In a nutshell, Social Security is heading towards financial instability, and that is truth. The timeframe of the beginning of this instability is seen differently by different people, but there is no doubt in any cogent person's mind that Social Security needs to either pay less in benefits, or take more funds in, or it will begin to falter at some time within the next 40 years.
Currently the financial institutions that participate in the Guaranteed Student Loan Program loan out many billions of dollars in student loans every year. The institutions which make these loans are obviously making more money with student loans than they would if they invested their capital in the way that the Social Security Trust Fund does - else they would mimic the method in which Social Security invests.
So, what's the point to this? Quite simple. I believe the Guaranteed Student Loan Program could significantly improve (if not fully remedy) the financial strength of Social Security if the Social Security Trust Fund were to be allowed to engage in student loan offers.
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These student loans would be guaranteed by the government in the same way that private institutions' loans are currently guaranteed. After the program has built steam for a few years, federal guarantees on student loans not offered by Social Security could end, allowing the "Social Security Student Loan System" exclusive access to federal guarantees on Student Loans, but still allowing non-guaranteed student loans from current sources that wish to continue offering them. Over time (depending on growth rates and incoming funds), Social security might even begin buying loans that already exist, and consolidating loans like the current lenders do.
There is already an existing model for a profitable business structure on which to base Social Security's entry into the Student Loan field, so no new methodologies need be invented, though I'm sure some variations would need to be implemented.
Going into default on Student Loans could be remedied in many ways, from partial deductions from the Social Security withholdings on paychecks to withholding retirement benefits for defaulted individuals until they have repaid what they owe with what would have been their monthly stipend. This would not preclude disability and possible exceptions to repayment rules, just as Student Loans can be deferred now, under some circumstances (determined by folks who know more about these things than I do) the repayment of Student loans based on Social Security income could be reduced, or eliminated in worst case scenarios.
On a similar note, there could be the possibility of (elective or mandatory) Pre-Tax automatic deductions from payroll deductions in order to pay for Student Loans. This would allow Social Security to offer both the convenience of automatic payment and tax free payment of Student Loan Debt.
There could also be the option for those who make over ninety thousand dollars per year to elect to have Social Security taxes withheld in order to repay student loans.
I am by no means an expert in financial matters, but I do believe this idea to be a sound one. If a plan something like this were to be implemented for Social Security, that agency could:
1) Provide a needed service to college students.
2) Make a good rate of return on it's investment (especially if the government guarantees the interest to Social Security in the same way that it guarantees money to private lending institutions)
3) Have a guarantee that one way or another it would almost always get it's money back, provided that the students work for a significant duration during their life at any given time.
4) Reduce the overall tax burden on people who have Student Loans, by allowing the option of pre-tax repayment on Student Loans through Social Security withholdings.
5) Reduce the amount of government funds that leak from the government into the banking industry through the loan guarantee mechanisms, and funnel that money back into Social Security.
As a layman, the biggest problem I see is the problem of weaning big financial institutions off the Student Loan program without disrupting students' access to said loans. The institutions that invest in student loans are Very Large, employing thousands upon thousands of employees and rash acts could have significant impacts on our education system and economy in the short, or perhaps even mid-to-long term. Not only that, but the affected financial institutions will fight tooth and nail to keep Guaranteed Student Loan money flowing into their coffers, instead of into Social Security.
Comments? I have sent this idea to a couple politicians, but if you think it's worthy of consideration, please feel free to send it to a few more.
