He said even though the number of students taking out loans has been on the rise, the number of people going to college has also increased. About 30 percent of new student debt can be attributed to an increase in enrollment since 1989.
The percentage of students who default on their loans, rather than the percentage of students who take them out in the first place, could be a better indication of whether or not a student debt crisis exists, he said.
There are several factors that affect default rates.
The reauthorization of the Higher Education Act in 1992 made it easier to get federal loans, and a large amount of money can be borrowed without realizing the consequences.
“If I take out a loan, I’m not paying anything right now, and the effect of the loan is not immediately apparent,” Roy said.
Whether or not a student finishes a degree is another indicator of their likelihood of defaulting. According to a report by Matthew Chingos at the Urban Institute, only about 59 percent of students who start a public, four-year university finish a degree in six years.
Roy said not finishing school has this effect because the student pays for the education, but is unable to reap the benefits, and they may be worse off than someone who did not go to college at all.
The type of institution is also a factor: Those attending a for-profit, four-year university are almost twice as likely to default compared to their nonprofit private and public university counterparts.
Path of study is the final determinant. Arts and humanities majors are the most likely to default on their student loans, while STEM majors are the least likely.
Roy said a college education is random in the sense that two people who both finished their degrees can end up in different economic situations. There are steps colleges and students can take to alleviate loan problems, he said.
“Students need to take a good hard look at themselves,” he said.
Education is a long-term investment, so students need to be informed and have a plan, Roy said.
“A lot of places are trying to nudge students in the direction of being better consumers of information and better buyers in the student loan market."
Having on-campus financial counselors who can talk to students about what they can afford, and their chances of paying back loans could prevent students from making bad decisions, he said.
The Office for Scholarships and Student Aid at UNC has some resources about financial literacy for college students on its website.