There are three programs that can waive teachers’ student loans. The best student loan forgiveness programs depend on: what kinds of loans you took out, how much debt you have, and how long you’ve taught at a secondary school.
Federal Student Loan Forgiveness for Teachers
The table below summarizes the three federal options available for teachers. You have to be in a classroom setting in an instructional capacity. Personnel such as administrators or supervisors do not unfortunately qualify. You have to be staffed at an elementary, middle or high school - teaching in universities or professional classes typically is not eligible for the Department of Education or federal forgiveness programs.
|Program||Teacher Loan Forgiveness||Perkins Loan Cancellation||PSLF|
|Amount Forgiven||Up to $5,000, or up to $17,500||100% of Balance||100% of Balance|
|Type of Loans||Direct Subsidized Loan Direct Unsubsidized Loan Stafford Subsidized Loan Stafford Unsubsidized Loan||Perkins Loan||Direct Subsidized Loan Direct Unsubsidized Loan Direct PLUS Loans Direct Consolidation Loans (can include FFEL, some health and nursing loans)|
|Time Taught||After five years of full-time teaching||One year full-time equivalent||10 years|
|Schools Taught||Title I or BIE school||Title I or BIE school Non-profit private school registered with IRS||Early childhood education Public education|
|Certifications||Certified or licensed||If Special Ed, licensed||Not specified|
|Subject Matter||Max of $5,000: elementary school teachers, certain HS teachers Max of $17,500: HS teachers in Math, Science, Special Ed||Subjects with teacher shortage Special Ed||Not specified|
|Forgiveness is Taxed||No||No|
Teacher Loan Forgiveness Program
The Teacher Loan Forgiveness program forgives less money compared to the 100% from the Public Service Loan Forgiveness (PSLF) program, but you qualify in half the time. If it’s math, science, or special ed, you can be eligible for up to $17,500. Any other subject would get you $5,000 forgiven at most. You do have to be full-time at a Bureau of Indian Education (BIE) or Title I school for either elementary, middle, or high school.
To apply: After you’ve hit five years of service, fill out and send this application to your servicer. The Chief Administrative Officer has to certify your employment. That means if you've taught in several schools in the past half a decade, you'll have to get the CAO at each of those school to sign off that you taught at their school.
Public Service Loan Forgiveness for Teachers (PSLF)
The PSLF program has the most flexibility compared to the other two programs - with the tradeoff of requiring the most amount of time spent teaching. It forgives more types of loans. On top of the standard direct loans, Direct PLUS and Direct Consolidation Loans are also eligible, which expands the field to FFEL loans and some professional health and nursing loans too. The Public Service program also recognizes a broader set of eligible schools. Early education programs, such as Head Start and state-sponsored pre-K qualify. It will accept non-Title I public schools too, which expands the universe of elementary and secondary schools that count towards your teaching requirement. Certifications and licensure aren’t explicitly required, so long as your duties are considered teaching by the administration at your school. That's also a bit looser than the definitions the Perkins or the standard Teacher Forgiveness apply. 100% of your remaining balance gets forgiven, although you have to work for a decade.
To apply: The application is under development and expected around October 2017. The first year teachers can have their loans forgiven is 2017, which means you must have met the requirements beginning in 2007. To help you (and the Department of Education), it’s best to start tracking your eligible teaching experience by filling out this Certification Form.
Perkins Loan Cancellation for Teachers
The Perkins Loan program forgives your student debt little by little each year until you hit 100% in your fifth year of full-time employment. Perkins loans have a lifetime maximum of $27,500 for undergraduates, and up to $60,000 for grad students, in case you have any advanced education masters or PhD degrees. Perkins is the only program to count work at private schools towards the requirement - so long as they’re a non-profit registered with the IRS.
- Year 1: 15%
- Year 2: 15%; cumulative total of 30%
- Year 3: 20%; cumulative total of 50%
- Year 4: 20%; cumulative total of 70%
- Year 5: 30%; cumulative total of 70%
Librarians and guidance counselors can qualify to get their Perkins loans cancelled, but not supervisors or researchers. Educators also have to teach in understaffed subjects, which can be broadly defined. Subjects usually includes math, science and foreign language. For the 2016-2017 school year in California, subjects include: dance, self-contained classes, and drama, to name a few. Arizona’s state education agency defines this as subjects and geographic shortage areas, including Maricopa county - the most populated in the state.
To apply: Since your university (or its servicer) is considered your loan manager, head to the business or student loan office of your school, and ask them for their cancellation form. You'll then need your employer to certify the service.
Strategies for Teachers to Reduce Loans
If your goal is to teach for the duration of the term required by the program, we'd recommend evaluating your monthly payment plan. Because the balance can be forgiven in exchange for your public service, you'll save the most by reducing your payments. Check your loan's policies or call your servicer, and see if you can switch to a repayment plan with lower monthly payments. The Revised Pay as You Earn plan doesn't have any income requirements - you simply pay 10% of your discretionary income divided over 12 months. Other plans require you meet some kind of financial hardship threshold.
Let's assume a Direct Unconsolidated Loan of $20,000 with a 2013 interest rate of 6.80% by a teacher earning $40,000 a year. Monthly payments, assuming no raises, would be:
|Plan||Monthly Payment||120 Total Payments|
|Revised Pay as You Earn||$185||$22,200|
Be careful here though, because the Revised Pay as You Earn plan scales with any raises you get. At some point you'll likely get a raise, and when you re-certify your income, your monthly payment will rise too. Be on the lookout for when the Revised Pay as You Earn amount grows more than the standard so that you can switch back, or re-evaluate your options.