As I was attending college, many ideas were running through my head regarding what career path I had a passion in pursuing. The first that came to mind was becoming a high school business teacher. I had so many teachers in my lifetime that made impacts on me and I wanted to do the same. Unfortunately, there was one issue with being a teacher… the pay. Teachers are notoriously known for working hard not only in the classroom, but at home as well all well-being underpaid. Don’t get me wrong, many teachers have great access to benefits offered through their schools, like pension plans, 403b plans, and health insurance, but their salary alone… would be tough for anyone to live off of. Put student loan payments on top of it, and you have teachers struggling to move out of their parent's house.
Luckily, Teachers have a couple forgiveness options revolving around their student loan debt. The problem is many teachers are not aware they have these options and might be missing out on some free money. The Teacher Loan Forgiveness Program (TLFP) and Public Service Loan Forgiveness (PSLF) are two options many teachers can take advantage of. The question is finding the right program that fits your needs as a teacher?
The Teacher Loan Forgiveness Program (TLFP)
The Teacher Loan Forgiveness Program was put into place by the Higher Education Amendments of 1998 to help teachers with forgiveness on their student loans. As of today, the TLFP may forgive anywhere between $5000 to $17,500 of eligible student loans after five consecutive, full academic years of service. Here is the catch. Most teachers won’t qualify for the $17,500 of forgiveness. According to Studentaid.gov to receive $17,500 of loan forgiveness you need to be either
- a highly qualified mathematics or science teacher who taught students at the secondary school level; or
- a highly qualified special education teacher (elementary or secondary level)
Now if you aren’t one of these types of teachers, unfortunately, this leaves you and many other educators only having the ability to receive up to $5,000 in loan forgiveness.
Now to qualify for this $5,000 Teacher forgiveness, you still need to pass the low-income student school eligibility test. To qualify, you need to be employed for five years at an elementary school, secondary school, or educational service agency that serves low-income students. You might be asking “How do I know if the school I work for qualifies?”. Don’t worry, this is easy! Visit https://studentaid.gov/tcli/directory-search type in your schools information and if it comes up you qualify.
Now I know this isn’t really what you had in mind for an all-encompassing student loan forgiveness program for teachers now is it. $5,000 while working 5 years in a low-income school, its not fantastic, but it is something. Don’t worry though, because there is another option. This is the Public Service Loan Forgiveness Program or better known as PSLF. Here’s how to qualify.
PSLF (Public Service Loan Forgiveness) For Teachers
PSLF is a program in my opinion less stringent eligibility test for teachers than the TLFP. Which is strange because TLFP was designed for teachers. Now PSLF is a program that will not only forgive 100 percent of student loans after 10 years, but the forgiveness is 100% TAX-FREE. But like any forgiveness program there are some tests you need to fulfill to qualify. Here’s what you need to do?
Work at a nonprofit or government employer
In order to qualify you need to work for a not-for-profit organization that is tax-exempt under section 501(C)(3) of the Internal Revenue Code. In other words, good news! Public schools and most private schools qualify for this requirement.
You are generally considered to work full time if you meet your employer's definition of full-time or work at least 30 hours per week, whichever is greater.
Make 120 PSLF Payments
You need to make 120 cumulative (12 payments for 10 years). This is different than TLFP because TLFP is 5 CONSECUTIVE years whereas PSLF is 10 years, but doesn’t need to be consecutive. So you could work for a non-profit or government employer for a couple of years, move to the private sector, and then come back to a qualifying employer and your old payments are still counted towards PSLF.
Have a Direct Loan
In order to qualify your loans, you need to have Direct loans. You can find this out by logging into your online account and seeing what type of loans you have. If you have loans prior to 2010 you likely have FFEL loans, which do not qualify. To fix this, you need to do what’s called a loan consolidation. This is where you convert all your loans into one direct consolidation loan. You can do this by visiting Studentaid.gov and going through and applying for an income-driven repayment consolidation.
Choose an Income-driven repayment plan
While making your 120 payments, your direct loan needs to be made through an income-driven repayment plan. As of today, there are four options
- Income-Based Repayment (IBR)
- Pay As you Earn (PAYE)
- Revised Pay As Your Earn (REPAYE) Which is turning into the “Saving On a Valuable Education” Plan (SAVE)
- Standard 10-year repayment plan
Make sure you are on one of these plans or your payments will not be counted for PSLF.
Certify your employment and income every year
This step tends to be the most forgotten about and why many people don’t get their loans forgiven. Every year you need to make sure to fill out your Employment Certification Form as well as verify your income. This way your PSLF payments will be tracked and your employment will be verified. By doing this you’ll have a paper trail of your qualifying payments in case your student loan servicer tries to fight you on your qualifying payments in the future.
I know there are a lot of steps, but after 10 years, what ever loans have not been paid off yet, they will be forgiven through the PSLF system and your student loan payments will be a thing of the past. You will then be able to focus more on what you do best… teaching.
Can I Take advantage of both TLFP and PSLF?
Yes, but not for the same time frame. For example, if Sam worked five years and received forgiveness from TLFP, those five years of payments could not be used for PSLF. Sam would need to work an additional 10 years of 120 payments to satisfy PSLF.
Which forgiveness program is Better for Me?
The fact is there is no cookie-cutter yes or no answer. As a rule of thumb, if you owe more than $50,000 in student loans it most likely makes more sense to skip TLFP and go for PSLF. While using PSLF it's important to get on an income-driven repayment plan and try to keep your income low. This is important because the less you make in monthly payments, the more you can get forgiven after 10 years. To keep your monthly payments low your income needs to also be low. One way to reduce your income is by contributing to your 403b retirement account. By doing so this will reduce your annual income hence keeping your student loan payments lower. This will lead to a larger amount being forgiven.
Now for Teachers with less than $30,000 of student loan debt, it probably would make since to try going for TLFP.
These are just rules of thumb but remember rules of thumb don’t apply the same for everyone. It’s best to run the numbers against each program to determine how you can pay the least amount of student loans and have the most forgiven.
Teachers have their work cut out for them, not only in the classroom but also in their daily lives. Teachers’ finances revolving around student loan forgiveness are unique to many other occupations out there. Try to see if you can take advantage of one of these programs or seek a professional who can help you out, so you can stop worrying about student debt and focus more on why you entered the teaching profession… your students.