Response to the following:
Read the Wall Street Journal article -The Rise of the Jumbo Student Loan By Josh Mitchell
The article reports on a research paper by Adam Looney of the Brookings Institution and Constantine Yannelis of NYU Stern. The research paper is available at -Borrowers with Large Balances: Rising Student Debt and Falling Repayment Rates by Adam Looney .
The main research findings highlighted in the WSJ article are that large-balance (above $50,000) borrowers now make up 17% of the total number of students leaving college or grad school in 2014 up from 2% in 1990. These borrowers thus owe the majority of outstanding student loan debt and those with such balances in 2010 had not paid down on the debt by 2014; instead, balances had increased due to accrued interest.
1. According to this article, what are the main findings about the overall status of student loan debt?
2. What is accrued interest?
3. How is it possible that a debtor with a student loan balance is not in default on the loan but the loan balance increases, rather than being paid down? In your answer, describe how a loan payment is allocated between interest and principal repayment.