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This article discusses the option for a Teacher's current student loan burden through the availability of student loan forgiveness under the Teacher Loan Forgiveness & Public Service Loan Forgiveness program. This article also encompasses the available options if a Teacher has their child(ren) with high levels of student loans.
Millions of U.S. college graduates begin their careers with crushing student loan debt balances putting them at a disadvantage. There are about 40 million Americans that owe more than $1.7 trillion in total loan debt. This high number parallels more than 50% of students graduating with significant debt. The overwhelming majority of this student debt is federal student loans, with the remaining amount owed to private lenders.
There are several existing programs that ease the burden of student loans but require decades of repayment. For example, the Public Service Loan Forgiveness (PSLF) program provides relief and was created to attract students into public service careers, such as teaching/education. The program allows borrowers who make ten years of loan payments to have the remaining outstanding balance forgiven. If you are a teacher/educator with student loans, keep reading about how to qualify for loan forgiveness.
Immediate Relief for Many Borrowers
In the past two years, student loan debtors enjoyed some relief as monthly payments took a pause during the pandemic. The Biden Administration extended this hiatus on student loan payments from late August until December 31, 2022.
In addition to the extended pause, President Biden announced that the government would forgive federal direct loans up to $10,000 for graduates with annual salaries below $125,000 or $250,000 for married couples or heads of households. Biden will also cancel up to $20,000 for borrowers who met those requirements and were Pell Grant recipients in college. The initiative caps the relief at the amount of a borrower's outstanding eligible debt.
Students still in school are eligible to have debt canceled. The income cap will apply to the parent's income if the student is still under their parents' dependency. Parents who took out Parent PLUS loans are also eligible.
For many borrowers, the debt cancellation will be automatic as their information is already on file. However, if the information is not on file, borrowers must verify their income with the Department of Education.
Income-Driven Loan Forgiveness
The federal government has four main income-driven payment plans, enabling borrowers to cap loan payments at a percentage of their monthly income. If the borrower is accepted into one of these programs, the remaining loan balance will be eligible for forgiveness after 20 or 25 years, depending on the plan. However, few borrowers have achieved loan forgiveness through these plans.
Other plans include teacher loan forgiveness, state-sponsored repayment assistance programs, and military student loan forgiveness and assistance.
Teacher Loan Forgiveness
Under this program, a borrower that is a teacher can be eligible for forgiveness up to a maximum of $17,500 if the borrower is a full-time teacher for five complete and consecutive academic years in mathematics or science at the secondary school level. Also, if a teacher teaches full-time special education at either elementary or secondary level.
Basic Requirements for All Teachers:
Attained at least a bachelor’s degree
Receive full state certification as a teacher
Not have certification or license requirements waived on an emergency, temporary or provisional basis
Although if a teacher does not teach mathematics, science, or special education, they are still eligible to receive up to $5,000 in loan forgiveness if they are a full-time elementary or secondary level teacher.
A teacher may receive both Teacher Loan Forgiveness and Public Service Loan Forgiveness Program. However, a borrower may not take the forgiveness for the same period of teaching service. For example, suppose the teacher completes five years of qualified consecutive teaching years and receives the Teacher Loan Forgiveness. In that case, these five years will not count towards the Public Service Loan Forgiveness.
Understanding Public Service Loan Forgiveness
This plan is available to federal, state, local, and Tribal government and qualifying nonprofit employees with federal student loans.
The government will forgive the remaining loan balances for eligible borrowers who complete 120 qualifying loan payments, i.e., ten years of work before being eligible for loan forgiveness.
How to Qualify for PSLF:
1. The Loans that Can be Forgiven
PSLF will only forgive eligible William D. Ford Federal Direct Loan (Direct Loan) loans. Unfortunately, private student loans do not qualify.
Debtors can consolidate other federal student loans, such as Federal Family Education Loan or Perkins loans, to make them eligible for PSLF. A borrower who qualifies for a Perkins loan consolidation can request forgiveness after five years of public service. In that instance, the best option is to pursue that forgiveness and not consolidate the Perkins loans. The debtor can still participate in PSLF if they have other federal student loans.
2. Full-time Work From a Qualifying Employer
Government organizations on any level (including tribal)
501(c)(3) nonprofits
AmeriCorps or the Peace Corps
Nonprofit organizations without 501(c)(3) status, although they provide a qualifying public service as their primary mission.
Religious organizations
Debtors must complete an employment certification form to confirm that their employer qualifies and send the form to FedLoan Services, this is the contractor that services PSLF for the department. Once the form is processed, the loans will be transferred to FedLoan to be serviced.
The caveat to the borrower is a form must be submitted annually or when the borrower switches jobs. The debtor can also apply for forgiveness once eligible and certify employment retroactively.
3. Hours that Must be Worked Weekly
Borrowers must work for the qualifying employer full-time, at least 30 hours per week. For example, if a debtor works part-time for two qualifying employers and the average hours are at least 30 hours each week, they may still be eligible.
4. Complete 10 Years' Worth of Payments
Each borrower must make 120 monthly loan payments.
The payments must be made:
For the entire amount that is due
On time, i.e., within 15 days of the due date
On or after October 1, 2007
The payments must be made while the debtor works full-time for a qualifying employer and on a qualifying repayment plan.
Payments will not count if they are made if the student is still in school, in deferment or forbearance, during a grace period.
There are a few other considerations. Eligible workers can change jobs, even switching between qualifying and nonqualifying employers. However, payments only tally towards PSLF when the worker is at a qualifying employer.
A Temporary Change Has Made a Permanent Difference for Many
Since its inception, the program suffered from being difficult to navigate for many borrowers, and the type of eligible loans was narrow.
In October 2021, temporary changes were made to the PSLF program to simplify the debt cancellation process for borrowers who have completed ten years of on-time payments. In addition, a retroactive waiver broadened the types of loans that are eligible for forgiveness, and automatic certifying of payments for federal employees and military members was introduced. In addition to having debts canceled, more than one million borrowers have used the waiver to receive additional credit toward forgiveness.
The temporary changes allow student borrowers to get credit for payments made on loans from the Federal Family Education Loan (FFEL) Program, Perkins Loan Program, and other federal student loans. To qualify for the program under the temporary changes, these borrowers must apply to consolidate their loans into a Direct Consolidation Loan before October 31. Borrowers can also combine multiple sources of part-time employment to qualify, and months in service do not have to be consecutive.
The changes were necessary and overdue. Over its history up to October 2021, the program discharged debt for only 7,000 borrowers, according to the Department of Education. The temporary changes resulted in 175,000 borrowers having canceled $10 billion in debt in the last ten months. However, the waiver of qualifying payment rules ends on October 31, 2022.
Tax Implications
According to the Internal Revenue Service, student loan amounts forgiven are not taxable income.
Final Steps
Once a borrower has fulfilled all the requirements of the PSLF program, it's time to submit the Public Service Loan Forgiveness application. The applicant must work full-time for a qualifying employer at the time of the application.
Along with the application, an employment certification form must be submitted for the current employer and each employer during the 120 payments. Only the current employer's certification must be included if the applicant completes these forms each year. FedLoan Servicing will notify the applicant once it receives its paperwork. As a result, the applicant does not have to pay the monthly loan bill while FedLoan Servicing processes the application.
Your Takeaways
For borrowers with lower balances, the $10,000 or $20,000 student loan forgiveness program will mean an immediate, tangible difference in income and standard of living. Borrowers with higher balances who have made payments but were having difficulty getting debts discharged will – until October 31, 2022 – have a chance to cut through the red tape and get relief.
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