Do income contingent student loans reduce labor supply?
Jack Britton and
Jonathan Gruber
Economics of Education Review, 2020, vol. 79, issue C
Abstract:
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.
Keywords: Income contingent loans; Labor supply; Higher education finance (search for similar items in EconPapers)
JEL-codes: H81 I22 I23 J22 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0272775720305471
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoedu:v:79:y:2020:i:c:s0272775720305471
DOI: 10.1016/j.econedurev.2020.102061
Access Statistics for this article
Economics of Education Review is currently edited by E. Cohn
More articles in Economics of Education Review from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).