A Solution to the Student-Debt and Social Security Crises

(Photo: Zimmytws/Dreamstime)
Forgive student loans for those willing to delay retirement.

Student loans and the solvency of Social Security are two problems looming over this country’s young adults. Nearly 50 million debtors ranging from their early twenties to their late thirties see their monthly pay strained by both their education’s costly past and their bleak retirement future.

William F. Buckley once said that “the most serious argument against social security has to do with its compulsory character, but very few people, if given the opportunity, would opt for exclusion.” But perhaps some would, if given something in return — such as student-debt forgiveness.

The Student Security Act of 2017, introduced as H.R. 4584 by Republican congressman Tom Garrett (Va.), is a proposal to do just that. It looks beyond traditional debates and pragmatically embraces the mood, concerns, and individualism of a rising generation.

The Student Security Program would offer student debtors the option of eliminating portions of their debt in exchange for delaying the age at which they will qualify for Social Security benefits. It would use immediate debt relief to cut mandatory spending in the future, and would create significant net savings over the lifetime of the program. Specifically, it would give $550 in student-loan forgiveness for each month a debtor was willing to raise his full retirement age, or $6,600 per year. For comparison, the average Social Security beneficiary receives $16,000 annually. Cosigners (parents, grandparents, etc.) could also participate, thereby resulting in earlier net savings for the program.

The Social Security Administration’s Office of the Chief Actuary estimates this program would save $726 billion over a 75-year window. This is a static score, meaning it does not account for the economic benefits of debt relief, and it represents roughly 11 percent of what is required to make Social Security fully solvent for the next 75 years in its current form.

The plan sets a maximum level of forgiveness of $40,150. This is high enough that 90 percent of those with student loans could fully erase their debt if they so chose, though it would entail delaying Social Security for up to six years and one month.

For perspective on a six-year raise in retirement, however, one need only consider the rise in life expectancy since Social Security’s inception. In 1940, the year of Social Security’s first disbursement of monthly benefits, the life expectancy of a 65-year-old was nearly 14 years. In 2017, a 65-year-old can expect to live another 20 years, with that number continuing to rise with development in modern medicine.

Student loans are the second-largest source of consumer debt in the United States, behind only residential mortgages. As early as 1985, Congressman William Ford cautioned that “we are producing a class of indentured servants who must work to free themselves of the bondage of educational debts. How will the next generation afford a home or car if their disposable income is committed to paying off student loans?” Entering 2019, debt is indeed inflicting substantial collateral damage on the entire economy as former students delay first-time home buying, family formation, business investment, and consumer spending.

A self-imposed sacrifice rather than a bailout, it is a conservative plan that can reform two programs at once.

Meanwhile, Social Security’s cash flows are becoming increasingly negative, with the fund projected to become insolvent in less than two decades. A recent Pew Research Center report found that 72 percent of Millennials don’t expect Social Security to be their main source of retirement income and 51 percent don’t think they will get income from the entitlement at all. This lack of faith in Social Security has led to the Millennial generation to becoming far more willing to support an overhaul.

By giving student debtors the opportunity for debt forgiveness in exchange for delayed Social Security benefits, Student Security simultaneously encourages significant mandatory spending reductions and provides immediate personal debt relief. A self-imposed sacrifice rather than a bailout, it is a conservative plan that can reform two programs at once.

Elliott Harding is an attorney from Charlottesville, Va., and former legislative director and counsel for Congressman Tom Garrett (R., Va.).