Paying off an Installment loan can be challenging, especially for people attempting to pay off thousands of dollars in student debt. But you may not have to repay your student debt in full if you teach! The U.S. Department of Education offers loan forgiveness for teachers. Learn about the different types of federal loan forgiveness programs and qualification requirements in this informational article.
What Are the 4 Loan Forgiveness Programs for Teachers?
Teacher loan forgiveness is a real possibility for individuals that meet specific qualifications. Although student loan forgiveness scams are rampant, the Department of Education offers four legitimate student loan forgiveness programs you should know about. Each program targets a specific type of instruction or requires a certain number of payments.
It’s possible for teachers to qualify for more than one type of student loan forgiveness program. In that case, weighing your options carefully is essential to choose the best program for your unique situation.
Public Service Loan Forgiveness (PSLF) Program
The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance of federal Direct Loans after 120 qualifying payments. Qualifying payments must be made under an income-driven repayment (IDR) plan. It takes approximately ten years for teachers to meet the minimum number of required monthly payments. As a teacher seeking loan forgiveness, you must work full-time for a qualifying employer and have Direct Loans.
A qualifying employer includes the following organizations:
- U.S. federal, state, local, or tribal government organizations.
- Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code.
- AmeriCorps or Peace Corps.
Suppose you have any other type of federal student aid, such as Federal Perkins Loans. In that case, you will need to consolidate with a Direct Consolidation Loan. Consolidating multiple federal education loans does not cost anything. Still, you must apply and agree to repay the new Direct Consolidation Loan. The new interest rate you receive will be fixed based on the average rates of the loans being consolidated.
To apply for the PSLF program, you can use the PSLF Help Tool. This tool helps you verify your employer before submitting an application form. If your employer meets the required qualification requirements, you can fill out and sign a PSLF form and submit it to a PSLF servicer.
Teacher Loan Forgiveness (TLF)
The Teacher Loan Forgiveness (TLF) Program forgives up to $17,500 of Direct or Federal Stafford Loans. Suppose you are a highly qualified special education or secondary mathematics or science teacher. In that case, you may qualify for the maximum forgiveness amount. Other types of eligible teachers could still get up to $5,000 forgiven.
To qualify for this type of loan forgiveness, you must meet the following requirements:
- Must complete five consecutive years as a full-time teacher at an eligible school.
- At least one year of teaching must have been after the 1997–98 academic year.
To get as much loan forgiveness as possible, the Department of Education recommends teachers apply for a Teacher Loan Forgiveness Forbearance. You will not have to make monthly loan payments if you are eligible for forbearance. However, keep in mind that interest will continue to accrue.
Student loan borrowers with more debt than the amount they apply for are not eligible for forbearance. Suppose your loan balance is $20,000, and you want to apply for the full TLF amount of $17,500. You will be unable to stop making your student loan payments.
PLUS Loans and Perkins Loans are not eligible for loan forgiveness under the TLF program. And any time spent teaching through AmeriCorps does not count towards the five-year requirement. You will need to submit a Teacher Loan Forgiveness application to a loan servicer after five complete and consecutive years of teaching.
Perkins Loan Cancellation for Teachers
Perkins Loan Cancellation for Teachers is a program that forgives up to 100% of Federal Perkins Loans. To qualify for this specific program, you must teach certain subjects as a full-time teacher at a low-income school. Interested borrowers can use the Federal Student Aid website’s online database to verify a school’s classification.
Suppose you are not a teacher that serves low-income students. In that case, you may still qualify for loan forgiveness if you teach a specific subject. Qualified applicants must teach mathematics, science, foreign languages, bilingual curriculum, or special education. However, you are still eligible if you teach a different subject if your state education agency determines that that subject has a shortage of qualified teachers.
Private school teachers may also qualify if the school has nonprofit status with the Internal Revenue Service (IRS) or provides elementary and/or secondary education. You can apply by contacting the holder of your Perkins Loan.
Eligible teachers can receive up to 100% loan forgiveness in the following increments:
- 15% canceled per year for the first and second years of teaching service.
- 20% canceled for the third and fourth years of service.
- 30% canceled for the fifth year of teaching.
Keep in mind that each amount that gets canceled annually includes the interest for that calendar year.
State-Sponsored Student Loan Forgiveness Programs
A State-Sponsored Student Loan Forgiveness Program can help teachers eliminate their student loan debt. Almost every state offers at least one student loan forgiveness program. Minnesota currently has ten student loan forgiveness programs, which is the most of any state. In contrast, North Dakota is currently the only state that does not offer any forgiveness programs.
You can check your state’s education agency for more information on available programs.
What If You Don’t Qualify for a Teacher Loan Forgiveness Program?
Although there are various federal forgiveness programs available, it’s possible that you may not be eligible for any. Teachers who do not qualify for loan forgiveness may save money on federal student loans through other methods.
Pay Federal Student Loans With Autopay
Borrowers that sign up for automatic debit can save money on their student loans. Signing up can help reduce interest rates by 0.25%. Your monthly loan amount will get deducted automatically from your bank account on the due date. To sign up, you will need to provide your bank name, routing number, and account number.
Automatic payments are convenient because you can avoid late payments. However, you should still ensure you have enough money in your checking account to avoid an overdraft charge.
Consolidate Federal Loans
Individuals with student loan payments can apply to consolidate their debt at no cost. Consolidation is the process of merging multiple loans into one loan. Debt consolidation can simplify your finances if you currently make numerous monthly payments.
Eligible applicants will get a new interest rate and one single monthly payment. The new rate is fixed, so you can make equal payments until you repay your student loan balance. The fixed rate you get depends on the average of your consolidated rates. Student loan consolidation may help you get a lower rate that keeps more money in your pocket.
Switch to an Income-Driven Repayment Plan
Although you cannot negotiate federal student loan debt, you can save money by switching payment plans. The Department of Education offers four income-driven repayment plans for borrowers who cannot afford monthly payments.
Most types of federal student loans are eligible for at least one income-driven repayment plan. Borrowers with super low income may qualify for monthly loan payments as low as $0. The qualification requirements vary for each plan, so it’s a good idea to
These are the four income-driven payment plans available:
- Revised Pay As You Earn Repayment Plan — The REPAYE Plan generally helps borrowers pay as little as 10% of their discretionary income.
- Pay As You Earn Repayment Plan — The PAYE Plan generally lets borrowers pay 10% of their discretionary income. However, individuals with a higher payment amount never pay more than the 10-year Standard Repayment Plan amount.
- Income-Based Repayment Plan — New borrowers that started making payments on or after July 1, 2014, generally pay 10% of their discretionary income with the IBR Plan. Borrowers that started paying before July 1, 2014, generally pay 15%.
- Income-Contingent Repayment Plan — Borrowers on the ICR Plan pay 20% of their discretionary income or the amount on a repayment plan with a fixed payment over the course of 12 years. The least expensive repayment option is the one a borrower will pay.
How To Reduce the Cost of Private Student Loans
If you have private student loans, you may feel frustrated by the lack of financial protections for borrowers. Borrowers must adhere to their loan agreement terms and repay the private student loan on time each month. However, there are steps you can take to reduce the total cost of your private student loans.
Use the Snowball Method
The snowball method is a quick debt repayment method for borrowers that have multiple loans. You pay off loans in order of smallest to largest. You must pay as much as possible on your smallest private student loan and make minimum payments on all other debts. Once you pay off a loan, you move on to the next smallest one. This method helps you stay motivated as you quickly pay off your smallest loans first.
Use the Avalanche Method
The avalanche method is similar to the snowball method, but this option helps borrowers save more on interest fees. Instead of focusing on the smallest debt, you first pay off the loan with the highest interest rate. Paying off high-rate debt first can help you keep more money in your pocket for other expenses. Once you pay off one loan, you move on to the next until you repay your private student loans.
Refinance the Private Loan
If you cannot afford your private student loans, it may be beneficial to consider refinancing. A loan refinance is when a borrower applies for a new loan to get a new financial contract with different repayment terms. A new loan may help you get lower rates and fewer fees. Affordable loan terms can help reduce your financial stress and save money.
You may be able to merge multiple private student loans into one account if you qualify for enough money. Borrowers can refinance with a new student loan or a different type of loan, such as a personal loan. Keep in mind that your credit score will affect the rate you can get. If your credit rating has decreased since you first obtained the private student loan, you may not be eligible for the lowest rate. But you may still find a more affordable loan offer by inquiring with multiple lenders.
Reduce Your Monthly Expenses
Borrowers can speed up their repayment schedule and save money by making additional payments on their private student loans. Reducing the cost of monthly expenses can help increase your spending budget so you can spend more on debt repayment. Make a list of your monthly bills to determine what can be cut or reduced. For example, you can switch from paid video streaming services to free options like Peacock or Tubi.