It's hard paying back those student loans especially as a teacher. With the average salaries hovering around $33,000 in some states and average undergrad student loan debt totaling almost $30,000, it's not hard to see why.
As a teacher myself, I know how hard teachers work to teach our future generations. It is a very rewarding job but at times it can also be stressful.
You don't need the added stress of worrying about how you are going to pay back your loans and make a living. Thankfully, there are forgiveness programs out there that could help you legally kiss your loans goodbye.
The best option for teachers is the Public Service Loan Forgiveness program. After just 10 years of making payments on your loan, you would qualify to have your remaining balance completely forgiven tax-free! Where do I sign up!?
Ok. I don't want to get too ahead of myself so lets go through all the forgiveness programs that are available to you. Choosing what's right for you is a unique proposition and definitely not one size fits all.
Here's an overview of the programs available to you as a teacher:
Program | Award Amount |
|---|---|
100% of Remaining Balance | |
100% of Remaining Balance (Tax-Free) | |
$5,000 or up to $17,500 | |
up to 100% loan | |
up to 100% loan | |
$1,000 - $10,000 |
These programs all have varying rules for eligibility and which loans qualify for forgiveness. So let's take a closer a look at each of these programs.
Income-Driven Student Loan Forgiveness
Now I know I said the Public Service Loan Forgiveness (PSLF) is the best but bear with me. We are starting here first since you must choose one of these plans to be eligible for the PSLF.
If you feel like your are drowning in monthly payments, then an income based repayment plan may be the best option for you. There are 4 different repayment plans that can help you bring your monthly payments down to a manageable amount.
The plans are based on your income and family size and you don’t have to work in a particular field to qualify. If your income is very low, you may even end up with $0 as your monthly payment.
Here are your options for repayment plans:
- Revised Pay As You Earn Repayment Plan (REPAYE)
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
These plans vary based on who is eligible to apply and the percentage of your discretionary income that you are required to pay. In addition, each plan has a different length of time that you are required to make payments in order for your loans to be forgiven.
Discretionary income is simply your income after deducting taxes, social security, and basic living expenses. A simple way to calculate this is to take your adjusted gross income (you can find this on your tax return) and subtract 150% of the poverty level for your family size.
The calculations for the Income Contingent plan is different. You are allowed to subtract 100% of the poverty level for your family size.
Eligible Loans
This forgiveness program only applies for federal student loans. Check the table below to see which loans qualify for each repayment plan.
REPAYE | PAYE | IBR | ICR | |
|---|---|---|---|---|
Direct Loans | ||||
Direct Loans PLUS (student) | ||||
Direct Loans PLUS (parent) | Cell | Cell | Cell | * eligible if consolidated |
Direct Consolidation (did not repay Parent PLUS) | ||||
Direct Consolidation (repaid Parent PLUS) | Cell | Cell | Cell | |
Stafford Loans (FFEL) | * eligible if consolidated | * eligible if consolidated | * eligible if consolidated | |
FFEL PLUS Loans (student) | * eligible if consolidated | * eligible if consolidated | * eligible if consolidated | |
FFEL PLUS Loans (parent) | Cell | Cell | Cell | * eligible if consolidated |
Federal Perkins Loans | * eligible if consolidated | * eligible if consolidated | * eligible if consolidated |
It is also useful to note that most plans will accept all federal loans as long as they are consolidated under a Direct Loan. The IBR plan accepts FFEL loans without them having to be consolidated.
The ICR plan is the only plan that accepts PLUS loans made to parents and consolidated loans used to pay back a parent’s PLUS loan.
If you consolidate your Perkins loans may miss out on other loan forgiveness opportunities
Qualifying Payments
To qualify for PAYE and IBR your payments under the plan must be less than the 10-year standard repayment plan. Otherwise, you don’t qualify.
Furthermore, for PAYE you must be a new borrower with no outstanding loan debt at the time you took out a loan (after September 30th, 2007). You also need to have received a disbursement of a Direct Loan after September 30th, 2011.
For PAYE and IBR, if you do qualify at first and then your income increases such that payments are now more than the 10-year plan, your payments will be calculated based on the 10-year standard plan. However, you will still remain under the PAYE or IBR plan.
For REPAYE and ICR, as your income increases your payments may increase as well. It may even exceed what you would have to pay under the 10-year standard plan.
Monthly Payments (% of Discretionary Income) | Years to Loan Forgiveness | |
|---|---|---|
REPAYE | 10% | 20 (undergrad loans) ; 25 (grad loans) |
PAYE | 10%** | 20 |
IBR | 10% (for new borrowers)** / 15%** | 20 (for new borrowers) ; 25 |
ICR | The lesser of: 20% OR 12 year fixed payment plan | 25 |
** Capped at the 10-year Standard Repayment Plan amount
New Borrowers - For loans taken out after June 30th, 2014. Must have no outstanding loan balances when you get your new loan.
To calculate how much you would pay, check out Student Aid’s Loan Simulator. It can tell you which repayment plan gives you the lowest monthly payments. It may not be one of the income-driven plans!
Re-certifying
Because payments under these repayment plans do not stay the same, you must re-submit the income-driven application every year with your income and family size to re-certify even if there has been no change.
You can resubmit or ask your loan provider to recalculate your payments at any time. For instance, if you lose your job, you can send in your paperwork early and ask them to recalculate your payment. However, if your salary increases, you do not have to tell them early. You can wait until it is required that you re-certify.
If you don’t re-certify, you may lose your ability to pay on the income driven based plan and your loan interest may be added to your balance. The IBR, ICR, and PAYE plans do allow you to stay under the plan even if monthly payments are no longer based on income.
If at any time, you need to defer due to economic hardship, you can and that period will still count towards your total repayment period. Same goes for if your payments ever drop to $0. Furthermore, your payments may count even if you make them under certain other repayment plans.
Any amount remaining after 20 or 25 years will be eligible to be forgiven. However, some people may find that they end up paying off their loans before then.
In which case, none of your loan amount would be eligible for forgiveness. If you are eligible for the Public Service Loan Forgiveness program, then your remaining loans can be forgiven after 10 years tax-free.
To Apply
To apply you must submit an Income-Driven Repayment Plan request to your loan provider. On the application, you can choose which plan you want or elect to have them choose the plan with the lowest payment for you. You can file the paperwork online or mail it in. If you have different loan providers, you have to send a request to each.
For more information, check the Student Aid website.
By extending your payoff timeline and lowering your payments, you may have to pay more in interest over time.
Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness program is one of the biggest loan forgiveness programs out there. It is open to people who work in the public service sector for the benefit of their communities.
Typically, these are social workers, teachers, doctors, etc. who work for a governmental organization or non-profit organization. Unlike other programs, your eligibility is determined by your employer not your job title. You can check if your employer is eligibility here.
Qualifying Payments
With the public service loan forgiveness program, you would simply have to choose from a selected list of payment plans, make those payments on time every month for ten years (or 120 payments), and then the remaining balance will be forgiven.
These monthly payments do not have to be consecutive if, for instance, you work for an employer that does not qualify for a period. The best part of this program is that the forgiven portion would be tax-free.
* Be sure to do this before you start your payment plan or else you may have to make qualified payments for longer in order to get them forgiven.
See above for the plans that you must choose from. They are the same repayment plans for the income driven repayments. The monthly payments would follow the same method as mentioned here. Remember though that under the PSLF your loans are forgiven after 120 months of payments.
Eligible Loans
The only eligible loans are federal direct loans. That means if you have Perkins or Federal Family Education loans (FFEL or Stafford), you must first consolidate them under a Direct loan before they would be eligible to be forgiven.
If you been making payments under a different plan, it is not eligible for PSLF but see below as you may qualify for the Temporary Expanded version.
To Apply
There are two different PSLF Forms: the PSLF Employment Certification Form (ECF) and the PSLF Application for Forgiveness. These forms will need to be submitted at different times.
Employment Certification Form
The Employment Certification Form is used to determine if you work for a qualified employer and to keep track of how long you have been working for them. Therefore, you will need to submit this form every year.
This is how the FedLoan Servicing people can keep track of how long you’ve been making qualified payments. So print this form, sign it, and take it to your employer to sign as well.
PSLF Application for Forgiveness
After 10 years of your on-time monthly payments and working for an eligible organization, you will want to submit the PSLF Application for Forgiveness. This will request that your loans be forgiven once and for all.
To get the correct form and use their great tool to help determine if you are eligible head over to Studentaid.gov.
Make sure you fill out your forms completely and accurately. You don’t want to find ten years later that you are ineligible because you forgot to fill in a blank.
If you have already been making monthly payments on your student loans but not under the specified plans for the PSLF, you are not eligible for PSLF.
However, you may still be able to find relief under the Temporary Expanded Public Service Loan Forgiveness program (TEPSLF). This is a temporary program that was started due to the large number of people who were found ineligible for the PSLF. We'll talk about that more below.
For those affected by the Coronavirus, the CARES Act ensures that you will still be eligible even if you are not making payments right now. Find out more about the CARES Act and what it means for your loans.
Temporary Expanded Public Service Loan Forgiveness Program
The Temporary Expanded Public Service Forgiveness (TEPSLF) makes student loan forgiveness much more accessible to public service workers.
To qualify you must fulfill all the requirements of the PSLF with the exception that some or all of your payments were not made with their income-driven plans.
This is the only reason that you will be able to apply for the Temporary Expanded version. If you are found ineligible for the PSLF for another reason, you will also be ineligible for the temporary one as well.
For TEPSLF qualifying payments must have been made:
- after October 1, 2007
- for the full amount due on your bill
- no later than 15 days after your due date
- while working full-time with a qualified employer
Also, here is the expanded list of acceptable repayment plans:
- Graduated Repayment Plan
- Extended Repayment Plan
- Consolidation Repayment Plan
- Consolidation Graduated Repayment Plan
Another rule is that the amount you paid in the 12 months before you apply as well as the last payment before applying must be as least as much as you would have paid under an income driven plan.
To Apply
To apply to TEPSLF, you must first be denied for PSLF. Therefore, first, you should confirm that you are working for a qualified employer by filling out the Employment Certification Form. Then you must apply for the PSLF by filling out the PSLF Application for Forgiveness. Do this even if you know you will be denied.
Then after you receive confirmation that your application has been submitted you can apply for the TEPSLF by sending an email to TEPSLF@myfedloan.org requesting to be reconsidered.
You don’t have to wait to be denied. You may send an email while the status of your PSLF application is pending. Include your name (as submitted on the application) as well as your date of birth. You can keep the email short and sweet, "I request that ED reconsider my eligibility for public service loan forgiveness."
You may also have to submit additional information such as income and family size. They will let you know. Be sure to respond within 21 days though or they may cancel your application.
First Come First Serve
TEPSLF has limited funding so it is done on a first come first serve basis. Once the funds run out that is all she wrote. It may take 60-120 days to hear a reply back about the status of your application. They will notify you if some or all of your loans have been forgiven.
Make sure you check the rules for both PSLF and TEPSLF as they can be pretty specific about who is eligible and what plans qualify. See Student Aid for more information.
Teacher Loan Forgiveness
This program is for highly qualified licensed or certified teachers who work full time in a low-income area at an elementary, middle, or high school, an educational service agency (after the 07-08 academic year) or at a school on an Indian reservation. You must have worked 5 complete, consecutive years with at least one year being after 1998.
There are some cases where if you were unable to complete a full academic year you may still be eligible.
Unsubsidized and subsidized Direct and FFEL loans (Stafford Loans) taken out after October 1st, 1998 are considered eligible. PLUS Loans and Perkins Loans are not eligible.
With the teacher loan forgiveness program, you can get loan forgiveness for up to $17,500. However, this depends on which subject you teach and it may be capped at $5,000.
Teachers who teach Math or Science at a secondary level or a special education teacher teaching in their area of training may receive up to $17,500. Everyone else may receive up to $5,000.
Who is eligible?
Highly qualified teachers:
- have at least a bachelor's degree
- have full state certification
- have not had licensure or certification requirements waived
- pass rigorous state tests
- (for secondary school teachers) your degree or advanced certification must be in the subject(s) you teach
For more details visit studentaid.gov.
Eligible low income schools:
To find out if your school is eligible check out the Teacher Cancellation Low Income (TCLI) Directory. Even if your school is listed for just one year out of the five years you worked there, you are still eligible for loan forgiveness.
Depending on your employer, you may be eligible for the PLSF or TEPLSF as well. However, the periods to which they apply cannot overlap.
This means payments made during your 5 consecutive years for the Teacher Loan Forgiveness does not count toward your 10 years (or 120 payments) needed for the PSLF. Your time as an AmeriCorp volunteer also does not count towards your 5 years.
To Apply
After you have completed your 5 years, you must submit a Teacher Loan Forgiveness Application to you loan provider. Have your school’s chief administrative officer complete the certification section. If you have different loan providers, you must submit a separate form to each one.
The form can be found here.
For more information about the Teacher Loan Forgiveness Program check the Student Aid website.
Perkins Loan Cancellation
You may want to hold off on consolidating your loans if you want to take advantage of this perk. If you worked full-time in a public or nonprofit elementary or secondary school, you may be eligible to have 100% of your Perkins Loans cancelled.
You must be directly employed by the school system and work there for 5 years. Eligibility depends on whether you provide educational services directly to the students and whether your school is in a low-income or shortage area or if you teach special needs kids. You do not need to be certified or licensed.
If you are working part-time at two or more schools, you can still have your loans cancelled as long as someone from one of your schools certifies you as having taught full time. Some private school teachers, prekindergarten teachers and preschool teachers are eligible as well.
Every year you work in an eligible employment or volunteer service, you can have a portion of your loans cancelled. For your 1st and 2nd years, they will cancel 15%. For your 3rd and 4th years, 20% and for your 5th and final year, 30%.
Some institutions may allow cancelations to be applied retroactively although payments made may not be refunded.
To Apply
You must apply directly with the school that provided the loan or that school’s Perkins Loan provider. So contact them for the necessary forms and instructions.
Perkins Loan Discharge
Your Perkins Loans can be discharged for several reasons:
- Discharged for Closed School: If your school closes (or you withdraw and you school closes within 120 days) before you can complete your education.
- Discharged for Bankruptcy: In the rare case that the courts rule repayment would cause undue hardship.
- Discharge for Total and Permanent Disability: If approved, the government will monitor your disability and income for 3 years just to be sure.
- Service-Connected Disability (Veterans)
- Spouse of 9/11 victim
- Discharge due to Death
To Apply
Just like their cancellation program, you must apply directly with the school that provided the loan or that school’s Perkins Loan provider. Contact them for the necessary forms and instructions.
State-Sponsored Loan Forgiveness Programs
Check American Federation of Teachers (AFT) website for information on state specific loan forgiveness programs. They have a great search tool that allows you to search for programs by grade level, subject area, position, district type, and state.
~The American Federation of Teachers is also a great place to check out for getting some extra funds.~
Here are some states that I know of that have programs for teachers:
- Arkansas – up to $6,000 ever year for 3 years
- Illinois – up to $5,000
- Iowa – up to 20% of your balance every year
- Maryland – up to $10,000 per year for 3 years (must have attended a MD school)
- Mississippi – up to $3,000 every year for 4 years
- Montana – up to $3,000 every year for 4 years
- New York - up to $5,000 per year for up to 4 years
- North Dakota – up to $1,000 every year for a max of $3,000
- Oklahoma - varies yearly
- Tennessee - $2,000 per year with a total max of $10k
- Texas – last $5,000 per year but changes every year
In addition, if you join AFT or are already a member, it looks like they teamed up with Summer, a new online loan software much like Turbo tax is for taxes but for your loans. They help you pay off your loans faster, and walk you through applying for various loan forgiveness programs.
Things to Note:
- Any debt forgiven you have to pay taxes on.
- Loans in default are not eligible for forgiveness programs (but are eligible for discharge programs). They must be brought back to good standing first (rehabilitated or consolidated). Else-wise you could try student loan settlement or bankruptcy.
- Check every year to make sure you still qualify for whichever program you choose. You don't want to get to the end and find out that you do not.
- You need to re-certify every year for the income driven repayment plans and PSLF program.
- You may qualify for more than one program but you may not be able to do them at the same time.
All in All
The struggle is real when it comes to paying back your student loan debt. But there are programs out there that can provide you with the assistance that you need. Be sure to do your homework, crunch some numbers, and choose the best plan for you.
*DISCLAIMER: The Information provided in this post is simply the opinions of the blogger and is given in the spirit of educational fun. It is not investment advice. Please do your own research and decide what is right for you before investing in any asset. If necessary, seek the help of a certified professional in discussing your options.