IMPORTANT COVID-19 UPDATE: If your income has gone down suddenly due to a layoff or reduction of hours, you may be eligible to have your student loan payment reduced through a federal income-driven repayment program. Please visit the new automatic sign-up tool that our partners at Savi created to help NEA members dealing with the economic impacts of the novel coronavirus.
Like many educators, you may have needed a loan (or two) to get your degree. Fortunately, there are ways to find relief from the debt once you’re out of college. This relief can come from income-based repayment options and forgiveness programs, but you have to know and follow the rules to the letter to make sure you get what you deserve.
Here are four things you need to know to make the most of your student loan debt options.
1. Some or all of your debt could be forgiven, if you meet certain requirements.
There are several programs associated with federal student loan forgiveness. Public Service Loan Forgiveness (PSLF) is one of the most well-known programs for educators. It forgives any balance remaining on your William D. Ford Federal Direct Loan after you make 120 monthly payments—equal to 10 years’ worth—while working for a qualifying public service employer. Review your loan documentation to see the type of loan you have, or log in to My Federal Student Aid with your FSA ID to see the information stored in the National Student Loan Data System (NSLDS®) database.
Most full-time public and private elementary and secondary school teachers meet the employment requirements, according to the Department of Education.
In order for your payments to count toward the 120 required, they need to be paid in full no more than 15 days late and made after Oct. 1, 2007.
If you didn’t borrow through a Ford Direct Loan, you could still make yourself eligible for PSLF by combining your loans into a Direct Consolidation Loan.
The Teacher Loan Forgiveness program enables certain “highly qualified” teachers in low-income Title 1 schools to to be eligible for $5,000 or even up to $17,500 in forgiven debt after teaching for five consecutive years.
“Highly qualified” means you’ve earned a bachelor’s degree, received a full state teaching certification and have not had your certification or licensure requirements waived on an emergency, temporary or provisional basis.
If you teach math or science in a secondary school, or special education at the elementary or secondary school level, you may be eligible to receive up to $17,500 in forgiveness. Even if you don’t, you could still receive up to $5,000 in loan forgiveness if you’re considered a highly qualified full-time elementary or secondary education teacher.
Perkins Loan Teacher Cancellation offers up to 100% forgiveness for Federal Perkins Loans if you teach at a low-income school. You also may qualify if you teach mathematics, science, a foreign language, bilingual or special education, or a subject your state education agency has determined to have a shortage of teachers.
2. Private refinancing or consolidating could negatively impact your forgiveness or repayment options.
It’s important to research and fully understand the implications of any change you want to make to your student loans.
Yes, refinancing may offer better payment terms. You may, for example, find that you could switch from your fixed loan (that always charges the same amount if interest) to a variable-rate private loan and receive an initial, short-term reduction in the monthly interest you’d pay. However, you could miss out on forgiveness opportunities in the process because your federal loans would be converted to private loans.
“Forgiveness programs are limited to federal student loans,” says Mark Kantrowitz, publisher and vice president of research at Savingforcollege.com. “If you refinance a federal student loan into a private student loan, you will lose the loan forgiveness.” What’s more, federal student loans carry fixed-interest rates, so although the initial, lower interest rate of a private, variable loan may look tempting, it could soar after the rate expires. That won’t happen with a fixed, federal loan.
Alternatively, if you consolidate into another federal student loan, you’ll still be PSLF eligible. But you also “reset the clock” on the number of qualifying payments made to zero, meaning you’ll restart your 10-year repayment window. “That’s because PSLF accounts for payments on a per-loan basis and not per-borrower,” Kantrowitz says. “A federal consolidation loan is considered a new loan.” You could also pay more in interest because the new loan would take longer to pay off. Some educators may consolidate older FFEL loans into a direct loan in order to become eligible for Public Service Loan Forgiveness.
You can also consolidate your federal loans into a Direct Consolidation Loan for free through the Department of Education and it's loan servicers. Learn the many pros and cons of federal loan consolidation here.
3. Grace periods offer time to get your financial house in order.
Upon graduation, federal loans offer six months of deferral before payments start; Perkins Loans allow for nine months. You can use this “grace period” time wisely by tending to other financial needs.
“You can establish an emergency fund of three to six months’ worth of living expenses,” says Sean Moore, a certified financial planner and founder of SMART College Funding. “And if you don’t know what three months’ of expenses looks like? Then you have to sit down and create a budget. Once that’s finished, look to pay down your credit cards.”
4. As an NEA member, you have access to a new tool that can help you explore your repayment and forgiveness options.
The NEA Student Debt Navigator, powered by Savi, helps you quickly and easily assess whether you qualify for free federal forgiveness programs. On average, Savi users are seeing more than $1,500 a year in new savings through this tool and an average of $40,000 in potential forgiveness.
Input information about yourself and your loans, such as your income, the amount of your monthly student loan payments, how long you’ve been teaching and where, and subject(s) taught. The Savi tool analyzes your information and displays available repayment and forgiveness options.
If you want to apply for Teacher Loan Forgiveness or Perkins Loan Teacher Cancellation, for example, it automatically determines whether or not your school qualifies as Title 1 (a low-income school).
There is no cost for NEA members to use the Savi interactive calculator to determine eligibility and potential savings.
If you want the convenience of filing electronically through the platform or want to talk to a student loan expert, you can do so at the discounted NEA-member cost of $29.95—a savings of $60. This can help speed up your application process, and a reduction in potential form errors can increase the likelihood of forgiveness approval.