chip Filson at Callahan & Associates, but the credit union business model works very well in a counter-cyclical model," said Mike Weber, vice president of marketing at CUSO CU Student Choice.

CU Student Choice was formed in 2008 by six credit unions that were offering student loans and wanted to develop a network that brought the credit union philosophy to student lending.

"In 2007, things got interesting," Weber said. "Lenders were too closely tied to schools and were steering students to get private loans before federal loans. Credit unions saw this happening and wanted to create a credit union network based on credit union philosophy."

Now entering its third lending season, CU Student Choice has 107 credit unions signed up for the network, 80 credit unions are up and running and 20 are in the implementation stage.

"There's a new phenomenon of credit unions competitively coming into the market with a network of lenders, and I'm hearing community banks are coming into the market, too. It's a return to balance sheet lending," Ranzetta said.

Student Lending Analytics creates a list of the top private student loan products available, and Ranzetta said credit unions make up his top three lenders. This list, at www.studentlendinganalytics.com/ratings.html, ranks Addison Avenue Federal Credit Union, NASA Federal Credit Union and Northwest Federal Credit Union as having the top products.

With schools shying away from lender lists due to regulations, Ranzetta said there is an increase in direct to consumer marketing, which is difficult for start-up lenders like credit unions. Previously though, lenders would compete on brand and consumers would take the first offer for a loan they would get and go on brand name, but Ranzetta said he is trying to change that and create a market where lenders compete on price.

Looking ahead to the next 20 years, Weber said that there are a lot of big X factors involved, mainly on the federal side. With the current legislation on the table, even if it is not passed or it is changed, Weber said the future for private lenders making federal loans doesn't look very bright.

"For private lenders offering private loans there is opportunity. There are a lot of factors that would have to come in to play in order for that to completely dry up. I definitely think more and more credit unions will look at student lending and a lot more credit unions will make the move," he added.

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