The Effect of the Social Security Student Benefit on Lifetime Earnings

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.