Being an educator doesn’t necessarily mean you’re educated about the best ways to deal with your student loan debt.
Considering how much student loan debt is out there, and the relatively low salaries many new teachers face, your education degree could come with a heap of debt.
Based on June 2018 credit report data for more than 60 million U.S. Credit Karma members, those who have student loan debt owe an average of about $33,370 in student loans. And the national average starting teacher salary for 2016-17 was just $38,617, the National Education Association reports.
With total student loan debt in the U.S. topping $1.5 trillion as of July 2018, according to the Federal Reserve, it’s no surprise that historically, approximately 11% of federal student loan borrowers have defaulted on their student loans, according to data from the U.S. Department of Education.
Clearly, many graduates have difficulty repaying their student loans. For some, student loan forgiveness could be an option, provided they meet qualifying criteria.
First things to know about loan forgiveness for teachers
If you’re struggling with student loan debt, you have options, like seeking an income-based repayment plan or refinancing higher-interest debt with a lower-interest loan. But what if you didn’t have to repay some — or even all — of your student loan debt? What if you could get your debts forgiven?
Loan forgiveness is when the lender agrees to cancel some or even all of your debt so that you no longer have to repay the forgiven amount because of your job. When it comes to federal student loans, certain borrowers could be eligible to have their student loans forgiven.
But even if you qualify — and it’s not easy — it’s not a free pass. You’ll need to meet very specific criteria to qualify for loan forgiveness. Student loan forgiveness for teachers requires you to work at a qualifying school or educational service that serves low-income students. This can mean working for a prescribed amount of time in schools in low-income areas or becoming an instructor at a participating educational service agency.
Qualifying for student loan forgiveness
Of course, anything that sounds as good as not having to repay your student loans is bound to come with some strings attached.
Loan forgiveness for teachers (or anyone else) requires you to meet qualifying criteria. Those criteria can vary depending on the type of loan you have, who’s forgiving it and where you work.
What kind of loans can be forgiven?
Only certain federal student loans can be forgiven. There are no loan forgiveness programs for private student loans, so if your student loans aren’t federal loans, you won’t qualify for federal loan forgiveness. If your loan isn’t eligible for forgiveness, you may be able to refinance your loan or negotiate better terms with the lender. If you’re struggling to repay your student loans, it may be worth reaching out to the lender.
Loan forgiveness programs for teachers
There are two main federal student loan forgiveness programs for teachers.
- Teacher Loan Forgiveness Program
- Perkins Loan Teacher Cancellation
Let’s look briefly at how each works.
Teacher Loan Forgiveness Program
If you qualify for this program, you could have up to $17,500 forgiven from your direct subsidized and unsubsidized loans or your subsidized and unsubsidized federal Stafford loans. If you repaid one of these eligible loans with a direct consolidation loan or a federal consolidation loan, you might be able to have the outstanding portion of the consolidation loan forgiven as well.
What’s the difference between direct subsidized and direct unsubsidized loans?
Direct subsidized loans are available to assist undergraduate students with financial need. The school decides how much you can borrow (up to the amount of your financial need) and the U.S. Department of Education pays the interest on the loan while you’re in school (at least half time), for the first six months after you leave school and during any deferment period.
Both graduate and undergraduate students can apply for direct unsubsidized loans, regardless of financial need. The school decides how much you can borrow based on the cost of attendance and other financial aid you’ll receive. Interest is your responsibility and will accrue (grow) and be capitalized (added to the loan principal) while you’re in school, during grace periods and during deferment or forbearance periods.
The eligibility requirements for this program include …
- Working for five full and consecutive academic years as a full-time, highly qualified teacher. At least one of those years must have been after the 1997-98 academic year.
- Meeting requirements for being considered a “highly qualified teacher,” such as having at least a bachelor’s degree, received full state teacher certification and other qualifications.
- Working at a school (elementary or secondary) or educational service agency that serves low-income students.
- Having taken out your loans before the end of your five years of qualifying service.
- Having had no outstanding balance on direct loans or Federal Family Education Loan (FFEL) program loans as of Oct. 1, 1998, or on the date you obtained the loan after that date.
- Being current (not in default) on the loan for which you’re seeking forgiveness, unless you’ve made acceptable repayment arrangements with the lender.
The amount you can have forgiven will depend on the subject you teach. Highly qualified full-time secondary school math and science teachers, as well as highly qualified special education teachers in secondary school or elementary school, may be able to qualify for up to $17,500 in forgiveness. Teachers in other subjects may be able to qualify for up to $5,000 in loan forgiveness.
To apply for loan forgiveness through this program, you’ll need to complete and submit a Teacher Loan Forgiveness Application to your loan servicer.
Perkins Loan Cancellation
Loan forgiveness and cancellation basically mean the same thing — you don’t have to repay all or a portion of your student loan debt. Under this cancellation program, you might be able to have all or some of your federal Perkins loan canceled.
The eligibility requirements for this program include …
- Working full-time as a teacher in a public or nonprofit elementary or secondary school as a:
- Teacher who serves students from low-income families
- As a special education teacher
- As a math, science, foreign language or bilingual education teacher, or teaching in any other field that a state education agency has determined to have a shortage of qualified teachers in that state.
- Being directly employed by the school system.
The amount of debt you can have canceled depends on the number of years you work in a qualified role as a teacher. For example, as a teacher, you could have up to 100% of your federal Perkins loans canceled.
To have your Perkins loan canceled, you must apply directly to the school that made the loan or to the school’s Perkins loan servicer.
Other reasons for loan forgiveness
You may also qualify to have your federal student loan forgiven by working for the government or a not-for-profit organization through the Public Service Loan Forgiveness Program, or for reasons other than years of employment or service.
For example, if you become totally and permanently disabled, you may be able to have your direct loans, Perkins loans and Federal Family Education Loans (FFEL) discharged.
If you don’t qualify …
If you don’t qualify for student loan forgiveness under any of these programs, you still have options for managing your student loan debt.
- Apply for a direct consolidation loan to consolidate multiple federal student loans into one loan. Consolidation may be able to simplify the repayment process, lower your monthly payment by extending the repayment period up to 30 years, and allow you to switch variable-rate loans into a fixed-rate loan. Note that because consolidation typically increases your repayment period, you’ll likely pay more in interest over the life of the loan.
- Request an income-driven repayment plan for federal student loans if your loan payments are high compared to your income. The plan sets monthly payments based on your income, and may even lead to loan forgiveness.
- Defer repayment until you’re better able to make monthly payments. Keep in mind, though, deferment means you’re not making progress toward paying off the loan. Plus if you have unsubsidized loans, any unpaid interest that accrues during the deferment period may get added to the principal balance, meaning the amount you pay going forward will be higher.
- Refinance multiple or higher interest private student loans into a single loan. If you have good credit or want to consolidate your private student loan debt, refinancing with a personal loan might be helpful.
When you’re struggling with student loan debt, having a loan forgiven can feel like a dream come true. Student loan forgiveness for teachers can help educators reduce their total debt, but forgiveness doesn’t come easy. You’ll need to work for forgiveness in a qualifying job for a qualifying employer and meet a number of other requirements in order to have some or all of your eligible federal student loans forgiven.