Are You Eligible for Student Loan Forgiveness?
Millions of educators qualify to have their student loans reduced or erased. Find out if you’re one of them.
If you spotted tens of thousands of dollars just lying around on the street, wouldn’t you pick it up?
Of course you would—which is why it’s difficult to believe that everyone who’s eligible for college student loan forgiveness doesn’t take advantage of it.
Student loan debt now averages more than $30,000 per borrower, up 4% from 2014, according to The Project on Student Debt from the Institute for College Access and Success. Seven in 10 graduates are saddled with some kind of college-loan debt as they enter the real world.
For many, this much debt can be overwhelming. The Department of Education reported earlier this year that more than 40% of the 22 million Americans with federal student loans were either behind in their payments or had received permission to postpone payments. Some 3.6 million were in default—at least 360 days behind on payment—and 3 million were delinquent—between 31 and 360 days behind.
And yet about one-quarter of the U.S. workforce could qualify for favorable loan repayment options extended to those in public-service fields, including education, according to the Consumer Financial Protection Bureau (CFPB).
Big Savings for Those Who Qualify
One path to loan forgiveness is the Public Service Loan Forgiveness (PSLF) program. It’s important to note that this program kicks in only after 120 payments—that is, after 10 years. It went into effect in 2007, so the first actual forgiveness window will be in October 2017. The standard loan repayment program pays down the loan in 10 years, so to benefit from forgiveness under PSLF a borrower would have to slow down payments by enrolling in an income-driven prepayment (IDR) plan or some other form of extension.
In 2012, the U.S. Department of Education introduced a voluntary Employment Certification Form (ECF) so that borrowers can keep track of whether they will qualify for loan forgiveness under PSLF. As of June 30, approximately 432,000 borrowers have submitted at least one approved ECF, the DOE said in August.
There are other options available to teachers for loan forgiveness and exploring them will be well worth your time regardless of the obstacles. Such options are extended to teachers because it’s forecast that the United States will need more than 425,000 educators by the end of the decade to replace retiring baby boomers, and the profession’s average starting salary is only $36,141, according to the National Education Association.
For instance, you can have as much as $17,500 of a subsidized or non-subsidized loan forgiven through the federal Teacher Loan Forgiveness program.
This applies to the William D. Ford Federal Direct Loan (Direct Loan) Program and the Federal Family Education Loan (FFEL) Program loans. You’re eligible if you’ve been teaching full-time in a low-income elementary or secondary school, or an educational service agency, for 5 consecutive years.
In addition, the Federal Perkins Loan (Perkins Loan) Program loan allows for loan cancellations up to 100% after 5 years if you serve full-time in a public or nonprofit elementary or secondary school system as a teacher serving students from low-income families; a special education teacher; or a teacher in fields of math, science, foreign languages, bilingual education or other specialties for which your state determines there is a shortage of qualified educators.
There are other special circumstances that can result in a loan being forgiven, canceled or discharged—all of which means the loan doesn’t have to be repaid, according to the U.S. Department of Education. These include a total and permanent disability and, in certain cases, bankruptcy.
Short of loan forgiveness, an IDR plan such as the Income-Based Repayment (IBR) plan sets a borrower’s monthly payment at a fixed percentage of your income so that payments become more manageable. As your income rises, however, your monthly payments will rise.
How to Claim Your Loan Forgiveness
To proceed with being considered for any forgiveness option, you must go through your student loan servicer and indicate which option you’re interested in.
Then, you’ll need to undergo what could be considerable paperwork and follow-through, including forms that your employer must sign.
Yes, if you’ve taught at different schools, you have to have each one sign off on the application. Yes, if you have multiple loans with different companies, you have to undergo the same process for each one.
Yes, all of this can get complicated and tedious.
But just think of the potential savings you’ll reap as a result: If you graduated with $30,000 in debt and have to pay nearly $350 a month (a typical cost), you’ll end up spending nearly $42,000 over 10 years to resolve the loan, according to estimates by Robert Farrington, founder of The College Investor. With $17,500 forgiven, the payments will shrink to $248 after the fifth year. And you’d only spend just a further $14,900 on the original $30,000 loan—a huge savings.
“It can get complex, but it’s worth it,” Farrington says. “You never want to walk away from ‘free’ money!”
One More Option to Ease Your Payments
Even if you can’t take advantage of student-loan forgiveness programs, you still may be able to reduce the interest rates on your loans. There aren’t any federal programs that can lower them, but many student loan-servicing companies offer incentives to do so.
Signing up for automatic payments, for instance, can get a reduction in rates because the servicer is assured of getting the monthly payment on time. This can reduce the interest rate by as much as 2% over time.
For more information about loan-forgiveness options, click here.
To learn about and access the Consumer Financial Protection Bureau’s student-loan debt toolkit, click here.
This article was published in NEAchieve!, our monthly e-newsletter. Sign up to receive helpful tips and information delivered to your email inbox.