A New Deal for Young Adults: Social Security Benefits for Post-Secondary School Students

Summary: Social Security is best known as the foundation of retirement security for older Americans. Equally important is the economic security it provides to families that lose a breadwinner’s support because of death or disability. Social Security provides benefits directly to about 3 million dependents under age 18 (or under age 19 if still in high school) who have lost parental support because of death, disability, or retirement. Between 1965 and 1983, the benefit continued until age 22 for young adult children who were enrolled in post-secondary education. This brief examines the case for reinstating Social Securitystudent benefits until age 22 for children of deceased and disabled workers. It finds:

• Higher education is even more important in today’s labor market than it was when student benefits were terminated. Workers with only a high school education face a larger wage gap today than did high school graduates 30 years ago.
• Higher education costs far more, and financial aid is less adequate, than when student benefits were terminated. After adjusting for inflation, a year’s tuition, room and board in public four-year institutions has more than doubled, reaching about $15,200 in 2009. At the same time, the average Pell grant (just under $3,000 today) has almost no more purchasing power than the average grant 30 years ago.
• In the past, student benefits improved college enrollment and completion rates among minority and low-income students.
• Social Security student benefits today could help low-income community college students better balance work and school to complete their degrees. When Social Security student benefits were in place, they helped college students work fewer hours than would have been necessary without the benefits. Yet, because student beneficiaries had, on average, lower family incomes, they still worked more than other college students.
• The cost of such a student benefit would be modest — 0.07 percent of taxable payroll over the 75-year horizon used by Social Security actuaries.
• Student benefits are consistent with other public policies that view students as dependents of their parents and fit with the family life insurance and disability insurance functions of Social Security.
• Americans support paying for such benefits through Social Security. A national survey in July 2009 found that 78 percent of Americans supported extending benefits for children whose working parents have died or become disabled, from the current cut off of 19 years to 22 years old, if the child is in college or vocational school.