July 12, 2017

Loan Forgiveness for Teachers: What Are Your Options?

Read more about Student Loan Forgiveness

If you're a teacher, you could be eligible for several loan forgiveness programs. Here are the different options available.

Like most new graduates, you probably have more than $30,000 in student debt. If you are a teacher and that's around your starting salary, what are you supposed to do?

It's possible that you can make some changes so your loans won't feel insurmountable while you work your way up in your new career. As a teacher, you have more options than other graduates because of your profession.

  • You can lower you payments by restructuring your debts through one of the four income-driven repayment plans. That's the upside. The downside is you pay more interest over time.
  • Another option is getting your loans forgiven altogether. This is a real possibility if you're a teacher.

Read on to see your advantages as a teacher borrower, depending on what kind of loan you took out before you started your schooling.

Do You Have Federal Perkins Loans?

We'll start with the easiest loan forgiveness option. If you have one or more Federal Perkins loans, read on. If you aren't sure, log into the National Student Loan Data System to see what loans you have.

Do you meet the following requirements?

  • You work as a full-time teacher in a low-income school
  • You taught for least one full academic year
  • You work part-time at two low-income schools simultaneously

If you don't teach at a low-income school but meet one of the following requirements, you may qualify:

  • Teach math, science, foreign language, or special education
  • Teach any subject which your state qualifies as a subject with a shortage of teachers
  • Teach at a non-profit school with nonprofit status

If you meet the above requirements, you may qualify for the following:

  • 15% of your Federal Perkins loans forgiven after your first and second year of teaching
  • 20% of your Federal Perkins loans forgiven after your third and fourth year of teaching
  • 30% of your Federal Perkins loans forgiven after your fifth year of teaching

If you teach for five consecutive years, you stand to have 100% of your Perkins loans forgiven.

This is just the start. Keep reading to see what other loan forgiveness plans you may qualify for.

Do You Have Direct Student Loans?

If you have student loans under the Direct Loan program (loans from the Department of Education), you could be eligible for up to $17,500 in student loan forgiveness.

Do You Meet the Following Requirements?

  • You've worked full-time in a low-income school for 5 consecutive years
  • At least one year you taught is after the 1997-1998 school year
  • Your student loans aren't in default

If you meet these requirements and have loans other than PLUS or Perkins loans, you may qualify for Teacher Loan Forgiveness.

Teachers in an elementary school or secondary school may receive up to $5,000 in loan forgiveness. Teachers in a secondary school who teach a highly qualified subject may receive as much as $17,500 in student loan forgiveness. A highly qualified subject includes math, science, or special education.

Here's the catch though - you must teach in a field you majored in during college.

"Highly qualified teacher" means you have a teacher state certification. Although the name sounds intimidating, it's something most teachers are anyway.

Do You Have More Student Loans Left?

As you sit and tally up your student loans, you may wonder what you will do with the remaining loans. Perkins loans only offer up to $5,500 per year. You may have much more than $5,000 in Direct Loans too. There's one more option - the Public Service Loan Forgiveness program.

Do You Meet the Following Requirements?
This program isn't just for teachers. But teachers can qualify for it. In order to qualify, you must:

  • Work in the public service sector for 10 years
  • Make payments on your loans for 10 consecutive years

You can check your eligibility with the Department of Education yearly. We also recommend completing the PSLF Employment Certification Form every year. This helps the DOE track your progress.

This program doesn't require you to work at a low-income school, though. If you didn't qualify for the Perkins Loan Cancellation or Direct Loan Forgiveness, this could be a better option.

There's a catch: You need to be on an income-driven repayment plan. It's not a requirement, but it's the only way the forgiveness plan will benefit you. If you stay on the standard repayment plan, you pay your loans off in 10 years. There's nothing for the DOE to forgive.

An income-driven repayment plan, on the other hand, lowers your payments according to your income. There are 4 options:

  • Income-based repayment: Your payment is 10% of your discretionary income. This payment must be lower than the standard payment to qualify.

  • Pay as you earn: Loans originated after October 1, 2007, and with a disbursement after October 1, 2011, qualify. Your payment is 10% of your discretionary income. This payment must also be lower than your standard payment to qualify.

  • Revised pay as you earn: You pay 10% of your discretionary income, but there aren't any date restrictions. There also aren't any payment caps. Your payment increases as much as your income increases.

  • Income contingent repayment: You pay either 20% of your discretionary income or a 12-year fixed payment. The servicer chooses the lower of the two payments for you.

Each of these programs offer loan forgiveness after 20-25 years. But if you meet the above requirements for the PSLF, your loans may be forgiven in as little as 10 years.

Check Your State's Offerings

There's still one more option. Your state may offer loan forgiveness for teachers. Areas with a high need for qualified teachers often have additional help. Check the American Federation of Teacher's database to see what your state offers.

A few examples of what states offer right now include:

  • Illinois
    Illinois offers the Illinois Teacher's Loan Repayment Program. It is a grant to graduates who teach in low-income areas. In order to qualify, you must have a portion of your student loans forgiven in the Teacher Loan Forgiveness Program. You may be eligible for an addition $5,000 in loan forgiveness if you qualify.

  • Oklahoma
    Oklahoma offers the Teacher Shortage Employment Program. This provides secondary school teachers who teach math or science additional loan forgiveness. You must teach at a public secondary school for at least 5 years to qualify.

  • Tennessee
    Tennessee offers the Tennessee Math and Science Teacher Loan Forgiveness Program. This funding helps public school teachers obtain an advanced degree in math or science. You must work at a Tennessee public school for 2 consecutive years to qualify.

Research Your Options

As a teacher, you have many loan forgiveness options at your disposal. Be careful, though, as they don't always work together. For instance, consolidating your Perkins loans could be a mistake. Consolidation could make you ineligible for the Teacher Loan Cancellation program. You may benefit from keeping them separate if you consolidate other loans.

We recommend looking at each option we discussed above in depth. Then you can formulate a plan. Talk to your loan servicer to see which options may pertain to you. Your loan servicer can then help you calculate where you would reap the largest savings.

Always keep in mind throughout all your decision-making: It's possible you could have a large portion of your loans forgiven. But the longer you pay on them and wait for forgiveness, the more interest you'll pay.

So see where you could save the most money not only monthly, but in the long run. Then you can determine the payment that works the best for you.

More from CreditDonkey:

Student Loan Forgiveness

How to Lower Student Loan Payments

Should I Consolidate Student Loans

More Articles in Money Tips

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