Student loan repayment continues to get more complex and this is creating more financial problems for borrowers in every economic income band. The common fallacy is that everyone assumes you either choose the standard 10 year repayment term or go for a reduced payment plan, also know as income based repayment. Ten year programs are often to expensive for many recent college graduates starting new careers. Income based plans are good but not on a permanent basis. Consumers misunderstand the costs of these programs and fail to make changes when they should.
Professionals in personal financial services need to be aware of these nuances and advise their clients to avoid major financial setbacks that end up costing much more than necessary. Tax preparers and CPAs are two groups that frequently misunderstand these programs and assume they should be treated like any other debt. Other financial professionals working in insurance need to be aware of how student debt can affect families in case of death. There are other implications for those who qualify for loan forgiveness that can result in significant tax liabilities.
Financial professionals who care about their clients have an ethical responsibility to understand these programs, their risks and rewards. CSLA provides training through our financial professional membership program. It can keep you current as programs and laws change.