The Concept of Social Security Child's
Benefits
The original Social Security Act of 1935 contained no provisions
for the payment of any type of dependents' benefits. However, even
before monthly payments began, the law was significantly changed
in the 1939 Amendments to transform the program into a family-benefits
social insurance system. In addition to benefits for the survivors
of deceased workers, the program was broadened to include dependents'
benefits paid to the spouse and/or minor children of the retired
worker. (After disability benefits were added to the program in
1956, these same type of dependents' benefits eventually became
available to the families of disabled workers as well.)
The basic concept of the Social Security program is that it is
designed to partially offset the loss of income to the family when
a worker retires, becomes disabled, or dies. The rationale for paying
benefits for minor children was that when a retired or disabled
wage earner has dependent children, the amount of lost earnings
that need to be replaced are greater than if the worker is single,
and so a benefit is paid for each dependent child. The Social Security
Board explained the provisions of the 1939 Act in this regard as
follows:
"The practical objective of the old-age insurance provisions
is to prevent old-age dependency. The effectiveness of the program
will be measured by the extent to which it enables the worker to
maintain himself in his old age without benefit of public assistance
or relief. This practical objective necessitates . . . the recognition
that the benefits to annuitants who have wives or children to support
must be larger than the benefits of those annuitants who have no
dependents . . . Therefore, it is desirable that, as early as possible,
benefit payments be at least sufficient in amount to afford subsistence
to the aged recipient and his dependents. This is accomplished under
the amendments in two ways: . . . (2) supplementary benefits related
to the wage earner's own benefit are provided for his wife if over
age 65 and for his children if under age 18. This recognizes the
greater presumptive need of families in which the wage earner has
such dependents." {1}
The Concept of "Student" Benefits
Under the 1939 law, a minor child of an eligible Social Security
beneficiary could receive a Social Security payment until he/she
attained age 18. Benefits stopped at this point because the child
was no longer presumed to be dependent on the beneficiary once they
reached this age--that is to say, they were no longer considered
to be a "child." (Later amendments would add the category
of "disabled adult child" under which a child past the
age of 18 could continue to receive child's benefits if they were
under a disability that started prior to age 18. Here again, the
rationale was that such a disabled child can be presumed to still
be dependent on his/her parents for support.)
In the 1965 Social Security Amendments the definition of a "child"
was broadened. In addition to presuming that a child under age 18
was dependent on its parents, the Social Security program began
to recognize the reality that children who are full-time students
after age 18 are often still in fact dependent on their parents
for their support. Consequently, the existing Child's Benefit was
extended in its duration to include children of the Social Security
beneficiary who were full time students, and under the age of 22.
The age of 22 was selected because this would be the usual time
period for a student to complete a four-year college education.
Thus, the "student" benefits added to Social Security
in 1965 were not really student benefits--they were an extension
of Child's Benefits. Although there was concern about the children
of Social Security beneficiaries being unable to pursue an education,
the basic rationale for these payments had to do with the presumed
dependency of the full-time student on his/her parents. That is
to say, it was predicated on the same rationale as the long-standing
Child's Benefit. Technically, they were in fact Child's Benefits.
As the House Ways & Means Committee explained this new provision
in its Report on the 1965 legislation:
"PAYMENT OF CHILD'S INSURANCE BENEFITS TO CHILDREN ATTENDING
SCHOOL OR COLLEGE AFTER ATTAINMENT OF AGE 18 AND UP TO AGE 22
Under present law a child beneficiary is considered dependent,
and is paid benefits, until he reaches age 18, or after that age
if he is disabled before age 18 and is still disabled. The committee
believes that a child over age 18 who is attending school full time
is dependent just as a child under 18 or a disabled older child
is dependent, and that it is not realistic to stop such a child's
benefit at age 18." {2}
The Payment of Student Benefits
Although properly speaking, Social Security student benefits were
in fact Child's Benefits, they quickly came to be viewed as a form
of "student aid," paid, in effect, to help students pursue
their education. This popular conception was difficult to displace
by any more precise understanding of the social insurance principles
underlying the benefit. In any case, the benefits were quite popular.
In the peak year of 1977, almost 900,000 students were receiving
this type of benefit. In the peak pay-out year of 1981, almost $2.4
billion was paid in the form of student benefits.
Number
of children receiving student benefits and total monthly
benefit 1965-99 {3} |
At End of
Year |
Number of children (students)
|
MONTHLY
benefit payment |
1965 |
205,677 |
$13,725,000 |
1966 |
375,873 |
$24,000,000 |
1967 |
427,267 |
$27,449,000 |
1968 |
474,056 |
$34,243,000 |
1969 |
498,015 |
$36,027,000 |
1970 |
537,170 |
$44,672,000 |
1971 |
583,374 |
$53,406,000 |
1972 |
634,481 |
$69,616,000 |
1973 |
651,540 |
$72,612,000 |
1974 |
679,101 |
$84,715,000 |
1975 |
774,261 |
$104,561,000 |
1976 |
834,975 |
$121,091,000 |
1977 |
865,542 |
$135,144,000 |
1978 |
817,492 |
$139,991,000 |
1979 |
793,185 |
$153,911,000 |
1980 |
733,267 |
$167,107,000 |
1981 |
760,508 |
$196,702,000 |
1982 |
476,307 |
$108,479,000 |
1983 |
293,489 |
$59,764,000 |
1984 |
172,872 |
$37,943,000 |
1985 |
94,400 |
$28,499,000 |
1986 |
84,120 |
$26,331,000 |
1987 |
78,916 |
$26,057,000 |
1988 |
95,974 |
$33,688,000 |
1989 |
90,753 |
$33,504,000 |
1990 |
89,278 |
$34,641,000 |
1991 |
94,667 |
$37,478,000 |
1992 |
90,333 |
$37,318,000 |
1993 |
94,197 |
$39,286,000 |
1994 |
93,790 |
$39,971,000 |
1995 |
91,514 |
$40,253,000 |
1996 |
95,904 |
$43,032,000 |
1997 |
97,156 |
$45,049,000 |
1998 |
93,452 |
$43,941,000 |
1999 |
104,230 |
$49,910,000 |
Problems with Student Benefits
Although these benefits were popular with the students and their
parents, there were at least three problems with student benefits.
The first problem was the relatively large volume of overpayments
experienced in the program. Since receipt of the benefit depended
upon the child being a full-time student, in any period in which
they were not a full-time student, they would be ineligible for
the payment. So if the student dropped-out, or scaled-back their
attendance to that of a part-time student, their benefits were supposed
to stop. The Social Security Administration (SSA) depended almost
entirely on self-reporting by the students or their parents to learn
about such changes in status. Often these reports were not made.
By the late 1970s this had become a cause for concern. An internal
SSA study in late 1978 estimated that as much as $150 million a
year was being overpaid in this manner. A study by the General Accounting
Office in early 1979 put the figure at $300 million. (The recovery
rate on the overpayments was about 75%--which means that the government
would eventually recoup most, but not all, of the money.)
The second problem with student benefits was their cost, in a period
when the Social Security program was facing budget pressures. At
more than $2 billion a year, student benefits were small enough
not to be a major component of the Social Security program, and
yet were large enough to yield significant potential savings from
scaling-back or eliminating these expenditures. Starting in the
mid-1970s, the Social Security program experienced several years
of adverse economic conditions, which had the effect of producing
concerns about its solvency. Policymakers were looking for ways
to reduce the costs of the Social Security program as part of an
initiative to address its solvency, and students benefits would
turn-out to be an attractive option.
The third problem has to do with the conceptual basis of these
benefits. If they were rationalized on traditional social insurance
grounds, then the argument used in 1965 would still be valid: full-time
students under age 22 are presumed to be the dependent children
of the Social Security beneficiary and the family therefore needs
a higher portion of its lost earnings replaced by Social Security
benefits. But as the popular conception of these benefits verged
from this foundation, their rationale came into question. Once this
type of Child's Benefit came to be seen as a form of student-aid,
its continuing support became dependent on considerations other
than social insurance principles. Indeed, the argument for eliminating
the benefit became that there were in existence abundant and available
forms of student aid, rendering this type of benefit unnecessary.
When student benefits were repealed as part of the Omnibus Budget
Reconciliation Act of 1981, the Senate Budget Committee offered
this explanation:
"Although the committee believes that a child beneficiary's
benefits should continue long enough to permit him a reasonable
opportunity to complete high school, benefits for post-secondary
students 18 and older should be gradually eliminated over the next
several years. Federal educational assistance is available for post-secondary
students for whom financial assistance is essential to complete
their education. (Since the time the student benefit was created
in 1965, the amount of such federally funded educational assistance
has grown from less than $300 million to about $7 billion a year.)
State, local, and private resources would also be available to assist
these students. Programs whose explicit purpose is to provide financial
assistance for education would be able to tailor the amount of aid
to the educational and living expenses incurred by the student,
and to the financial resources available to the student and his
family." {4}
Legislative Action to Repeal Student Benefits
In its 1977 and 1978 budgets, the Ford Administration proposed
a phase-out of student benefits; in its 1979 budget the Carter Administration
made a similar proposal. When the Reagan Administration took office
in early 1981, it offered a comprehensive budget and tax proposal
designed to achieve its economic objectives. Within this budget
blueprint, was a large set of Social Security proposals, primarily
aimed at reducing the cost of the Social Security program.
As part of its Fiscal Year 1982 budget proposals, the Administration
offered several sets of Social Security proposals. The Reagan Administration's
legislative proposal initially contained 12 provisions eliminating
or cutting-back on various Social Security benefits and 10 provisions
making cuts in Medicare. The Administration plan was introduced
in the House on May 6, 1981 as H.R. 3457 and in the Senate on June
1, 1981 as S. 1292. Among the 12 Social Security proposals was one
eliminating students benefits. Specifically, the proposal was to:
- Eliminate payments to students aged 18-21 pursuing higher education,
effective August 1981, with a 3-year phase-out for current college
students;
- Eliminate payments to elementary and/or secondary school students
upon attainment of age 19, effective August 1982.
On May 12, 1981 the Administration offered another legislative
package, with 13 additional proposals for Social Security programs,
virtually all of which were cuts of various types. Several of these
proposals were quite dramatic, including: cutting early retirement
benefits by 25%; eliminating regular child's benefits for the children
of retired workers under age 65; eliminating the minimum benefit
for current and future beneficiaries; no longer considering vocational
factors in disability determinations; doubling the duration of a
disability before benefits could be claimed; and a one-time delay
in the annual COLA benefit increase, among other proposals.
Although introduced initially as stand-alone bills, the Social
Security and Medicare proposals became part of the budget reconciliation
process in Congress and were eventually included in both Chambers'
versions of the Omnibus Budget Reconciliation Act of 1981. The House
passed its version of the Budget Reconciliation Act (H.R. 3982)
on June 26, 1981 by a vote of 232 to 193. The Senate passed its
version of the bill on June 25th, by a vote of 80 to 15. Both versions
of the bill included the phase-out of student benefits, modified
such that:
- The phase-out of benefits to post-secondary students would take
place such that the benefit would be reduced 25% per year, starting
in September 1982 and concluding in September 1984.
- Benefits would only be paid to post-secondary students for 8
months a year rather than the full 12 months.
Since the two versions of the bill differed somewhat, a House-Senate
Conference Committee was convened during July 22-29, 1981 to resolve
the differences between the two houses. This Committee, because
of the many issues involved in the Omnibus bill, contained 72 Senators
and 183 members of the House of Representatives. The Conference
completed its work on July 29th and the Conference Report was adopted
on a voice vote in the House on July 31, 1981 and later that same
day it passed the Senate on a vote of 80-14. The bill, as Public
Law 97-35, was signed into law by President Reagan on August 13,
1981.
The final version of the legislation concerning student benefits
consisted of the following provisions:
- Benefits paid to post-secondary students ages 18-21 are to be
phased-out;
- The phase-out is to be completed by April 1985;
- Benefits to elementary and/or secondary school students older
than 18, are to end in August 1982;
- Current post-secondary students, or those entering school before
May 1982, may continue to receive benefits until April 1985, except
that their benefit amount will be reduced 25% each year starting
in September 1982;
- During the phase-out students will not receive COLA increases:
- During the phase-out student benefits will not be payable during
May through August.
Thus, under the provisions of the Omnibus Budge Reconciliation
Act of 1981, student benefits for post-secondary and for elementary
and/or secondary students older than 18, were phased-out and finally
eliminated by April 1985. This change in the law was estimated to
save the Social Security program $10.6 billion over the first five
years.
Student benefits are still payable to elementary and/or secondary
school students provided they are under age 19. Currently about
100,000 students receive this type of Child's Benefit each year--about
one-tenth the volume prior to the change in the law. |