What Do Social Security and Student Loans Have in Common?
It sounds like the beginning of a bad joke, but consider this. If you had the chance to get up to $40,105 of your student loans forgiven, would you push back your retirement 6 years and 1 month to do so?
That’s the premise behind a bill recently introduced in the House to solve two problems in America.
Social security is the first problem the bill addresses. Many claim social security is unsustainable. According to the Social Security Administration website, “both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing.” The 2017 report also predicts that the funds will be depleted around the year 2030.
The other problem is student loans. We don’t need to convince you they’re a problem, but here’s a quick reminder. Student loan debt continues to break records, estimated at about $1.4 trillion and growing. Increasing numbers of borrowers (more than half according to an ASA study in 2015) are putting off large investments and life milestones, like buying a house or a car or starting a family. The national economy relies on those kinds of consumer spending.
The Student Security Act of 2017, though somewhat misleading in name, proposes the solution to the two problems outlined above. Harding predicts the bill would be “the most liberating piece of legislation to pass Congress in multiple decades.”
How does it work? If you’re interested, you can choose to push back your eligibility for social security benefits to a later age in exchange for scaling amounts of student loan forgiveness.
Specifically, you can get $550 of federal student loan forgiveness for each month you promise to delay your eligibility for social security benefits. For example, let’s say you will be eligible to start receiving social security benefits when you turn 70. To wipe away $13,200 in student loans, you decide to take advantage of the program and trade 24 months. You would then be eligible for social security benefits when you turn 72.
The delay would give the social security fund some time to catch up a little. At the same time, it would relieve you of some debt so you can focus that money elsewhere — like saving for retirement.
The Student Security Act of 2017, still in its first draft, proposes a cap at 6 years and one month, or $40,200 per person.
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