According to a congressional press release, a new piece of legislation before the House may impact college graduates and their ability to repay student loans. The Student Security Act of 2017 gives student borrowers a chance for partial debt forgiveness in exchange for a later Social Security age of retirement, delaying the receipt of benefits in old age.
The program will offer a $550 credit for every month of delay in receiving benefits. For example, a borrower delaying his or her benefits for one year would qualify for $6,600 in loan forgiveness. The maximum allowable debt relief is $40,150, translating to six years and one month.
While commenting on the proposed legislation, Congressman Tom Garrett (R-VA) admonished Congress for “not [showing] much urgency to address the millions of Americans…struggling to pay $1.3 trillion in student debt.”
Experts at the Social Security Administration predict the Student Security Act will free up more than $700 billion in their budget due to delayed or forgone benefit payments to Americans at retirement age. This amount is roughly 11 percent of the required cash infusion to keep the fund solvent through the Baby Boomer retirement bubble.
While student debt is a sincere problem for young American student borrowers today, the $1.3 trillion outstanding balance pales in comparison to the unfunded liabilities held by the SSA. The Administration predicts a shortfall of $11.4 trillion by the year 2090.
Regardless, it appears that student debt is concerning enough for Congress to consider such a potentially game-changing policy in social security and student debt. Many of the 44 million Americans carry their educational debt for over a decade, pushing off their actual retirement age. A recent study by OneWisconsin Institute found that in-state students with graduate degrees needed 23 years to repay their loans. Bachelor degree holders weren’t much better off – 19.7 years to repay the average loan.
Congressman Garrett was blunt in his statements to the press: “These economic pressures inhibit key life events, like home-buying, starting a family, and worst of all, harnessing ideas and starting businesses.”
The economic impact of excessive levels of debt cannot be overstated, yet it remains to be seen whether this bill gains any traction. While it could provide needed relief for many families struggling with their student loan payments, it could also cause undue hardship later down the road.