Are CPAs and Tax Preparers doing all they can for consumers?

As there are nearly 50 million taxpayers with student loans, tax professionals will commonly see 1098-E loan interest forms every spring. All too often, it’s a cursory review of interest paid and the income phase-out to assess how much of a deduction, if any, is possible. Rarely is any thought given to the unique repayment options of student debt, or the long reaching affects student debt has on other aspects of tax and financial planning.

Do CPAs have an ethical responsibility to question about their student loans?

We believe that financial professionals who are committed to providing the best possible information and guidance to their clients do have a responsibility to ask.

Is anyone successful by not putting their client’s needs first? Then it should be incumbent on the advisor to ask some basic information about the client’s student loans.

Why?

  1. The student loans may be a troubled debt.
  2. The loans might be in default or the client could simply be struggling with the payment.

This is information that a client might not necessarily voluntarily disclose, so asking is important. You are there to provide advice, whether it is financial planning, investments, or tax planning and preparation. Why miss out on (or ignore) this key problem area that millions of consumers are dealing with?

Rather than deciding if any loan interest is deductible for clients, there are greater opportunities to provide a deeper, responsible level of service. In fact, we would suggest that this is an ethical responsibility as a financial professional.

Building a stronger, life-long relationship.

Having details about the status of the student loans(s) (type, term, payments), and if the client is facing challenges are critical pieces of information for the advisor. These easy to find details can enable the advisor to facilitate changes that may improve the client's financial position and/or solve pressing problems. What better way to endear the client to the financial professional and solidify a long-term relationship!

Minimally, if the financial advisor or tax professionals feel unqualified to evaluate the loan repayment options, the responsible action would be to refer the client for specialized help.

Avoiding discussion about their loan status is ethically questionable as loan repayment is a major component of many client’s financial life. It’s every bit as important as home mortgages, retirement savings, and income taxes. These topics are all top of list items when discussing tax filing and also when creating financial plans.

Financial professionals take numerous continuing education .. why not about student loans?

Financial professionals participate in continuing education courses and seminars to understand the latest information relating to their area of responsibility. Many do this in order to remain licensed.

Why then, do we have so little knowledge of the effects of student loans on personal finances and future financial planning?

The CSLA Board believes that financial professionals should seek this knowledge as a matter of ethical practice responsibility. Failing to accurately advise clients when they have student loans is a serious matter with personal risk to the professional. 

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