How CPAs can help clients with student loan debt

August 15, 2017

By James Sullivan and Melissa Towell at Journal of Accountancy on August 14, 2017

Student loan debt is a long-term drag on wealth accumulation for young people. As economists at the Federal Reserve Bank of New York recently determined, graduates with student loan debt are less likely to own homes than graduates without it. A recent AICPA survey found that half of all families with student loan debt are putting off saving money for retirement so they can pay off their debts. Student debt is an especially important issue for women, who make up 56% of all undergraduate students but hold 65% of all student loan debt.

Nationally, student loan debt is a mounting problem. Not only is it the second-fastest growing type of debt (after home mortgages), but it now exceeds the total amount of credit card debt. And many of the debtors are behind in their payments.

It is highly likely that many of your clients or prospective clients have children with large amounts of student debt. Many "boomerang" children—those moving back home to live with mom and dad—are unable to live on their own, in part, because they owe thousands of dollars of student loan debt.

However, student loan repayment alternatives are complex. Federal loans alone may involve:

  • Over 50 repayment strategies;
  • Complex rules regarding repayment strategy eligibility that borrowers seldom understand and have difficulty implementing;
  • Assistance for the borrower if the repayment plan causes financial hardship;
  • A variety of default options;
  • Garnishment appeal procedures;
  • Debt consolidation choices; and
  • Cancellation and forgiveness options.

Often, borrowers struggle to make sense of their options. This is where CPAs can make a difference.

By offering student loan debt counseling as a service, CPAs can help clients and their families better handle their debt. They can play a key role in helping borrowers understand which repayment programs they may qualify for and help them reduce the burden of their student loans so that they can focus on long-term wealth accumulation.

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