Updated June 18, 2019

Loan Forgiveness for Teachers: What Are Your Options?

Read more about Student Loan Forgiveness

If you're a teacher, you could be eligible for student loan forgiveness. Read on to learn more about available programs and how to see if you qualify.

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The average college graduate has more than $30,000 in student debt. But teachers have more options than most when it comes to dealing with student loans. You could:

  • Lower your payments through one of the four income-driven repayment plans.

  • Get your student loans forgiven altogether.

Before you decide what to do, you'll need to know what kind of student loans you have. Keep reading for more information.

Did you know: Teachers with student loans can apply for the Teacher Loan Forgiveness Program. You'll need to teach 5 consecutive years at an eligible school or agency and meet other criteria. Those who qualify can earn forgiveness for up to $17,500 in subsidized and unsubsidized loans.

Federal Vs. Private Student Loans

As a student, you might have received federal, private, or even both types of loans. Here are the differences:

  • Federal Student Loans
    Subsidized and issued by the government, most federal student loans are eligible for loan forgiveness and income-based repayment plans.

  • Private Student Loans
    Issued through banks and private lenders, these loans are NOT eligible for government-issued loan forgiveness programs. However, certain lenders may offer loan repayment assistance.

If you don't know which types of loans you have, you have a couple of options:

  • Call your student loan servicer to ask OR

  • Visit the National Student Loan Data System (NSLDS), which has a list of all federal loans issued by the U.S. Department of Education.

Not all schools participate or offer Federal Perkins loans. Speak with your school's financial aid office after completing the FAFSA to better understand your options.

FEDERAL TEACHER LOAN FORGIVENESS OPTIONS

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Keep reading for several ways that teachers may qualify for loan forgiveness.

PUBLIC SERVICE LOAN FORGIVENESS (PSLF)

If you work for a government agency or non-profit, you may be eligible for Public Service Loan Forgiveness (PSLF). To qualify for PSLF, you must:

  • Work full-time for a government agency or for certain types of nonprofit organizations.

  • Have Direct Loans (or consolidate other federal student loans to qualify).

  • Be enrolled in one of the 4 Direct Loan Program repayment plans.

  • Make 120 qualifying payments for your balance to be forgiven. Payments made before enrollment don't count as qualifying payments towards PSLF.

To apply for PSLF, download this form from the U.S. Department of Education and submit it to your loan servicer. If FedLoan Servicing is your servicer, log in and upload your PSLF application or Employment Certification Form on their website.

Note: The time it takes to process PSLF varies. You will be notified once your servicer receives all of the necessary documentation. You are not required to make payments on your loans while your loan forgiveness application is being processed.

TEACHER LOAN FORGIVENESS

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

FFELs ended in July of 2010. Speak with your loan servicer to find out if you have any FFELs.

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.

Default occurs when you miss your loan payment for 270 consecutive days. Your loans will enter into collections at 360 days past due.

Don't let this happen. There are options if you find yourself struggling to make payments. Start by calling your loan servicer.

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 mathematics, science, or special education. There is a catch, however - you must teach in a field you majored in during college.

If you meet these requirements and wish to apply, download a Teacher Loan Forgiveness form from the U.S. Department of Education and submit the completed application to your loan servicer.

The loan holder is allowed up to 60 days from the day it receives your completed application to process it and forward it to the guarantor. The guarantor then has an additional 45 days to either approve or deny the request.

PERKINS TEACHER LOAN FORGIVENESS

If you have one or more Federal Perkins loans you may be eligible for teacher loan forgiveness. But remember, not all schools participate or offer Federal Perkins loans. Speak with your school's financial aid office after completing the FAFSA to understand your options.

Requirements

  • Teach full-time in a low-income school
  • Have taught for at least one full academic year.
  • Work part-time at two low-income schools simultaneously.

Exception: If you don't teach at a low-income school, you may still qualify if you:

  • 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 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 academic years at a qualified school, even if you have taught at more than one qualified school during that period, you stand to have 100% of your Perkins loans forgiven.

Application for forgiveness of a Perkins Loan must be made to the school that made the loan or to the school's Perkins Loan servicer. The school or servicer can provide forms and instructions specific to your forgiveness request.

Teacher Cancellation Low Income (TCLI)

Teachers in qualifying low-income elementary and secondary schools and educational service agencies may qualify for loan cancellation under the:

  • Federal Perkins/National Direct Student Loan
  • Federal Family Education Loan (FFEL)
  • William D. Ford Federal Direct Loan (DL) programs

Requirements

  • Teach in a qualifying low-income school or educational service agency for a minimum of 5 years.

If you qualify, search the TCLI U.S. Department of Education directory for current and past year qualification information based on state, year, school/education service education name, and/or location.

Apply for TCLI by submitting a completed Teacher Loan Forgiveness Application form from the U.S. Department of Education to your loan servicer after you have completed the required five years of qualifying teaching.

Is teacher loan forgiveness taxable? Loans forgiven through teacher loan forgiveness programs are not considered taxable. As a general rule, forgiveness programs that require borrowers to work in certain occupations for a period of time are tax-free.

State by State Teacher Loan Forgiveness Plans 2019

Your state may also programs offering loan forgiveness for teachers. Areas with a high need for qualified teachers often provide additional support.

Keep reading for our updated list of state-sponsored teacher loan forgiveness plans. You can also check the American Federation of Teacher's database.

Arizona

  • Arizona Teacher Student Loan Program
    For teachers who enter an agreement with the Arizona Commission for Postsecondary Education (ACPE) to teach in an Arizona public school and meet other designated qualifications.

Arkansas

  • State Teacher Education Program (STEP)
    For teachers in a public school located in a geographical area of the state designated as having a critical shortage of teachers or in a subject matter area designated as having a critical shortage of teachers of the state.

Illinois

Iowa

Kentucky

Maine

  • Educators for Maine Program
    For students pursuing careers in education or child care in Maine and planning to work in state after graduation.

Mississippi

New York

  • Teach NYC
    For New York State certified teachers and school-based pedagogic clinicians working on specified shortage areas and bilingual education.

North Dakota

South Carolina

  • South Carolina Teacher Loan Forgiveness
    For teachers who obtained a Teachers Loan, Career Changer Loan, or a PACE loan and teach in certain critical geographic and/or subject areas in the South Carolina public school system.

Texas

TEACH GRANT

The federal government provides Teacher Education Assistance for College and Higher Education (TEACH) grants of up to $4,000 a year. The grants are available to students who are completing or plan to complete certain types of course work needed to begin a career in teaching in specified fields.

To qualify for a TEACH grant, you must be an undergraduate, postbaccalaureate, or graduate student that participates in a TEACH grant program or a TEACH Grant-eligible program.

Requirements:

  • Serve in a high-need field

  • Serve in an elementary school, secondary school, or educational service agency that serves students from low-income families

  • Serve for at least four complete academic years within eight years after completing (or ceasing enrollment in) the course of study for which you received the grant

Grant awardees must also:

  • Maintain certain academic achievement standards (generally, scoring above the 75th percentile on one or more portions of a college admissions test or maintaining a cumulative GPA of at least 3.25)

  • Receive TEACH Grant counseling annually that explains the terms and conditions of the grant's service obligation

  • Sign a TEACH Grant Agreement

If you do not meet the requirements of your service obligations, all TEACH Grants you received will be converted to Direct Unsubsidized Loans by the federal government.

You must repay these loans in full, with interest charged from the date of each TEACH Grant disbursement.

The Department of Education recently adopted a process that enables TEACH Grant recipients to convert Direct Unsubsidized Loans back to TEACH Grants in certain circumstances.

Visit this page for more information.

Teach Grant Application Process

  1. Create an account and log in to complete a FAFSA form on the U.S. Department of Education site.

  2. You will then be required to log in and complete TEACH Grant Initial and Subsequent Counseling.

  3. Sign the Agreement to Serve.

Other Ways to Get Rid of Student Loans

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Loan Discharge

Your federal loans can also discharged due to a catastrophic event. These may include the student's death, false certification from the school, a school closing down, or a change in the health of a student (such as disability).

Closed School

  • Did your school close after you obtained your student loan?

  • Did the school close while you were enrolled?

  • Did the school close within 120 days after you withdrew?

Read here to learn more about loan discharge due to school closure.

Passing of a Student
Another type of discharge available is when a student, or a parent borrower of a PLUS loan, has passed away.

The federal loan servicer handling the student's loans will require a certified death certificate to authenticate it and then discharge the loans.

Read here to learn more about how to get your loans discharged due to the death of the borrower or student.

Disability
If a student becomes disabled and is no longer able to perform the duties for which they received the federal student aid, they may be eligible for a discharge.

  • Are you permanently disabled?

  • Does your disability prohibit you from doing the work for which you took out the student loan?

For example, students who went to a career college for Commercial Driver's License training may be eligible for a discharge if they became an insulin-dependent diabetic. Or, as a veteran, you may qualify for discharge if you have a VA disability.

Read here to learn more about how to get your loans discharged due to total and permanent disability.

Bankruptcy
In rare cases, you may have your federal student loan discharged if the bankruptcy court determines that repayment would impose undue hardship on you and your dependents.

You must declare Chapter 7 or Chapter 13 bankruptcy, and the hardship must be decided through proceedings in bankruptcy court.

Read here to learn more about student loan bankruptcy discharge.

False Certification of Student Eligibility
Also called "Unauthorized Signature/Unauthorized Payment Discharge," this option can discharge your Direct or federal loans if certain criteria are met.

  • Did your school falsely certify your eligibility to receive the loan based on your ability to benefit from its training?

  • Was your loan falsely certified because you were a victim of identity theft?

  • Did the school certify your loan eligibility but due to extenuating circumstances you cannot meet state requirements for employment in the area for which you were trained?

  • Did the school sign your name on the application or promissory note without your authorization?

  • Did the school endorse your loan check or authorized for electronic funds transfer without your knowledge, and the money was not given to you or applied to charges that you owed to the school?

Read here to learn more about false certification of student eligibility or unauthorized signature/unauthorized payment discharge.

Unpaid Refund Discharge
Your school may be required to return a portion of your loan money if you withdrew from school after receiving a student loan. You would need to have attended the school for less than 60% of the academic period for which your loan was issued.

Check with your school to find out how federal refund policies apply to federal aid at your school. You may also contact your loan servicer for additional information.

Income-Driven Repayment Plans

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You may also be eligible for one of the 4 income-driven repayment options. These plans base your monthly payment on your income.

If you earn very little, your payments could be as low as $0. After 20 - 25 years of repayment, the remainder of the loan balance will be forgiven.

Here's what you need to know about income-driven forgiveness programs:

  • Only Federal loans are Eligible
    This includes Direct and Direct PLUS Loans. If you have other loans (such as Federal Stafford Loans or Perkins Loans), you may need to combine them into a Direct Consolidated Loan. Private loans and Parent PLUS loans are not eligible.

  • Payment is Based on Your Discretionary Income
    Your monthly payment can be as little as 10% of your discretionary income.

Your discretionary income = Your adjusted gross income - 150% of the federal poverty level for your family size

For example, for a family of 1, 150% of the poverty level is $18,090.

If your income is $40,000 a year (after taxes), your discretionary income =
$40,000 - $18,090 = $21,910.

Keep reading to learn more about your income-based repayment options.

Income-Based Repayment (IBR)

You must have Federal Direct Loans or Federal Family Education Loans (Stafford, Federal PLUS Loans, and Federal Consolidation Loans) to qualify.

  • Loans were taken out before July 1, 2014
    Students pay 15% of their discretionary income. After 25 years of making payments, any amount left over is forgiven.

  • Loans were taken out after July 1, 2014
    Students pay 10% of their discretionary income. After 20 years of making payments, any leftover amount is forgiven.

As your income increases, so does your payment. The maximum payment is the amount of the Standard Repayment Plan's payment.

The government will pay your interest on subsidized loans for the first 3 years. After that, the unpaid interest may get added to your principal balance. Luckily, this doesn't happen until your IBR payment equals the Standard Repayment payment.

Example: You have $50,000 in student loans with an interest rate of 5%.

Under a Standard Repayment Plan, you will owe a total of $63,640 including interest. Your annual adjusted income is $30,000. You enter the Income-Based Repayment plan with a monthly payment of $148/month.

After 25 years of payments on this plan, you will have paid a total of $44,662. The rest is forgiven at that point.

Note: You won't always save money by waiting for your balance to be forgiven. Remember, you will pay more interest over the life of the loan (since it is 20-25 years rather than with Standard Repayment Plan).

And as your monthly income increases, so does your monthly repayment amount, up to that of the Standard Repayment Plan.

Pay as You Earn Repayment (PAYE)

Fewer graduates will be eligible for this program because of date restrictions.

  • You must be a new borrower after October 1, 2007. In other words, you must not have any student loans dating before this date.

  • You must also have taken out an eligible loan after October 1, 2011.

  • Payments are 10% of your discretionary income. If you don't have an income right now, you don't have a payment.

  • Your outstanding balance is forgiven after 20 years of payments.

The max payment of this plan equals the Standard Repayment plan payment. Interest payback begins when you reach that amount.

You must reapply for these programs once every 12 months. Otherwise, the loans will resume at the Standard Repayment Amount.

The REPAYE program is for those who don't fall into one of the above categories. There are no date restrictions. Only Parent PLUS loans and most private loans are excluded.

  • Payments are 10% of your discretionary income.

  • There is no cap on the payments, unlike the other plans we discussed thus far. As your income increases, so do your payments. This could make for some hefty monthly bills once you start bringing in more income.

  • Your outstanding balance is forgiven after 20 years of payment. Because there is no payment cap, you won't have any interest added to your principal balance.

Income-Contingent Repayment (ICR)

This is the only repayment plan available for borrowers with Parent PLUS loans. To be eligible, the Parent PLUS loans must first be consolidated into a Direct Consolidation Loan.

  • For the ICR plan, discretionary income = your adjusted gross income - 100% of the poverty level (instead of 150%).

  • Your payment is 20% of your discretionary income OR payments based on a 12-year repayment plan, whichever is less.

  • This payment may also exceed the Standard Repayment Plan monthly payment.

The government does not subsidize any unpaid interest. 100% of the unpaid interest gets added to your loan balance annually.

However, no more than 10% of the loan balance will be added.

To see if you are eligible for one of the four income-driven repayment plans, create an account with the U.S. Department of Education and fill out an application.

Refinancing

Through refinancing, you can get a lower interest rate, which means a higher percentage of your payments chip away at your principal balance. That equals less interest paid over the life of the loan.

Student loan refinance options vary, so you'll want to shop around with private lenders to find the best offers. Look for refinancing terms that offer:

  • Lower Interest Rates
    The point is to save money, so you'll want to find an interest rate that is lower than what you pay now.

    Interest rates vary based on individual credit and income. Check the rates from several lenders within a 14-day window. This way it only counts as one credit inquiry on your report.

    Soft Credit Pull versus Hard Credit Pull
    A soft credit pull will not affect your credit score. A hard credit pull will drop your credit score by at least a couple of points if not more.

    Read more on how to improve your credit score here.

  • Fixed Interest
    Variable rates are often lower than fixed rates. But your monthly payment amount will likely rise if your interest rate increases. If you aren't sure how long it will take you to pay off your debt, stick with a fixed rate.

  • No Prepayment Penalties
    Steer clear of servicers that charge for this. You do not want to pay more for a loan that you are trying to pay off early.

  • Automatic Payments
    You could qualify for a reduced interest rate, up to a .25% discount, by agreeing to have your payments automatically deducted from your checking account.

    Can I negotiate my student loan payoff?
    You may be able to negotiate a student loan payoff with a private student loan lender. Settlement might be difficult. Increase your chances by asking your lender what they would be willing to negotiate, rather than approach them with a set proposal.

TEACHER LOAN FORGIVENESS FORBEARANCE

If you have Direct or FFEL program loans, you may be eligible for a teacher loan forgiveness forbearance. If approved, teachers receive forbearance of payments on eligible loans while performing qualifying teaching service as a full-time teacher at an elementary or secondary school or for an educational service agency.

You may be eligible for Teacher Loan Forgiveness Forbearance if you are:

  • A highly qualified full-time special education teacher for elementary school children with disabilities (forgiveness of up to $17,500).

  • A highly qualified full-time special education teacher for secondary school children with disabilities (forgiveness of up to $17,500).

  • A highly qualified full-time mathematics teacher for secondary school students (forgiveness of up to $17,500).

  • A highly qualified full-time science teacher for secondary school students (forgiveness of up to $17,500).

  • A highly qualified full-time secondary education teacher, or (for those who began teaching before 10/30/2004) a full time secondary education teacher in a subject area relevant to your academic major (forgiveness of up to $5,000).

  • A highly qualified full-time elementary education teacher, or (for those who began teaching before 10/30/2004) a full-time elementary education teacher who demonstrated knowledge and teaching skills in reading, writing, mathematics, and other areas of the elementary school curriculum (forgiveness of up to $5,000).

How to Apply:
Download and complete a Teacher Loan Forgiveness Forbearance Request and return the form and any required documentation to your loan holder.

If you don't qualify, consider student loan refinancing. It can help make your payments more manageable because you can potentially get a lower interest rate and better term options.

Bottom Line - Know Your Options

As a teacher, you have several loan forgiveness programs at your disposal. But be careful - they don't always work together. For instance, consolidating your Perkins loans could make you ineligible for the Teacher Loan Cancellation program.

Research your options and talk to your loan servicer. They can help you calculate how to reap the largest savings. It's also important to remember that even if you can get a large portion of your loans forgiven, you'll be paying significant amounts of interest until that happens.

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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