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Do income contingent student loans reduce labor supply?
Open accessAbstract
Government-backed income contingent student loans are increasingly being used to fund higher education. Until the outstanding balance is cleared, an income contingent repayment plan acts as an incremental marginal tax on earnings above a threshold. If this additional “tax” on earnings reduces the labor supply and hence the earnings of borrowers, this could reduce both loan repayments and tax receipts, increasing the cost of funding higher education. This paper investigates this under-studied topic by exploring bunching at various loan repayment thresholds between 2002 and 2014, using a novel, linked administrative dataset from the United Kingdom. Our findings suggest that the UK's income contingent repayment plan does not cause borrowers to reduce labor supply, at least for those with earnings near to the threshold.
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Cited by
Sorted by citations
The Distributional Effects of Student Loan Forgiveness
Catherine, S., & Yannelis, C. (2023) · Journal of Financial Economics · doi:10.1016/j.jfineco.2022.10.003 · Cited by 48
Metadata
- Authors
- Britton, J., & Gruber, J.
- Affiliations
- Institute for Fiscal Studies (GB)
- Corresponding author
- Britton, Jack
- ORCID
- Britton, Jack
- Venue
- Economics of Education Review
- Publisher
- Elsevier BV
- Published
- 2020-12
- Volume
- 79
- Pages
- 102061
- ISSN
- 0272-7757 (ISSN-L)
- OpenAlex
- W3094687690
- Cited by
- 13
- References
- 2
- Citations by year
- 2026: 1 · 2025: 4 · 2024: 4 · 2023: 2 · 2021: 1 · 2020: 1
- FWCI
- 0.85
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Economics of Education Review (publishedVersion, cc-by)
- RePEc: Research Papers in Economics (submittedVersion)
- DSpace@MIT (Massachusetts Institute of Technology) (submittedVersion, cc-by-nc)
- Funders
- British Academy
- Economic and Social Research Council
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Politics, Economics, and Education Policy
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Literacy, Pension, Retirement Analysis
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Keywords
- labor supply, bunching, income-contingent repayment, higher education funding
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- Britton, J., & Gruber, J. (2020). Do income contingent student loans reduce labor supply? Economics of Education Review. https://doi.org/10.1016/j.econedurev.2020.102061
