Restoring the Social Security student benefit: The best policy idea you haven’t heard of yet

“I do believe we are responsible for the widow and the orphan.”

— Richard Gilbert, Tea Party supporter (New York Times, April 16, 2010)

Whether you are a Francis Perkins admirer or Sarah Palin follower, Americans believe Social Security is a promise worth protecting for all generations. Supporting the children of a diseased and disabled parent is a core American value enshrined in the values of the Social Security program, and reinstating the student benefit for post-secondary education should be a top priority of any reforms to strengthen Social Security. Since 1939, Social Security has supported the children of deceased, disabled or retired workers — that support now helps keep over a million vulnerable children out of poverty. In 1965, Congress recognized the growing importance of a college education and extended Social Security benefits for children of a deceased or disabled parent enrolled in college until age 22. The benefits were successful in helping children enroll in college and complete an education without having to enter the workforce when they turned 18 to support themselves and their family. In 1983, when Social Security faced a real crisis (unlike the phony one portrayed today), Congress sacrificed the benefit in a compromise to save the long-term solvency of the program. Today’s circumstances are vastly different and merit the restoration of the benefit.

According to an excellent new policy brief by Alexander Hertel-Fernandez and the National Academy of Social Insurance, a number of factors make the student benefit even more important for children than it was in 1983. First, the imperative of a college education continues to grow in a knowledge economy: “college graduates earn, on average, 61 percent more over their lifetimes than do high school graduates.” While the value of a college education has risen, so has its cost (roughly double since 1979). At the same time, youth have even less access to financial aid than ever before. The value of a Pell Grant has barely increased in real dollars, leaving it inadequate to meet the needs of rising education costs. The results have been devastating for the children of deceased and disabled parents. A 2003 study found that more than a third of the children eligible for the pre-1983 benefit did not enroll in college because of the lost benefit.

The two principal reasons cited in 1983 for the benefit elimination — a Social Security shortfall and administration challenges — are much less relevant today. The Social Security actuary estimated it would cost .07 percent of taxable payroll to restore the benefit (measured over the traditional 75-year Social Security window). The actuary did not consider how much that cost would be offset from the higher earnings and increased payroll tax contribution of the additional college graduates (paging Stephen Goss). In 1983, the Social Security Administration had some difficulty verifying student enrollment and eligibility for the benefit. Today, electronic verification through the FAFSA application (a requirement for almost all schools) would make such concerns moot. Given the extensive benefits of the student benefit to society and vulnerable youth and its rather miniscule potential cost, restoring the student is a policy equivalent of a no-brainer.