Personal Finance

How is Social Security funded? Political debate resurfaces question on program

Published

6 months ago

December 5, 2024

Richard Stephen | Istock | Getty Images

New leadership has yet to be sworn in, in Washington, D.C. Yet Sen. Mike Lee, R-Utah, ignited a debate this week on the future of Social Security with a series of posts on social media platform X.

The program, which provides monthly checks to more than 65 million beneficiaries, faces funding issues that may prevent the program from paying full benefits in as soon as nine years.

“We were sold a dream, but received a nightmare,” Lee stated in the X thread on Monday. “It’s time for a wake-up call. We need real reform.”

Experts on both sides of the aisle generally agree it’s better to address Social Security’s funding woes sooner rather than later.

“It’s a system that requires a fix,” said Charles Blahous, senior research strategist at George Mason University’s Mercatus Center and former public trustee for Social Security. “Acting like everything is fine and that we can just ignore it for a few years would not serve the public well.”

Meanwhile, Lee’s post on Social Security — in which he said it is “almost fair to compare it to a Ponzi scheme that’s running out of new investors” — prompted mixed responses.

Elon Musk, who has been tasked with cutting government spending under President-elect Donald Trump, shared Lee’s post while calling it “interesting.” Yet Social Security advocacy groups were quick to defend the program they said has never missed a benefit payment in nearly 90 years.

Among the issues Lee identified is the mechanism for holding money used to pay benefits, commonly known as the “trust funds.”

“This money doesn’t sit in a nice, individual account with your name on it,” Lee stated in his X thread. “No, it goes into a huge account called the ‘Social Security Trust Fund.'”

What are Social Security’s trust funds?

Social Security mostly relies on payroll taxes paid by both workers and their employers for funding, according to a recent Congressional Research Service report.

But the program also receives money from other sources, including federal income taxes some Social Security beneficiaries pay on their benefits, reimbursements from the Treasury’s general fund and interest income from investments held in its trust funds.

That latter source — the trust funds — hold money that is not needed in the current year to pay benefits and administrative costs, according to the Social Security Administration. The money in the trust funds is invested in special Treasury bonds that are guaranteed by the U.S. government.

The interest on those securities is tied to market rates. The trust fund’s bonds are redeemed when they either are needed to pay benefits or they expire.

“The trust funds basically keep track of what workers have paid into the system,” Blahous said.

Social Security’s trust funds prompt headlines each year when Social Security’s trustees release their annual report on the program’s financial outlook.

President George W. Bush is shown paper evidence of US Treasury Bonds in the Social Security trust funds by Susan Chapman, director of the Division of Federal Investments, during a tour of the Bureau of Public Debt in Parkersburg, West Virginia on April 5, 2005.

Luke Frazza | Afp | Getty Images

The program’s two trust funds are legally distinct and generally do not have the authority to borrow from each other.

The trust fund used to pay benefits to retired workers — as well as their spouses, children and survivors, should they die — faces the soonest estimated depletion date of 2033, when just 79% of those benefits will be payable if Congress does not act before that.

Lee is not the first politician to question Social Security’s trust fund structure. In 2005, then President George W. Bush said the trust funds are the equivalent of government IOUs in a four-drawer filing cabinet. More recently, during a 2023 Budget Committee Senate hearing, Sen. Ron Johnson, R-Wisconsin, held up a photo of a filing cabinet when discussing the program’s funding.

“This is the Social Security trust fund,” Johnson said. “It’s a four-drawer file in Parkersburg, West Virginia.”

In response, Stephen Goss, chief actuary at the Social Security Administration, said at the time that the funds are “all electronic.”

By pointing to filing cabinets, the politicians imply the trust funds aren’t real, said Andrew Biggs, senior fellow at the American Enterprise Institute and former principal deputy commissioner of the Social Security Administration. Yet if someone has a retirement account with Vanguard or a defined benefit pension, it would also be represented with a paper document, he said.

“These trust fund bonds are real,” Biggs said.

Experts say the trust funds are misunderstood

Social Security’s trust funds are legitimate, in the same way as Treasury bonds are issued to China, a pension fund or a grandmother on behalf of a grandchild, said Nancy Altman, president of Social Security Works, an advocacy organization.

“They all have the same legal status,” Altman said. “If Congress didn’t pay it, it would be a matter of default, so this is a matter of law.”

In his post on X, Lee said: “the government routinely raids” Social Security’s trust fund.

The general fund of the Treasury is allowed to borrow from the Social Security trust funds, according to the Congressional Research Service. When that happens, those funds are typically paid back with interest.

“This is standard accounting practice and not considered raiding in a legal sense,” said Jason Fichtner, chief economist at the Bipartisan Policy Center, who previously worked in several senior positions at the Social Security Administration.

During a July 2023 Senate hearing on protecting Social Security, Sen. Ron Johnson, R-Wisconsin, describes the program’s trust funds as a “four-drawer file.”

Source: U.S. Senate Floor

If Social Security has a surplus, they’re required to invest it with the federal government, according to Biggs. That means the federal government is required to borrow it, he said.

However, that borrowing mostly stopped 15 years ago, since Social Security no longer has surpluses, Biggs said.

In his X post, Lee also focused on the extra interest Social Security’s investments could earn if the money were invested more aggressively in stocks. Sen Bill Cassidy, R-Louisiana, has also called for investing in stocks on the program’s behalf.

But rather than talking about Social Security as an investment, we should be focusing on it as a social insurance program that’s funded by a payroll tax, said the Bipartisan Policy Center’s Fichtner.

The program provides both retirement and disability benefits and is designed to be progressive, so Americans with lower lifetime earnings get a higher income replacement rate. Focusing on the income replacement the program provides can help identify which reform proposals are helpful and necessary, Fichtner said.

“In general, we should be having an open, honest discussion about Social Security and the important role plays in the foundation of retirement security for Americans,” Fichtner said.

Personal Finance

What Trump, Harvard battle over international student visas may cost

Published

2 hours ago

June 9, 2025

Business Finance News

Rep. Khanna on foreign student ban: International students contribute $44B to the American economy

The escalating battle between the Trump administration and Harvard University over international student visas could come at a high economic cost.

Altogether, international students who studied in the U.S. contributed $43.8 billion to the U.S. economy in the 2023-24 academic year, according to the most recent data by NAFSA: Association of International Educators. In Massachusetts, alone, international students contributed nearly $4 billion and supported more than 35,000 jobs.

At Harvard, the share of international students is disproportionately high compared to most other colleges and universities. International students accounted for 27% of Harvard’s total enrollment in the 2024-25 academic year, up from 22.5% a decade earlier.

With more than 6,000 international students, Harvard supports over 1,125 local jobs and contributes $180 million to the greater Boston economy, largely through student spending, according to a new analysis by Implan, an economic software and analysis company.

A ban on international enrollment could destabilize a vital revenue stream, said Bjorn Markeson, an economist at Implan.

“Because Harvard has a very high international student population, it’s going to have more of that impact,” Markeson said. “The economy is a network structure, so dollars flow through. They don’t just stay in one place — and when something hits Boston, it affects New England as a whole.”

A Harvard University student walks through Harvard’s campus.

Erin Clark | Boston Globe | Getty Images

Schools have increasingly sought out international students “because they compliment the student body, and that benefits all students,” said Robert Franek, The Princeton Review’s editor-in-chief.

But foreign students also typically pay full tuition, which makes international enrollment an important source of revenue for Harvard and many colleges and universities in the U.S., according to Franek.

Where the Trump, Harvard battle stands

For now, the fate of international enrollment at Harvard and elsewhere is still up in the air.

Tensions between the federal government and the Ivy League university have continued to escalate after Harvard in April refused to meet a set of demands issued by the Trump administration’s Task Force to Combat Anti-Semitism.

In May, President Donald Trump attempted to ban Harvard from enrolling international students, but a federal judge issued a temporary restraining order on Friday “to maintain the status quo.”

U.S. District Judge Allison Burroughs said the restraining order would remain in effect until June 20. Meanwhile, Harvard President Alan Garber said that “contingency plans are being developed to ensure that international students and scholars can continue to pursue their work at Harvard this summer and through the coming academic year.”

In an interview with NBC News on Friday, U.S. Secretary of Education Linda McMahon said Harvard needs to do more to combat antisemitism on campus and screen admissions of foreign students.

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Personal Finance

Supreme Court gives DOGE access to personal Social Security data

Published

3 hours ago

June 9, 2025

Business Finance News

A sign in front of the entrance of the Security Administration’s main campus on March 19, 2025 in Woodlawn, Maryland.

Kayla Bartkowski | Getty Images

The Supreme Court on Friday granted the Department of Government Efficiency access to Social Security Administration data that includes sensitive personal information of millions of Americans.

The decision comes as the federal government sought a stay, or temporary suspension, after a federal judge blocked DOGE’s access to that data in April. The nation’s highest court granted an emergency application from the Trump administration to lift that injunction; the case is expected to proceed in lower courts.

In its decision, the Supreme Court concluded the Social Security Administration may give DOGE access to agency records while the case plays out “in order for those members to do their work.”

Both the White House and the Social Security Administration called the Supreme Court decision a victory. In a statement, White House spokesperson Elizabeth Huston said it will allow the Trump administration to “carry out commonsense efforts to eliminate waste, fraud and abuse and modernize government information systems.”

Likewise, Social Security Commissioner Frank Bisignano in a statement said the agency “will continue driving forward modernization efforts, streamlining government systems, and ensuring improved service and outcomes for our beneficiaries.”

Yet others expressed grave concern in reaction to the decision, including Justice Ketanji Brown Jackson, advocacy groups and plaintiffs in the case against DOGE and the Social Security Administration.

“This is a sad day for our democracy and a scary day for millions of people,” said the coalition of plaintiffs including American Federation of State, County and Municipal Employees; the American Federation of Teachers; and the Alliance for Retired Americans, who are represented by Democracy Forward.

“This ruling will enable President Trump and DOGE’s affiliates to steal Americans’ private and personal data,” they said, while vowing to “use every legal tool at our disposal” to prevent the misuse of public data as the case moves forward.

Millions of Americans’ sensitive data at stake

The dispute focuses on how much access DOGE should have to Americans’ personal data.

The plaintiffs filed an initial complaint in early March, stating the Social Security Administration had “abandoned its commitment to maintaining the privacy” of the sensitive personal information of millions of Americans under DOGE’s influence.

The Social Security Administration collects and stores some of the “most sensitive” personally identifiable information of millions of Americans, ranging from seniors to adults to children, the complaint notes.

When applying for a Social Security number, the agency requires the disclosure of place and date of birth, citizenship, ethnicity, race, sex, phone number and mailing address. It also requires parents’ names and Social Security numbers.

But the agency is also privy to other personal data, including personal health information, the complaint notes. That includes:

driver’s license and identification information
bank and credit cards
birth and marriage certificates
pension information
home and work addresses
school records
immigration and naturalization records
family court records
employment and employer records
psychological and psychiatric health records
hospitalization records
addiction treatment records
records for HIV/AIDS tests

The Social Security Administration also collects tax information, including total earnings, Social Security and Medicare wages and annual employee withholdings.

What you need to know about Social Security

DOGE has not only accessed the agency’s sensitive and protected information; it has also publicly shared it, according to the complaint. The actions of the defendants, including the Social Security Administration, DOGE and leaders including former head Elon Musk, have deprived Americans of privacy protections guaranteed by federal law and made their personal information vulnerable, the complaint alleges.

In her dissent, Jackson, joined by Justice Sonia Sotomayor, notes that records show “DOGE received far broader data access” than the Social Security Administration usually allows in fraud, waste and abuse investigations. Typically, those investigations start with high level, anonymized data, with more access to more detailed information only granted as necessary.

Justice Elena Kagan also dissented in the 6-3 decision.

“The government wants to give DOGE unfettered access to this personal, non-anonymized information right now – before the courts have time to assess whether DOGE’s access is lawful,” Justice Jackson wrote.

While litigation is pending, the government has asked to temporarily suspend the lower court’s temporary limitations on DOGE’s access to Social Security data, she noted.

“But the government fails to substantiate its stay request by showing that it or the public will suffer irreparable harm absent the court’s intervention,” Justice Jackson wrote.

Personal Finance

Student loan borrower in SAVE forbearance says interest growing

Published

7 hours ago

June 9, 2025

Business Finance News

Los Angeles, CA – May 17: Signage and people along Bruin Walk East, on the UCLA Campus in Los Angeles, CA, Wednesday, May 17, 2023.

Jay L. Clendenin | Los Angeles Times | Getty Images

An unexpected $3,000 in interest

Ellie Bruecker

Courtesy: Bruecker Family

Despite the government’s promises, Bruecker’s student debt has grown by around $3,000 during the roughly year-long SAVE reprieve, her loan documents show.

“I saw those numbers and my eyes bugged out of my head,” said Bruecker, 34.

She’s not the only SAVE borrower seeing interest accruing: Other people facing the same issue have taken to social media to try and get answers.

At one point, around 8 million people were enrolled in the SAVE plan, according to the Education Dept.

Bruecker happens to work as the director of research at The Institute for College Access & Success, a nonprofit that does advocacy work in the higher education space. But she wonders how many student loan borrowers will even know that this wasn’t supposed to happen, let alone be able to get it corrected.

“Will they resolve this for everyone, or just those who get them on the phone and are loud about it?” she said.

Advocate: Check your loan history

It’s unclear how widespread the issue is.

A spokesperson for the Education Dept. did not answer CNBC’s questions about the issue some borrowers are facing, but said that those “enrolled in the SAVE Plan remain in a forbearance that is not accruing interest.”

Mohela did not immediately respond to a request for comment.

But Mohela has a notice at the top of its website that reads: “If you recently received an interest notice for your student loan account, please know that this is not a bill, and no action is necessary at this time.”

The notice goes on to say that, “For borrowers on the SAVE administrative forbearance, interest is currently set at 0%. Refer to your loan details in your notice.”

The company does not say that the alerts were sent in error, but they likely were, said higher education expert Mark Kantrowitz.

“MOHELA sent out misleading notices to their borrowers who are in the SAVE repayment plan,” Kantrowitz said.

“Borrowers who are worried about the MOHELA letter should check their loan history to see if the balance has changed,” Kantrowitz added. If their debt has grown since July 2024, “they should contact MOHELA,” he said.

Educator and former U.S. Representative Dr. Jamaal Bowman speaks to hundreds of students from Washington, DC universities protesting U.S. President Donald Trump’s dismantling of and funding cuts to the Department of Education, in Washington, D.C., U.S. April 4, 2025.

Allison Bailey | Reuters

Bruecker said her loan records from both Mohela and the Education Dept. reflect a higher balance after roughly around $3,000 in interest was added to her debt during the forbearance.

“Mohela has been allowing interest to accrue the entire time my loans have been in this SAVE forbearance,” she said.

She tried to contact Mohela to correct the error, but said she was unable to reach a representative despite waiting on the phone for hours.

In recent months, the Trump administration has terminated around half of the Education Department’s staff, including many of the people who helped assist borrowers when they ran into issues like this one. A federal judge has ordered Trump officials to reinstate the terminated employees, but the administration is now asking the Supreme Court to block that order.

“With the level of dysfunction at the Education Department right now, I have a real distrust this is going to get resolved for people,” Bruecker said.