About 5 million Americans are currently in default on their student loans, with the default rate expected to approach 40 percent by 2023. The average Class of 2016 grad owes more than $37,000.
Meanwhile, the future of Social Security is more precarious than ever as payouts to retirees outpace the payroll contributions of active workers.
But one congressman from Virginia thinks he's come up with a way to defuse both these generational time bombs — or at least postpone their detonation for another few election cycles, which is what denizens of Washington call long-range planning.
U.S. Rep. Tom Garrett, a Republican whose tobacco-country district includes the Appomattox Courthouse where Robert E. Lee surrendered to Ulysses S. Grant, was elected to his first term in 2016. His Student Security Act would let student loan borrowers knock $550 off their outstanding principal for every month they agreed to postpone their retirement, thus delaying their eligibility for Social Security benefits.
Workers born after 1960 are currently eligible to start collecting benefits when they turn 62 (although “full retirement age” is 67). Student debtors willing to forgo benefits for 73 months after their 67th birthday can pare their student loan principal by up to $40,150.
Garrett figures that's a good deal for debtors reasonably confident that they'll be able to work until they're 73 — or save enough to support themselves without the Social Security benefits they've agreed to forego.
Many of those struggling to make their current payments seem to agree.
In a survey of 943 student debtors conducted by LendEDU, an online lending company that specializes in refinancing student loans, nearly half those surveyed (46.3 percent) said they'd be willing to swap Social Security benefits for loan forgiveness, while fewer than one-fifth nixed the idea outright.
The average respondent had a little more than $29,000 in student debt and was willing to delay his or her retirement age 22 months, knocking about $12,000 off their student debt. But more than a third of those willing to participate said they'd trade whatever deferral time was required to wipe out 100 percent of their debt.
It's not clear how those survey results square with the federal government's projections. But Garrett says the Social Security Administration estimates that his proposal would save it $725 billion over the next 75 years — in addition to whatever reduction in stress-related illness results from relieving tens of millions of students of their obligations.
Is anyone really surprised that a significant number of debtors in their 20s, 30s and 40s are willing to trade benefits they won't see for decades (in the rosiest scenario) for an immediate reduction in their monthly expenses? Isn't that the same posture our elected representatives in Washington have adopted toward practically every fiscal challenge they confront.
Eat, drink and be merry
A lot of milennials I know are convinced that my generation, or maybe even the incumbent president's national security team, will have rendered their generation's Social Security eligibility a moot question long before they approach retirement age.
The more you believe in the imminence of a pre-emptive nuclear strike on North Korea or Iran, the better the deal outlined in Garrett's bill begins to look.
And although some conservatives worry that even a limited debt forgiveness initiative might send policymakers down the slippery slope that leads to (shudder!) free college, many Republicans share Garrett's view that his proposed compromise could be a winning play for congressional candidates looking to woo younger voters.
The truth is that nobody who appreciates just how shaky the whole Social Security edifice is thinks today's college graduates should count on collecting benefits half a century from now in any event. If Garrett's right, a lot of those students are going to jump at the chance for defer their future entitlements while they can still get something in return.
You may contact Brian Dickerson at the Detroit Free Press at [email protected]