A Solution To College Debt?

During Congress’s final weeks of 2017, Virginia Rep. Thomas Garrett proposed a barely publicized bill which could have a major impact if it were to be passed into a law in the near future.

Formally known as H.R. 4584, the Student Security Act of 2017 seeks to combat two major issues facing Millennials today: rising college debt and the future insolvency of Social Security.

Debt Problems

Statistics regarding student loan debt are frightening.

As discussed in Forbes last year, “student loan debt is the second highest consumer debt category,” in America, and “there are more than 44 million borrowers with $1.3 trillion in student loan debt.” The same article also reports that the average student in the “Class of 2016 has $37,172 in student loan debt.”

As of 4Q 2016, of the nearly 50 million borrowers, there was a reported 11.2% delinquency or default rate.

Social Security Problems

Sadly, the statistics regarding the state of our nation’s Social Security program are equally as depressing.

Another Forbes article from 2016 details how the Social Security “system is already bust.”

Will Baldwin writes that, “more money is going out in benefits and overhead ($714 billion a year) than is coming in from payroll taxes ($646 billion) … There’s supposed to be $2.7 trillion set aside in a trust fund to cover Social Security benefits. It turns out that this fund is a fiction. The savings account is empty.”

A Legislative Solution?

The Social Security Act of 2017, a bill that is currently just floating around in the House Ways and Means Committee and Education and the Workforce Committee, proposes a possible solution to these two dilemmas.

Elliot Harding breaks down the bill by highlighting the following key provisions:

  • “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.
  • 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.”

Be sure to check back in for future updates on this bill as it, hopefully, makes its way out of its committees and towards a more robust debate and vote in Congress.

***

JG

 

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