Andrew Martin and Andrew W. Lehren write “A Generation Hobbled by the Soaring Cost of College,” a story in today’s New York Times. It is a sobering, yet fascinating read. The topic is relevant for all Americans, not just families, and employers, of today’s college students=. It leads me to call for an end the 150 semester hour educational requirement to sit for the CPA exam.
The educational debt bubble seems positioned for a loud and messy pop.
Accrued student loan debt is over $1 trillion USD. Large numbers (60-80%) of students graduate with a bachelors degree and holding $20,000-$40,000 of student loan debt. If a student pursues a graduate degree, debt soars quickly because colleges have cut much of their financial assistance for graduate education. Total student debt exceeds credit card and other consumer debt.
I see the impact of this debt on a daily basis. My accounting students during college struggle with the emotional impact of accumulating so much debt. It is normal for students to have two or three part time jobs, which adversely impacts their ability to study and learn. Many opt for getting required education (150 semester hours to qualify for CPA) at the less expensive undergraduate level instead of pursuing a more expensive masters degree that would provide more educational benefit. At Concordia College, over 90% of graduates leave college with over $30,000 in debt. For a typical American college student, adding a MAcc or MBA would likely add $30,000-60,000 to the personal debt level.
To a large extent, the problem today exists because society no longer wishes to shoulder the burden of providing collegiate educations to its citizens. State legislators have cut massive amounts of aid to public colleges. Colleges and universities have responded with increased prices and decreases in scholarships and aid. It is unlikely that even outstanding students today will receive adequate financial assistance for graduate school.
Yet, educating one citizen benefits all of society. Providing the capable with a college education increases the productivity and wealth of us all.
What needs to be done to fix the problem? It would be nice if the USA was wealthier. It would be nice if the USA was not crippled by an overwhelming and debilitating national debt of its own. But the USA is not as wealthy as it once was, and it is facing a national debt which it may be forced to default on in the intermediate future.
We need to scale back educational requirements for the CPA. Historical analyses show the push for the 150 hour requirement came mostly from collegiate accounting programs. For sure it was self-serving. Requiring accounting students to enroll and pay for more classes keeps highly paid accounting professors employed. There is some benefit from a masters education in accounting, but the USA can’t afford it, anymore. I call on fellow accounting professors to initiate the effort to rescind the 150 hour requirement.
It is customary for accounting firms and corporate employers to skimp with low salaries for entry level positions. Another potential fix for mitigating the problem would be for employers to help shoulder principal payments debt. It would be more palatable if these payments were tax deductible.
But other than these two potential solutions, there are no cheap or agreeable fixes. Any solution will require large amounts of real money, and that money is already allocated for other purposes.
What do you think? Do you have a solution? Please leave a comment.
Debit and credit – - David Albrecht
Want more of The Summa? Sign up to receive email notification of posts. And please follow me on Twitter (@profalbrecht).
I agree. It is shocking that student loan debt now exceeds credit card debt. Elimination of the 150 hour requirement to become a CPA is a great idea. I had hoped that California would be able to hold out long enough to get other states to back down, but that didn’t happen. 150 hours becomes effective in California in 2014. While an original purpose of 150 hours was to broaden the knowledge of accountants, that is not the case for California where the additional hours are required to be 20 of accounting and related subjects and 10 in ethics.
The continuing education requirements for CPAs and work experience are sufficient to be an effective CPA. For specialization in tax or perhaps forensics, graduate work makes sense with that done after a few years of work experience.
Also, with so many accountants studying at state funded universities, the cost to taxpayers is also high, not just to students.
Perhaps the solution is for legislators to look at the 150 hour requirement as a way to reduce spending.
Instead of reducing the 150 hour requirement, would it be more appropriate to reduce tuition fees and all other kinds of fees students have to pay?