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The Effect of the Social Security Student Benefit on Lifetime Earnings

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Abstract

Between 1965 and 1981, Social Security extended eligibility for dependent benefits from age 18 to age 22 for individuals who were enrolled full-time in school. The “student benefit” ended in 1981, and past research has shown that the benefit’s elimination greatly reduced the probability of attending college for individuals who would have been eligible for it. We use the 1979 National Longitudinal Survey on Youth to examine the student benefit’s effect on lifetime earnings. We compare the lifetime earnings of individuals who would or would not have been eligible based on their high school graduation year and whether they had a deceased father. Over the study population, we find large differences in lifetime earnings (cumulative over ages 19 to 62), with those ineligible for the benefit earning less over their lifetime. This result is driven by women and elder siblings, as opposed to younger siblings or only children. We interpret what these results mean for understanding the effect of college on earnings, how college is subsidized, and whether cutting the benefit was more costly to Social Security in the long run by lowering earnings.

Key Findings

  • This study used a difference-in-differences (DiD) approach to causally identify the effect of the Social Security student benefit (an extension of dependent benefits for unmarried, full-time enrolled students) on lifetime earnings. We used the 1979 National Longitudinal Survey on Youth (NLSY79). The student benefit began in 1965 and ended in 1981. Based on high school graduation year, half of the birth cohorts in the NLSY79 were potentially eligible for the student benefit; the others were not. We identify individuals in the survey who would have been eligible for the benefit based on whether they had a deceased father and their high school graduation year. We find:
    • The student benefit likely increased college attendance. (This is a finding from previous literature).
    • The student benefit is associated with an increase in lifetime earnings when measured cumulatively over the study participants’ full work lives (ages 16 to 62).
    • The increase in lifetime earnings is driven by a statistically significant increase for women and elder siblings.
  • Our findings have implications for public finance and the returns on subsidizing college enrollment as well as for Social Security. The student benefit was cut in a cost saving effort, but our results suggest that cutting the benefit might have cost the program more in the long run by reducing earnings.

Citation

Edwards, Kathryn Anne, Daniel Schwam, Melanie Zaber. 2023. “The Effect of the Social Security Student Benefit on Lifetime Earnings.” Ann Arbor, MI. University of Michigan Retirement and Disability Research Center (MRDRC) Working Paper; MRDRC WP 2023-479. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp479.pdf

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Project

Paper ID

MRDRC WP 2023-479

Publication Type

Working Paper

Publication Year

2023