The student loan debt crisis has become one of the big moral and political quandaries of our age. 44 million Americans owe over $1.4 trillion in total debt, which is almost double that of total U.S. credit card debt. Even worse, those in debt are young, productive Americans who have to deal with this burden instead of purchasing homes or other investments which would further help the American economy. Even young accountants can find themselves struggling under the pile of such debt.
Individuals looking to ease their debt burden can find countless articles on the Internet describing ways to relieve their debt payment, but there is no substitution for professional expertise and advice. This is where CPAs can step in. By offering sound, personalized advice, they can help clients wade through the treacherous waters of student loan debt and find the best ways to both lower their debt and form a payment plan.
While 44 million Americans suffer from student loan debt as noted earlier, we should remember who the typical American burdened with such debt is. Student loan debt is primarily a middle to upper middle class phenomenon which burdens young citizens. Most of your clients are probably not young Americans.
But while your older clients may not be burdened by student loan debt, there is a good chance that their children or grandchildren are. Even if they are not, those children may be on the verge of entering college and taking out their first loans. And it is far easier to deal with the problems of students before they take out the loan compared to afterwards when they have to start managing chargebacks.
Consequently, a CPA interested in helping others with student loan debt should start by asking current clients about whether they or their relatives are struggling with that debt burden. Explain to them that as a financial professional, you are familiar with the most prudent means to help them. Also note that by talking with a professional, a young citizen can learn financial literacy at a crucial juncture in their life. Once you have young clients and help them with their student debt problems, then it will be easier to get additional clients through marketing and word of mouth.
Looking to Help
Even if you have clients willing to listen to your advice, you need information in order to help get out of their debt. Important information includes details about their loans, which your client can provide using the National Student Loan Data Service, as well as their current income and other important financial expenditures such as healthcare. Make clear that you need to know information about all their loans, not just their government or private loans.
Once you have that information, you can begin formulating a plan. Dealing with student loans is not just a matter of the loans, but of completely reconstructing the client’s budget so that they can deal with paying off the loans while not overly degrading their quality of life. And as a professional, you can begin discussing repayment alternatives which may be easier over time. For example, the client could consolidate his government loans together, making it easier to keep track of the loans and avoid missing a payment.
While you can with a budget and through other financial techniques such as consolidation or negotiating with a grace period ease the client’s burden, you have to take care not to inflate the client’s expectations. With government loans, you can discuss alternative repayment strategies. With private loans, you could negotiate with the lender about lowering the interest rate or accepting settlement terms which can end the debt.
But you are not going to be able to just wipe the debt off the books, and the client must understand that. And while you can draft a budget which will help with repayment and make it easier for the client to pay back the loan, the final responsibility still lies with the client. If the client chooses not to listen to your advice, it may be time to part ways rather than try to work with someone who does not want help.
Gaining New Clients
Even if you do not approach clients about helping them with student debt, they may come to you. If your accountancy is prepared, your business can draw from a pool of 44 million young citizens who may have never considered the benefits of hiring a professional were it not for the burdens of student loan debt. And when you help them with such a major burden, they will be more willing to stay as loyal clients.
Student debt loan will continue to remain a serious problem. But for the enterprising CPA, it should represent a new opportunity to help young Americans and grow your business.
Gary Eastwood is a CPA licensed senior accountant from Seattle, Washington. He received his CPA license from the Washington State Board of Accountancy in 2001 before relocating to Onawa, Iowa in 2008. Over more than 15 years of accounting experience, Gary has worked with multinational health service providers and independent CPA firms. He has a proven ability in dealing with business clients from a variety of backgrounds as well as leading companies to greater efficiency and profitability. He is familiar with both US GAAP and China GAAP.