JSIT21-01: The Effect of the Student Earned Income Exclusion on Labor Market and Educational Choices of SSI Recipients

The postsecondary enrollment decision for younger SSI recipients can have large effects for the long-term earning potential of these young adults and could help them transition off the SSI program as adults, lowering the financial cost of the SSI program. However, college enrollment rate of 18–21-year-old SSI recipients is far below the national average. Postsecondary attendance may be particularly challenging for SSI recipients with limited income and family assistance to supply the basic consumption needs of postsecondary students. To address this issue, the SSI program offers the Student Earned Income Exclusion (SEIE) which allows SSI beneficiaries under age 22 attending school regularly to exclude up to $1,930 of their monthly earnings during college from their SSI benefit level determination. SEIE decreases the amount of countable earned income allowing SSI students under 22 to keep more of their SSI benefits when they work.
First, this research project will provide a descriptive analysis of SEIE trends over the past 19 years including variation in location, demographics, and disability type. Second, this project will be the first paper to estimate the causal effect of the SEIE availability on the education and labor decisions of SSI beneficiaries. I will identify the causal effects exploiting two sources of variation: the large exogenous shock to the SEIE threshold that occurred in 2001 and the fact that SSI beneficiaries lose eligibility for the SEIE at age 22.