Monday, March 16, 2020

New paper: “Does Student Loan Forgiveness Drive Disability Application?”

Does Student Loan Forgiveness Drive Disability Application?

Philip Armour, Melanie A. Zaber

NBER Working Paper No. 26787
Issued in February 2020
NBER Program(s):Public Economics

Student loan debt in the US exceeds $1.3 trillion, and unlike credit card and medical debt, typically cannot be discharged through bankruptcy. Moreover, this debt has been increasing: the share of borrowers leaving school with more than $50,000 of federal student debt increased from 2 percent in 1992 to 17 percent in 2014. However, federal student loan debt discharge is available for disabled individuals through the Department of Education's Total and Permanent Disability Discharge (TPDD) mechanism through certification of a total and permanent disability. In July 2013, the TPDD expanded to include receipt of Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) as an eligible category for discharge, provided medical improvement was not expected. Using data from the Survey of Income and Program Participation (SIPP) matched to SSI and SSDI applications, we find that SSDI and SSI application rates increased among respondents with student loans relative to rates among those without student loans. Our estimates suggest the policy change raised the probability of applying for SSDI or SSI in a given quarter among student loan-holders by 50% (baseline rate per quarter is approximately 0.3%), generally increasing SSI and SSDI awards. However, these induced award recipients were unlikely to receive the disability designation necessary to obtain student loan discharge. Given that the geographic distributions of student loan indebtedness and historical SSDI/SSI program participation differ, there are strong implications for both the size and location of SSDI and SSI beneficiaries. Furthermore, these findings highlight the importance of learning from policy changes in programs that interact with SSDI and SSI to better understand the drivers of disability program participation.

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Monday, January 27, 2020

New paper: “The Employment Effects of the Social Security Earnings Test”

The Employment Effects of the Social Security Earnings Test

Alexander M. Gelber, Damon Jones, Daniel W. Sacks, Jae Song

NBER Working Paper No. 26696
Issued in January 2020
NBER Program(s):Program on the Economics of Aging, Labor Studies Program, Public Economics Program

We investigate the impact of the Social Security Annual Earnings Test (AET) on the employment decisions of older Americans. The AET reduces Social Security benefits by one dollar for every two dollars earned above the exempt amount. Using a differences-in-differences design, we find that the employment rate of those predicted to become subject to the AET decreases substantially relative to those not predicted to become subject to it. The point estimates suggest that the AET reduces the employment rate of Americans aged 63-64 by at least 1.2 percentage points.

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Savings and Retirement Forum February 4 with the CBO’s Nadia Karamcheva

Join us the afternoon of February 4

For a Lunch Meeting with Guest Speaker:

Nadia Karamcheva


Congressional Budget Office

Who will discuss her paper:

The Relationship Between
Household Debt and Retirement Timing

Noon-1:00 p.m.
Tuesday, February 4th, 2020

Click to RSVP

Location: Tax Foundation
1325 G St NW

(Lunch will be provided)

Nadia Karamcheva is an economist at the Congressional Budget Office (CBO) in Washington DC. Prior to joining CBO, she worked as a research associate at the Urban Institute. She has a Ph.D. in Economics from Boston College and a B.A. in Economics and Business Administration from the American University in Bulgaria.

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Thursday, January 2, 2020

CBO’s Long-Term Social Security Projections: Changes Since 2018 and Comparisons With the Social Security Trustees’ Projections

In June 2019, CBO updated its long-term budget projections, including projections of the Social Security system’s finances. CBO compares those projections with its 2018 projections and with the Social Security trustees’ latest projections.

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Friday, November 8, 2019

Social Security Bulletin, Vol. 79, No. 4

Released November 2019.

The Use of Longitudinal Data on Social Security Program Knowledge

by Laith Alattar, Matt Messel, David Rogofsky, and Mark A. Sarney

This article presents and compares results from the first two waves of Understanding America Study (UAS) surveys of public knowledge about Social Security programs. The article briefly reviews the Social Security Administration's past efforts to gauge public knowledge of the programs, describes the UAS survey instrument used in the current effort, and presents survey results with detail by respondent age, education, and financial literacy level. Among the authors' findings are that younger workers with lower levels of education and financial literacy are logical targets for agency informational outreach and interventions.

Hispanics' Knowledge of Social Security: New Evidence

by Janice Peterson, Barbara A. Smith, and Qi Guan

Although Hispanics rely more on Social Security benefits for retirement income than other population groups, their knowledge about the programs is shallower. The authors of this article use data from a large Internet survey panel to identify gaps in Social Security knowledge between Hispanics and non-Hispanic whites and among Hispanics across ancestry and primary-language groups and test the statistical significance of their findings. The results offer insights for further research and guidance for policy that aims to promote retirement security for U.S. Hispanics.

The Comprehensive Wealth of Older Immigrants and Natives

by David Love and Lucie Schmidt

This article compares the retirement preparations of immigrant and native-born Americans aged 51 or older. The authors estimate the present value of future income streams in calculating measures of comprehensive wealth and an annualized equivalent. In addition to some significant differences in median annualized wealth between immigrants and natives, the authors find that the most recent waves of immigrants are more financially vulnerable in retirement than earlier immigration cohorts were at similar ages. With a decomposition analysis, the authors estimate how much of the immigrant-native wealth gap is attributable to differences in observable characteristics.

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Wednesday, October 30, 2019

New working papers from the Center for Retirement Research

The Center for Retirement Research at Boston College has recently released five working papers:

How Best to Annuitize Defined Contribution Assets?
Alicia H. Munnell, Gal Wettstein, and Wenliang Hou
How Do Older Workers Use Nontraditional Jobs?

Alicia H. Munnell, Geoffrey T. Sanzenbacher, and Abigail N. Walters 
Will More Workers Have Nontraditional Jobs as Globalization and Automation Spread?

Matthew S. Rutledge, Gal Wettstein, and Sara Ellen King
Do States Adjust Medicaid Enrollment in Response to Capitation Rates? Evidence from the Medicare Part D Clawback
Laura D. Quinby and Gal Wettstein
The Effect of Medicare Part D on Evergreening, Generic Entry, and Drug Prices
Geoffrey T. Sanzenbacher and Gal Wettstein

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Friday, September 20, 2019

New paper: “Promoting Economic Growth through Social Security Reform”

From Marc Goldwein, Maya MacGuineas and Chris Towner of the Committee for a Responsible Federal Budget.

Here’s the summary, but you can read the full paper here.

Summary of Recommendations for Pro-Growth Social Security Reform

Recommendation #1: Increase the Retirement Ages while Insulating Vulnerable Workers with an Age 62 Poverty Protection Benefit (62-PPB). One way to increase the size of the economy is to promote work among older Americans. Workers today face mixed retirement signals that often draw them into early retirement and treat retirement itself as a binary choice. To encourage longer and more flexible working lives, we propose phasing in an increase to Social Security’s early and normal retirement ages and then indexing them to growth in life expectancy. Understanding that many workers are unable to continue to work, we also propose offering all workers a 62-PPB benefit designed to insulate low-income workers from the financial effects of the age increases and ensure that anyone can retire at 62 without slipping into poverty.

Recommendation #2: Calculate Benefits Based on Each Year of Work Rather than Lifetime 35-Year Average Earnings. Higher labor force participation among workers of all ages can help to strengthen the economy. Yet the current Social  Security benefit formula imposes a significant implicit tax on those who work less than ten years and on workers later in their careers – especially after 35 years of work. To reward each year of work, we propose counting every year of earnings toward Social Security benefits and applying Social Security’s benefit formula to annual, rather than average, earnings through a formula known as “mini-PIA.”

Recommendation #3: Automatically Enroll Workers into a “Supplemental Retirement Account” (SRA) on top of Social Security, with the Choice to Opt Out. Increasing the national savings rate would boost overall investment, increasing capital stock and economic growth. Unfortunately, many workers lack access to retirement savings vehicles, or are saving too little for retirement. To increase savings and investment, we recommend enrolling workers into add-on SRAs and automatically contributing 2 to 3 percent of their wages unless a worker chooses to discontinue contributions. SRAs could be invested into one of several well-diversified, low-fee funds and would be owned by the worker, who could access the funds upon retirement.

Recommendation #4: Make Social Security Sustainably Solvent Through a Combination of Progressive Tax and Benefit Changes. Reducing federal borrowing can promote economic growth by reducing “crowd out” of private investment, while improving policy certainty can significantly improve saving and investment choices. Unfortunately, Social Security is running large and rising deficits, which increase federal debt and leave the program on course to exhaust its trust fund reserves by 2035. To make the program sustainably solvent, we suggest a package of progressive revenue and benefit adjustments that would protect low-income seniors, phase in gradually, and ultimately bring the program’s costs and revenues in line. We also suggest that the precise composition of this package be decided as part of a political negotiation.

We also suggest lawmakers consider other pro-growth reforms – as part of and to supplement Social Security reform – in order to maximize potential growth effects.

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