Work

Do Income Contingent Student Loan Programs Distort Earnings? Evidence from the UK

Year: 2019

Type: report

Abstract: Government backed income contingent student loans are an increasingly being used to fund higher education. An income contingent repayment plan acts as an incremental marginal tax on labor earnings, which could cause individuals to distort their work effort. This paper uses an administrative dataset from the UK that links student loan borrowers between 1998 and 2008, to their official tax records between 2001/02 and 2013/14. Using a combination of techniques, including bunching and difference-in-difference methodology, our findings strongly reject the hypothesis that the UK’s income-contingent repayment plan distorts labor supply.

Source: National Bureau of Economic Research

DOI: 10.3386/w25822

Authors: Jack Britton, Jonathan Gruber

Institutions: National Bureau of Economic Research, Institute for Fiscal Studies, Massachusetts Institute of Technology

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Reduced inequalities, Quality education, No poverty

Open Access status: green

Funder: Economic and Social Research Council