Teachers play a vital role in shaping the next generation and instilling the value of an education. Earning the degrees and certificates to mold minds as an educator does not come easy and can be an expensive decision. The New America Education Policy Program 2014 study found that “people who earned a masters in education had more student loan debt ($50,879 on average) than people who earned an MBA ($42,000)”.
But the average salary for an MBA graduate was $142,000 in 2017, whereas the national average for a K-12 teacher is closer to $47,230. So how can teachers pay back the debt they took out to become an educator? Besides the popular budgeting tips, there are a number of federal and state-sponsored programs that teachers may be able to apply for to help bring that debt down.
Qualified teachers are eligible to receive between $17,500 and $5,000 on Direct Subsidized and Unsubsidized Loans through the Teacher Loan Forgiveness Program. But who is qualified? First, you must first have taught “full-time for five consecutive years in a low-income school or educational service agency,” according to the Student Aid website.
You also must be considered a qualified teacher, meaning:
- You have earned a bachelor’s degree
- Received state certification as a teach
- Not had your certification or license requirements waived on an emergency, temporary, or provisional basis
There are more requirements for those new to teaching, so be sure to check the Teacher Loan Forgiveness Program website for a full list of requirements.
Then, you need to confirm that your school qualifies as low-income by checking for it on the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits (Low-Income School Directory), compiled by the Department of Education.
Full-time math and science high school teachers and special education teachers may qualify for the largest loan forgiveness amount, $17,500. Teachers who don’t teach math, science, or education may still qualify for up to $5,000 in loan forgiveness. While not as large of a chunk of change, $5,000 is still a dent in your loans that does not have to come out of pocket.
Not specific to teachers, this is a large program that educators often fall into. Qualified individuals can apply for the federal government to forgive the remaining balance on Direct Subsidized and Unsubsidized Loans after 120 qualifying payments. 120 payments also means ten years. These all need to be full payments, made within 15 days of the deadline, and you needed to have started those payments after October 1, 2007.
Qualifying employment for the PSLF program includes:
- Government organizations at any level (federal, state, local, or tribal)
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
- Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
- Time serviced as a full-time AmeriCorps or Peace Corps volunteer can count towards the PSLF program
There is also a list of employers that do not qualify, and interested borrowers should review the complete list on the PSLF website before applying. Qualifying repayment plans include all of the Income-Driven Repayment Plans that are offered by the government. Be sure to review all of your options before selecting a plan to pursue.
While the Perkins loan is no longer offered by the federal government, there are still forgiveness programs for borrowers one. For each academic year working full-time, a qualified teacher is eligible to have a portion of their loan canceled.
To qualify for the cancellation program you must have worked full-time in a public or nonprofit elementary or secondary school system as one of the following:
- A teacher in a school serving students from low-income families
- A special education teacher, including teachers of infants, toddlers, children, or youth with disabilities
- A teacher in the fields of mathematics, science, foreign languages, or bilingual education, or in any other field determined by a state education agency to have a shortage of qualified teachers in the area
The cancellation of your loan can be up to 100%, including interest accrued during that year, but is over the following increments:
- 15% canceled per year for the first and second years
- 20% canceled for the third and fourth years
- 30% canceled for the fifth year
As with all other programs discussed here, there is fine print to be aware of before filling out an application. Interested borrowers should check out the Perkins Loan Cancellation for Teachers website to confirm they are a fit.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is a possible funding solution fit for those considering going to school to earn a bachelors, masters, or post-baccalaureate degree in education and plan to work in a high need field, or a low-income district after finishing school for the next eight years. Unlike the previous programs discussed, this grant program provides the student with up to $4,000 each year to help with the cost of education.
There is a complete list of qualifications on the TEACH website that applicants should review before applying. If the student does not fulfill the work conditions the grant requires, the grant money will instead be converted to a Federal Direct Unsubsidized Loan. Interest will then be added on to the principal from each date when the grant was disbursed.
State-Sponsored Student Loan Forgiveness Programs
Besides federal programs, there are also a number of options offered by individual states to help teachers with loan forgiveness. The American Federation of Teachers website includes a comprehensive list of available programs with a search function. Most of the programs focus on supporting teachers working in low-income areas.
The Pros of Student Loan Forgiveness Programs
The immediate upside is that a chunk of money will be taken out of your debt. If you are working in a highly qualified field and area, then it could be a huge weight removed. Federal repayment plans are also not seen as taxable income, which is an added bonus. This is not the case for all non-federal programs, so make sure you take that into account and declare debt forgiveness correctly on your taxes.
The Cons of Student Loan Forgiveness Programs
As you might have noticed, not every teacher will fit the qualifications for loan forgiveness for each program, or maybe any of the programs. Generally, you have to be teaching in a set area or subject matter for an extended period of time, which can limit career opportunities. Some teachers might move school districts to accept a pay raise, but lose their eligibility for loan forgiveness. There are also different values to the eligible forgiveness amount based on when you graduated.
Another con to leaning on a loan forgiveness plan is that you are unable to refinance your loans with a private lender. The federal loan forgiveness programs are only for federal loans. However, if you are unable to take advantage of federal loan forgiveness, then refinancing could be an option to lower interest payments and save money on loan payments.
Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide financial, legal, or tax advice.