The Ultimate Guide to Student Loan Forgiveness Programs for Teachers

If you're an educator and you want part or all your federal student loans forgiven, the good news is that you have options. This article primarily focuses on the Teacher Loan Forgiveness Program. Since you do have the option to use other federal programs, it's important to understand how the Public Service Loans Forgiveness Program and the Perkins Loans Cancellation Program can help you. You, the borrower, need to understand these other programs to make a determination of which program is best for you.

The Teacher Loan Forgiveness Program

The Teacher Loan Forgiveness Program can eliminate up to $17,500 of your subsidized and unsubsidized loans under the Federal Direct Loans Program or your subsidized and unsubsidized Stafford Loans under the Federal Family Education Loan (FFEL) Program. Parent PLUS Loans, Graduate PLUS Loans, and Perkins Loans aren't eligible for this program. The eligibility requirements for this program is that you’re a highly qualified teacher that teaches full-time for five complete and consecutive academic years in a low-income school or educational service agency.

Highly Qualified Teacher

One of the eligibility requirements is that you must be a highly qualified teacher. "Highly qualified" means you have attained at least a bachelor’s degree and you're certified or licensed by your state.

Additional Requirements for Elementary School Teachers That Are New to the Teaching Profession

If you're new to the profession and teaching elementary school, to be considered a highly qualified teacher, you must have passed a state test demonstrating your skills in reading, writing, mathematics, and other areas of the basic elementary school curriculum. The state certification or licensing test might meet this requirement. The state may have a special test for elementary school teachers that meets this requirement.

Additional Requirements for Middle School or Secondary School Teachers That Are New to the Profession

If you're a middle school or high school teacher, to be considered a highly qualified teacher, you must:

• pass state tests for each of the academic subjects you'll be teaching, or 

• complete an academic major, graduate degree, course work equivalent to an undergraduate academic major, or advanced certification or other credential for each of the academic subjects you teach.

Additional Requirements for Those That Are Not New to the Profession

In addition to meeting the requirements for new teachers, if you’re an experienced teacher, you must demonstrate competence in all the academic subjects you teach based on your state's uniform standard of evaluation. This uniform state standard of evaluation may involve multiple objective measures of teacher competence and must:

• be set by the state for grade-level appropriate academic subject matter knowledge and teaching skills;  

• be aligned with state academic content and student academic achievement standards; 

• provide information about your core content knowledge for the subjects you teach;  

• take into consideration, but not primarily, the amount of time you've been teaching the subject.

Five Complete and Consecutive Years

What does "five complete and consecutive years" mean? It's possible that less than a full academic year can qualify as a complete year. This is the case if

1. you completed at least half the academic year; and

2. your school system considers you to have met your contract requirements for the academic year for purposes of salary increases, tenure, and retirement; and

3. you were unable to complete the academic year because 

4. 1. you returned to college, on at least a half-time basis studying a field related to your teaching service, or

   2. you had a condition covered under the Family and Medical Leave Act of 1993, or

   3. you were called up to active duty for a period of more than 30 days as a member of the armed forces reserves.

Low-Income School

What is a low-income school? Schools that meet the requirements for being low-income schools are listed on the U.S. Department of Education's Federal Student Aid website. See the Teacher Cancellation Low-Income Directory (TCLI).

Loan Forgiveness Amount

If you're a highly qualified full-time teacher in math or a science teacher that teaches at the secondary education level, you're eligible for $17,500.00 of student loan forgiveness for your Direct Loans or Stafford Loans. 

If you're a qualified special education teacher in high school, middle school, or elementary school whose primary responsibility is to teach children with disabilities, you could be eligible for $17,500.00 of forgiveness for your Direct Loans or Federal Stafford Loans. 

If you don't fall into these subject areas, your maximum forgiveness under the Teacher Loan Forgiveness Program is $5,000.00.

The Public Service Loan Forgiveness Program and Perkins Loan Cancellation Program

It's important to understand Public Service Loan Forgiveness (PSLF) since it may be a better option than the Teacher Loan Forgiveness Program for you.  Or, it may be best for you to use the Teacher Loan Forgiveness Program in conjunction with the PSLF program.

Which program is better depends on your situation, but often, you'll find the PSLF Program is the better of the two. The PSLF Program provides a 100% discharge if you make 120 qualifying monthly payments on a qualified repayment plan while working full-time for a qualified employer. Generally, "qualified payments" means loan payments no later than 15 days after the due date. Generally, a "qualified repayment plan" is the standard 120 payment of the full loan balance or one of the income-driven repayment (IDR) plans. Common "qualified employers" include government organizations at either the federal, state, local, or tribal level, and 501(c)(3) nonprofit organizations. Public schools meet these employer requirements as governmental organizations. Private schools usually meet the requirements as long as they are a 501(c)(3) nonprofit. See the table below for a comparison of the main loan forgiveness programs for teachers.

FFEL Loans and Federal Perkins Loans do not qualify for the PSLF program. It's easy to resolve this problem by using Direct Loan Consolidation loans to bundle your FFEL loans into the Direct Loan Program. Once part of the Direct Loans Program, the former FFEL loans qualify for the PSLF program. The same can be done with Perkins Loans. 

The Perkins Loan Cancellation Program is often better than either Teacher Loan Forgiveness or PSLF. If you consolidate a Perkins Loan into a Federal Consolidation Loan, you lose your eligibility for the Perkins Loan Cancellation Program. The qualifications for Perkins Loan Cancellation may be better for you. For example, the Perkins Loan program allows you to eliminate 100% for teachers of bilingual education or foreign language teachers. The Teacher Loan Forgiveness program doesn't cover these teacher categories for its maximum loan forgiveness. For this reason, careful analysis is necessary to determine how to handle your Perkins Loans. 

Examples Comparing the Different Student Loan Forgiveness Programs Available for Teachers

The program that's best for you depends on many questions. For lower loan balances on Stafford or Direct Loans, the Teacher Forgiveness Program is usually best. If you have a PLUS Loan or a higher loan balance for a Direct Loan or Stafford Loan, you'll probably be better off with the PSLF Program. Your FFEL loans won't qualify for the PSLF Program unless you use a Direct Consolidation loan to convert the FFEL Loans to Direct Loans. See the examples below for situations where each of these two forgiveness programs is best.

Example 1:

You work in a low-income school. You're a highly qualified math teacher. So, under the Teacher Loan Forgiveness Program, you're eligible for $17,500.00 in loan relief. Your Direct Loan balance is $22,000.00. Under your income-driven payment plan, you'll pay $150.00 per month. Over five years, you'll pay $9,000.00 and your entire loan balance will be forgiven. If you chose the PSLF, you would have to pay $18,000.00 over ten years with the same income-driven repayment plan. With either plan, you would have your loan balance reduced to zero. Yet, with the Teacher Loan Forgiveness Program, you'll only pay for five years and your total payments will be $9,000.00 instead of $18,000.00.

Example 2:

All facts are the same as Example 1 except your loan balance is $50,000.00. If you choose the Teacher Loan Forgiveness Program, you'll still owe $23,500.00 after five years and $9,000.00 in payments. If you choose the PSLF Program, you would pay $18,000.00 but would have a balance of zero at the end of ten years. In this case, the PSLF is your better choice.

There's another option. You can use both the Teacher Loan Forgiveness Program and the PSLF Program, yet you can't do both at the same time. So, it will take 15 years to use both programs. Usually, this is a bad idea since you could've achieved the same result with just 10 years in the PSLF Program. 

There may be circumstances where using both programs would be advantageous. An example would be taking out new loans for continuing your higher education after completing the Teachers Loan Forgiveness Program. Since you can't use the Teachers Loan Forgiveness Program twice, PSLF may be your only choice for the new loans.

If you have Perkins Loans, you could use the Direct Loans Consolidation Program to make those loans eligible for the PSLF Program. This is usually a bad idea since you can completely discharge all your Perkins Loans with five years of service at a qualifying school.

Conclusion

Teachers have good options available for loan forgiveness. Which option is best for you depends primarily on the types of loans you have and how much you owe. It's a good idea to carefully analyze your options before deciding on a course of action.