By Brenton Harrison
We often meet our clients when they’re already in high paying professions like medicine or law, but their associated debt from those degrees isn’t always as ideal as their current earnings. With the price of advanced degree programs skyrocketing over the past few decades, more and more of our clients come to us not just with large paychecks, but with up to six-figures of student loan debt. It is more important than ever for advisors to sharpen our knowledge around student loans and their impact in order to be the best resource for our clients.
Planning for student loan repayment isn’t as simple as comparing interest rates. Before you can offer loan analysis services, learn the difference between private and federal loans, including their repayment structures, tax implications and forgiveness options. There are numerous seemingly minor factors that can make a significant impact on student loan repayment, and it’s critical to have a basic understanding of them when advising your clients.
One of the repayment plans I see most frequently among my clients is based on income levels, offering payment plans based on income and family size. While these options aim to be cost-effective, even high income-earners still struggle to balance these payments with the rest of their financial obligations. By understanding how items such as retirement savings and even HSA contributions are factored into the federal payment calculation, your advice can further reduce the financial burden caused by their student loans.
If your client is fortunate enough to be eligible for student loan forgiveness, be aware of the tax consequences before executing. Loans forgiven under these programs could be classified by the IRS as taxable income in the year they are discharged, which leaves your clients open to the possibility of being taxed based on the amount of forgiven loans – if this is the case, it must be accounted for in the budget.
Understanding all the factors that go into planning for clients with student loan debt can be a tall order, and you don’t need to be an expert in every aspect of student loans to advise your clients well. I frequently visit studentaid.ed.gov for more in-depth resources, and I’ve also been impressed by the phenomenal advancements that have been made in the student loan tech space. Right Capital and Pay For Ed offer software programs that allow advisors to model the impact of tax status on a client’s student loans, compare federal and private loans and even model how retirement contributions can lower student loan payments. These tools allow me to be confident in the advice I’m providing for my clients and know I’m setting them up for financial success.
Designate Your Knowledge
Student loan designations, like the College Funding and Student Loan Advisor (CFSLA), are new enough to be a differentiator for advisors who want to enter the marketplace. Advisors who’ve gained them are so rare in fact that Pay For Ed still lists each of their names on their website.
We love when our clients find success in their careers, but we cannot disregard the significant investment they’ve made to get there. It’s on us to invest in our skills and knowledge in student loans so we can plan for our clients’ futures without allowing the debt to drag them backwards.
Brenton D. Harrison is a Financial Advisor with Henderson Financial Group, Inc., focusing on healthcare practitioners, business executives, and religious leaders. He entered the financial services industry with Innovative Financial Group, and brings the latest financial solutions to the clients he serves with HFG. Through excellent communication and service skills, he earned the coveted New Associate of the Year Award for Innovative Financial Group in 2010, and in 2015, was named as one of Top 30 Advisors under 30 by LifeHealthPro magazine. Brenton is also a qualifying member of the Million Dollar Roundtable, one of the premiere organizations for financial professionals around the world.