Student debt is a hot topic in Washington as lawmakers who championed suspension of debt payments during the coronavirus pandemic are now pushing for debt forgiveness.
President Joe Biden, who extended the suspension on payments through Aug. 31, 2022, is under pressure to cancel debt of $50,000 for all students. The Committee for a Responsible Federal Budget has calculated that the loan payment pause through the previous expiration date of May 1, 2022, has resulted in an effective cancellation of $5,500 per student, at a total cost of $100 billion.
Almost one-third of American students go into debt to graduate from college, and total student debt had reached $1.58 trillion by the fourth quarter of 2021. Only 5% of that total was delinquent or in default, according to the Federal Reserve Bank of New York. The low rate reflects the U.S. Department of Education decision to report current status under the forbearance program. The average per student was $38,792 in 2020.
Many of these borrowers may qualify for favorable loan repayment options extended to those in public-service fields, including education.
Start by checking your NEA student loan forgiveness options
The NEA Student Debt Navigator is a very popular membership benefit that can help you identify options that can reduce or eliminate some or all of your student loan debt obligations.
As a member of the National Education Association (NEA), you can run your numbers through the free-to-use interactive calculator tool to see what you might be able to save and what refinancing or forgiveness programs could suit your situation. If you need further assistance, you can access student loan experts at our partner Savi via telephone or email through the tool.
Filing your paperwork electronically can help reduce errors and speed up the process of getting you into a refinancing or forgiveness program that can save you money. Savi can populate your information in the official application, and if you do choose to e-file through the platform, you can file for free the first year and get a steep discount in subsequent years as an NEA member.
Big savings are possible 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 started 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 lower payments by enrolling in an income-driven repayment (IDR) plan or some other form of extension.
As part of the Covid-19 student loan relief, however, debtors can get credit for monthly payments even during the suspension, as if they had actually continued to make payments. If you continued to make payments, you can get a refund of the money and still get credit for the payments.
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. Since then, approximately 740,000 employment certification forms have been approved.1
There are other options available to teachers for loan forgiveness, and exploring them will be well worth your time. Such options are extended to teachers because it’s forecast that the United States will need hundreds of thousands of educators to replace retiring baby boomers, and the profession’s average starting salary is $41,770, as of the 2020-21 school year, according to NEA.
For instance, as an educator, 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, whether subsidize or unsubsidized. You’re eligible if you’ve been teaching full-time in a low-income elementary or secondary school, or an educational service agency, for five consecutive years.
A word of caution: As a rule, you can’t count a period of time for both Teacher Loan Forgiveness and Public Loan Forgiveness, although the limited temporary waiver from last October does allow this.
In addition, the Federal Perkins Loan Program allows for loan cancellations up to 100% after five 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, or
- You are 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.
Note that schools were no longer able to make Perkins loans after Sept. 30, 2017.
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 Education Department. 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, your monthly payments will go up accordingly.
How to claim your student loan forgiveness
To be considered for any forgiveness option, you must go through your student loan servicer and indicate which option you’re interested in. You’ll need to complete all paperwork and follow-through, including forms that your employer must sign.
- If you’ve taught at different schools, you’ll have to have each one sign off on the application.
- If you have multiple loans with different companies, you have to complete the same process for each one.
But just think of the potential savings you could reap as a result. A borrower who graduated with $30,000 in debt and currently pays about $350 a month (a typical cost) would 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 monthly payment would shrink to $248 after the fifth year. The borrower would only spend $14,900 on the original $30,000 loan, which is a huge savings.
“It can get complex, but it’s worth it,” Farrington says. “You never want to walk away from ‘free’ money!”
Due to the Covid-19 forbearance, there has been no interest accrual or payments due for federal loans since March 2020. As such, many federal borrowers have seen a reprieve. Farrington notes that the current waiver allows for Teacher Loan Forgiveness and Public Service Loan Forgiveness to be “double-dipped,” so teachers who previously received TLF and still have outstanding loans may consider re-applying for PSLF now.
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 normally can reduce the interest rate by 0.25%, with some lenders giving as much as 0.50% off.
You can get more information about federal loan-forgiveness options from the Federal Student Aid site.
The Consumer Financial Protection Bureau offers a student-loan debt toolkit for teachers and other public servants.
1Source: FedLoan Servicing via studentaid.ed.gov