NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Jack W. Britton

Institute for Fiscal Studies
7 Ridgmount Street
London WC1E 7AE
United Kingdom

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Institutional Affiliation: Institute for Fiscal Studies

NBER Working Papers and Publications

May 2019Do Income Contingent Student Loan Programs Distort Earnings? Evidence from the UK
with Jonathan Gruber: w25822
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.
 
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