Income-contingent repayment

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

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:

• £18,330 for Plan 1 loans: (Scotland and Northern Ireland) & (England and Wales for loans take before 1 September 2012)
• £25,000 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 pass the money onto HMRC along with other contributions (Income Tax and National Insurance. HMRC Then provides the full financial year's worth of deductions to student loans company beginning from May after the finance year and may provide updates until December. Customers receive their statements 30 days after their accounts are updated. ^[1] The loans are also repaid through Tax Returns by Self Assessment, which is paid in the January after the Financial year is ended and given to SLC in April. Customers who reside or work overseas are required to directly contact SLC to arrange repayment of their loans directly to Student Loans with another means of income assessment. 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

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