Income-contingent repayment

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Income-Contingent Repayment is an arrangement for the repayment of a loan where the regular (e.g., monthly) amount to be paid by the borrower depends on his or her income. This type of repayment arrangement is mostly used for student loans where the ability of the new graduate borrower to repay is usually limited by his or her income.

United Kingdom[edit]

Income-Contingent Repayment is available for Student loans in the United Kingdom since 1998. The Student Loans Company (SLC) that manages student loans for students living in the UK makes sure that the repayment of loans only begins after the student has left higher education and is earning over a certain threshold of:

  • £17,335 for Plan 1 loans: (Scotland and Northern Ireland) & (England and Wales for loans take before 1 September 2012)
  • £21,000 for Plan 2 loans: (England and Wales for loans taken after 1 September 2012)

These loans are collected via the PAYE tax system by employers deducting from the salary from their employees and hold the money until the end of the tax year (5 April) and then pass the deductions to HMRC along with tax, national insurance etc., who then break the payments up and pass them on to SLC between May and December.[1] This is different from the previous "mortgage style" loans (These have now been sold from SLC to other loan companies that include Erudio Student Loans, Theisis Servicing and Honours Student Loans) that set a fixed monthly payment irrespective of the graduate's income.

United States[edit]

There are a number of loan repayment options available to U.S. federal student loan borrowers, including some that are based on the borrower’s income.[2]

See Income-Based Repayment for detailed information.

References[edit]

  1. ^ Higher Education Retrieved on November 28, 2012
  2. ^ https://studentaid.ed.gov/repay-loans/understand/plans