You have several options to get teacher loan forgiveness, even though only one program has a name specifically referring to teachers. Having your student loan debt wiped out seems like a good thing. However, the government did not create all of these programs equally.
Each forgiveness program has different qualifications and guidelines, and the right program for you depends largely on your total amount of debt, current and future employment, and future life goals. Certain tax implications could even affect whether a forgiveness option is right for you.
Is teacher loan forgiveness even the best option to handle your student loan debt? Read on to learn about the available student loan forgiveness for teachers, what they could mean for you, as well as other options to pay off your student loans.
Teacher Loan Forgiveness Has Narrow Benefits
The federal Teacher Loan Forgiveness Program is popular among teachers looking for relief from their student loan debt, but there are very specific requirements.
After working five consecutive academic years as a full-time teacher in a low-income school or educational service agency, the program offers up to $17,500 in loan forgiveness if you meet additional eligibility requirements. For teachers outside of those requirements, you might still qualify for loan forgiveness help but only up to $5,000 total.
Are you eligible for the Teacher Loan Forgiveness program?
Here are the main requirements for Teacher Loan Forgiveness, according to Student Federal Aid, an Office of the US Department of Education:
- You must have taught full-time, for five complete and consecutive years. One of those years must have been after the 1997–98.
- You must be a highly qualified teacher employed at a qualifying school.
- The loan(s) for which you are seeking forgiveness must have been made before the end of your five academic years of qualifying teaching service.
Who is considered a highly qualified teacher? A highly qualified teacher is a teacher who has received a bachelor degree, are fully certified in the State that they teach, and have not had any licensing or certification requirements waived for any reason.
If you are a highly qualified special education teacher (at the elementary or secondary) or a secondary mathematics or science teacher, you may qualify for up to $17,500 in forgiveness.
Other teachers can only receive up to $5,000 total in loan forgiveness.
Borrowers with PLUS loans and Perkins loans are not eligible to be forgiven through the Teacher Loan Forgiveness program. Teachers can apply for loan forgiveness after completing the five-year teaching requirement.
For more detailed information on this particular type of student loan forgiveness for teachers, visit the Federal Student Aid website. If you’ve confirmed your eligibility and would like to pursue the program, you need to fill out the Teacher Loan Forgiveness Application.
Public Service Loan Forgiveness for Teachers
Teachers looking for student loan forgiveness options can look into Public Service Loan Forgiveness (PSLF). According to the Department of Education, PSLF “has the broadest employment qualification requirements of the federal programs listed—it doesn’t require that you teach at a low-income a public school, or even be a teacher. Most full-time public and private elementary and secondary school teachers will meet the employment requirements.”
PSLF is a federal student loan forgiveness open to anyone with qualifying Federal Direct Loans and who meets all the program requirements. Those requirements are:
- Have student loans through any federal income-driven repayment programs
- Make 120 qualifying payments on your student loan. A qualifying payment is one that is on-time and paid in full, and the 120 payments don’t need to be consecutive.
- Work for a government or qualifying non-profit organization the entire time
you are making qualifying payments, as well as during the application process.
Which repayment plans qualify for PSLF?
All four income-driven repayment plans that qualify for PSLF: Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR).
Technically, the standard 10-year payment plan qualifies for PSLF as well. However, your student loan payments aren’t lowered within the standard repayment plan so your student loan debt would be paid off by the time you reached 120 payments.
PSLF requires you to have direct loans. If your student loans are non-Direct federal student loans, you’d need to first consolidate them into a Direct Consolidation loan. If you have both types of loans, its best to only consolidate your non-direct loans. This is because any payments made on your direct loans prior to consolidating would no longer count toward your 120 loan payment count.
While some student loan forgiveness programs are taxable, PSLF is not. Forgiven loans aren’t considered income by the Internal Revenue Service (IRS).
To apply, you need to fill out and submit the PSLF Application for Forgiveness. Another important step in qualifying for PSLF is submitting the Employment Certification for Public Service Loan Forgiveness form annually and any time you change employers.
Comparing Teacher Loan Forgiveness vs. PSLF
Any teacher who has had to take out student loans would love an easy way to wipe out that debt and create more financial freedom. Not only would it remove a giant stress in your life, but also free up money for other life goals like buying a home, starting a family, and saving for retirement.
The problem with federal teacher loan forgiveness for many teachers are the strict requirements you must meet to be awarded the full $17,500 in loan forgiveness. While the alternative $5,000 option is helpful, if you have over $25,000 in student loan debt, you are still left with a hefty amount to pay off.
Another potential issue is not picking the right program and sabotaging your chances for more funds. Technically, you can receive loan forgiveness through Teacher Loan Forgiveness as well as Public Service Loan Forgiveness, but there is a catch.
According to the Federal Student Aid website, “you can potentially receive forgiveness under both the Teacher Loan Forgiveness Program and the Public Service Loan Forgiveness Program, but not for the same period of teaching service.”
In other words, if you work for five qualifying years to receive Teacher Loan Forgiveness, you can’t count any of the payments made during that time period toward your required 120 qualifying payments for PSLF. This then adds five more years of payments if you wanted to pursue both programs.
Is PSLF a better option?
Looking at the scenario above, it would make more sense to just start out pursuing PSLF instead of Teacher Loan Forgiveness. Not only is PSLF less strict in regards to teaching qualifications, but it also would wipe out your entire student loan debt, not just a portion of it.
A drawback to PSLF, though, is that you need to make 10 years of qualifying payments in order to be eligible. What if your career goals change or you decide to stop teaching? A lot can change in the life of a teacher in 10 years.
While PSLF and Teacher Loan Forgiveness are the most common programs relied on for loan forgiveness, teachers have other options. Picking the right option will depend on your specific situation, with all programs having benefits for certain teachers.
Why PSLF is Usually Better than Teacher Loan Forgiveness
Imagine you’re a teacher with $50,000 in student debt. You’re a highly qualified math teacher at the high school level. You could get $17,500 in total forgiveness.
You earn $40,000 per year, have two kids, and a spouse who earns about the same amount of money as you do. The spouse has no student debt.
You could go for the Teacher Loan Forgiveness program. You’d get $17,500 forgiven in the first five years. Of course, you’d still have a balance leftover. Then you have to wait around for an additional 10 years to get your loans forgiven since you can’t double count service for both programs.
Instead, you could forgo Teacher Loan Forgiveness and just utilize PSLF from the start.
If you filed married filing separately for taxes and had inflation level raises on your $40,000 salary, your first Pay As You Earn (PAYE) payment as a teacher would be $74 a month.
Over 10 years, you’d pay a total of $10,123 under PSLF as a teacher.
However, if you did Teacher Loan Forgiveness, you would have $17,500 wiped away, but you’d still owe $50,000 plus whatever interest had accrued minus that forgiveness payment.
It’s obvious that you’d rather pay $10,000 over 10 years instead of $30,000 to $40,000 that’s left after Teacher Loan Forgiveness.
Hence, Teacher Loan Forgiveness is pretty useless if:
- You plan on having a career in teaching
- You owe more than $30,000
- The debt you have is mostly federal student loans
How ironic is it that the program named for teachers is so useless for teachers compared to the more generically named PSLF program? Our student loan system deserves its own Shakespearean tragedy.
Other Loan Forgiveness Options for Teachers
Teachers looking for relief from student loans have other options available. Factors like what type of student loans you have and where you reside play a role in the programs available to you.
Federal Perkins Loan Cancellation
If you have Perkins loans, you can potentially have your loans canceled up to 100 percent through this program. In order to qualify, you must be:
- A teacher serving students of low-income families;
- A special education teacher (including teachers of infants, toddlers, children, or youth with disabilities); or
- A math, science, foreign language or bilingual education teacher or be a teacher in another field that is determined to have a shortage of qualified teachers in your state.
To find out if your school of employment is classified as a low-income school, check the Federal Student Aid online database.
Up to 100 percent of the loan may be canceled for full-time teaching service, based on the number of years of service you have:
- 15 percent canceled per year for the first and second years of service
- 20 percent canceled for the third and fourth years
- 30 percent canceled for the fifth year
Any canceled amount includes interest accrued during that year of service.
For more information and to apply for Perkins Loan Cancellation, teachers need to contact the school that made the loan or to the school’s Perkins Loan servicer.
Income-Driven Repayment (IDR) plans
If you are a teacher who doesn’t qualify for one of the other federal loan forgiveness options listed above, there is another way to get your loans forgiven. You would need to move your student loan payments to one of the four eligible income-driven repayment options.
After making payments for 20 to 25 years, any remaining student loan debt would be forgiven. As mentioned earlier, the four income-driven repayment plans are:
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
The drawback to pursuing this type of loan forgiveness is that there are potential tax implications when your loans are forgiven. Since forgiven loans through IDR is considered taxable income, you might face a hefty tax liability– do your research and weigh the pros and cons before making any decisions on pursuing teacher loan forgiveness this way.
State-based loan repayment programs
In addition to federal loan forgiveness programs, certain individual states have programs to help teachers pay off student loan debt. Programs vary from state to state; for example, let’s look at two available state-based programs:
Illinois Teachers Loan Repayment Program
The Illinois Teachers Loan Repayment Program allows for teachers working in-state to receive up to $5,000 if they already received funds through the federal loan forgiveness program, but still have a balance remaining on their loans. Teachers have to fulfill their five-year teaching obligation in an Illinois elementary or secondary school designated as a low-income school.
Tennessee Math & Science Teacher Loan Forgiveness Program
If you’re a teacher teaching at a Tennessee public school and are pursuing an advanced degree in math or science, or a certification to teach a math or a science, you could be eligible for loan forgiveness through the Tennessee Math & Science Teacher Loan Forgiveness Program. For each year you receive loan funding, you must be employed in a Tennessee public school system two (2) years.
For more information on this and other state-sponsored student loan forgiveness for teachers, check out the American Federation of Teachers’ searchable list of available state-based programs.
My family’s experience with loan forgiveness for teachers
My wife, Barb, is a public school teacher in Ohio and has been teaching for over 17 years. When she pursued her bachelor degree, she accumulated some student loan debt. However, it wasn’t very much, and she paid it off quickly.
More recently she decided to pursue a Master’s Degree in Special Education. She needed to take classes in order to renew her teaching license in Ohio. She also wanted to expand her teaching options and move up a pay grade. After graduating from Baldwin Wallace University in Berea, Ohio with her Masters in Special Education, she ended up with $19,270 in student loan debt.
At the time, neither of us were familiar with any options for student loan debt other than just paying it off through the standard repayment plan. One of her colleagues told her about the federal Teacher Loan Forgiveness program.
We tried pursuing the maximum forgiveness of $17,500, but she didn’t qualify because she wasn’t in a teaching role that lined up with her Master’s degree. She did, however, qualify for $5,000 loan forgiveness through the program and was approved for forgiveness earlier this year. She’s now free of student loan debt.
While it’s great that we are out from under those monthly student loan payments, we wish we were better informed about what was available. Most likely she would have qualified for PSLF, which would have lowered the amount we had been paying monthly and then wiped out all of her remaining student loan debt, not a portion of it.
Our lesson: it was our fault that we didn’t seek out help in not only understanding our options but determining the best option for our situation.
What is the best option for paying off your student loan debt?
With all of the options available for teacher loan forgiveness, it’s a lot of information to digest and decode in order to find the right fit for your situation. Just as teachers are experts at educating students, the consultants at Student Loan Planner are experts at educating our clients and working with them to find the right payment options.
If the thought of saving money and getting out from under your teacher student loan debt sounds good, book your student loan consult today.
Has teacher student loan forgiveness been worth it for you?