Pictured above is the Capitol Building in Washington, D.C.
According to a Congressman’s press release, there is a new bill before Congress that is aimed at helping borrowers repay their student loan debt. This time, the bill offers a new twist on the subject. Known as the Student Security Act of 2017, it offers borrowers loan forgiveness in exchange for delaying their Social Security benefits.
Graduate student loan borrowers would receive $550 of as a loan credit for every month they agree to postpone their retirement. So if they postpone retirement for a full year, they’ll receive $6,600 in loan forgiveness. The maximum amount of debt forgiveness participants can receive is $40,150 which will delay their retirement age by six years and one month.
The legislation was introduced by freshman Republican Congressman Tom Garrett, who acknowledged in his press release that he is still paying back his student loan debt. He stated that while student loan debt is a growing concern, Congress has taken very little initiative to address this issue.
Garrett felt compelled to bring forward a solution to this problem, adding that by failing to address the student loan crisis, "…we will lose much of the potential from this generation. This loss would be devastating, as too would be the loss of its energy, ideas, and vision that create jobs and opportunity."
According to Garrett, participation in this program would be on a completely voluntary basis. He claims that early estimates have shown this bill would save Social Security $700 billion over the span of 75 years, which is more than the 11 percent needed to keep the program running. Garrett added, "This debt is a huge threat to America…I will not stand idly by as Social Security goes bankrupt and millennials drown in debt."
It remains to be seen what kind of support this bill will garner in the U.S. House, but if it passes, it could be beneficial to the average borrower who is struggling to repay their student loans. This voluntary program would allow participants to take on as much or as little forgiveness as their situation required.
The average college student graduates with $28,000 in student loan debt and studies have shown that this debt causes most borrowers to delay major life milestones like buying a home, getting married, and starting a family. Even small amounts of loan forgiveness could help graduates move forward in their lives more quickly.
And for individuals born after 1960, the soonest they can begin receiving their full Social Security benefits is age 67. So if they take the full amount of loan forgiveness, this pushes their retirement age back to 73, which isn’t entirely unrealistic given the average life expectancy is now 78.7 years.
Of course, this bill is anything but a sure thing. Congress is notorious for opposition, and loan forgiveness is somewhat of a touchy topic in general. It remains to be seen how this bill would truly impact the social security and student loan systems.
At any rate, it’s clear that this idea touches on the fact that many young Americans don’t have much faith in the future of social security. Current projections give the program another 20 years of sustainability from 2017 to 2037 before trust fund reserves are exhausted. It’s an easy assumption to make that young student borrowers would rather take the loan forgiveness today then hope Social Security gets revamped by their retirement.
It should also be noted that this idea will likely pertain to only federal student loans. Private loans are offered in a separate sector, and they lack many of the standard benefits offered by the federal government.
image copyright Jeremy Buckingham
Author: Andrew Rombach
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