Debt Relief for Teachers
Teachers are some of the most vital individuals in society. Nearly every person has fond memories of at least one teacher that reached out and helped them understand the world in a new or meaningful way. However, economic trouble, state budget cuts, and a host of other factors have caused teacher’s real wages to shrink over the years. As a result, many teachers are facing problems with debt.
One of the biggest debts carried by teachers is student loan debt. After all, we want to make sure our teachers have the best possible knowledge and abilities so that the young minds they help shape will get the most out of their education. However, these skills and information don’t come cheap. The cost of college has gone up dramatically over the years. As a result, more teachers are struggling under debt than ever before. Whether it’s credit cards, student loans, or other types of debt, teachers need debt relief more than ever before. Dealing with student loans is a great way to lower your overall monthly expenses so you can concentrate your money on getting out of debt.
Thankfully, there are several options to help teachers deal with student loans. We’ll look at some of the most popular and effective options to help you focus your energies on the classroom instead of your bills.
Public Service Loan Forgiveness Program
The Public Service Loan Forgiveness Program, or PSLF, is a program run by the federal government which will forgive the balance on your loans if certain qualifications are met. The first qualification is that you must have made at least 120 qualifying payments on your loan balance. That’s 10 years of monthly payments, on time and as agreed.
Additionally, there are employment qualifications. The PSLF has less restrictive employment qualifications than many other loan forgiveness programs. It doesn’t require that you teach at a low-income school, or even a public school. Moreover, certain occupations within the school are eligible for the program even if you’re not actually in the classroom.
Another qualification for this program is that you must have Direct Loans, rather than other types of loans like FFEL or Perkins loans. However, you can consolidate these loans into a direct loan and the consolidated loan will be eligible. You’ll still have to make 10 years of payments on the consolidated loan before you can use the program, so this might not be the best option for those who have been paying off other types of loans.
One way to get the most out of this program is to repay your loans on an income-driven repayment plan. There are a few different income driven repayment plan options, and you should talk to your loan servicer about them. An income driven repayment plan means you’ll be paying the least amount possible on your loans, and after 10 years, the program will forgive the balance, no matter what it is.
Finally, an added benefit to this program is that the loan forgiveness you get from the PSLF isn’t considered taxable income by the IRS. This stands in stark contrast to most loan forgiveness and debt relief, which the IRS counts as income and therefore can be taxed. This can result in a huge tax bill. For example, if you have $20k of loans forgiven, your income will be taxed at a level $20k higher than you actually made.
Teacher Loan Forgiveness
The Teacher Loan Forgiveness program operates much like the PSLF, but has more restrictions. However, it also works in a shorter timeframe than the PSLF, so it can be an excellent option for some teachers.
The first difference is that in order to qualify you must have been employed full-time at an eligible school for five complete and consecutive years. The eligible school list is the biggest restriction on this program, as far fewer institutions qualify than the PSLF program.
Additionally, you won’t necessarily get the full amount of your loan forgiven. Payments range from $17,500 to $5,000, depending on what field you teach in, your qualifications, and other factors. Therefore, teachers with a tremendous amount of student loans won’t benefit as much from this program. Moreover, some loans aren’t eligible for the program, specifically PLUS loans and Perkins loans. You can’t apply any benefits you get from working through AmeriCorps, and any time in the AmeriCorps program can’t count toward the five-year qualification. Finally, you can only apply for the program after you’ve completed the five-year requirement.
Perkins Loan Cancellation
The Perkins Loan Cancellation program only applies to Federal Perkins Loans. You’ll need to check with your student loan servicer to determine if your loans are eligible. One of the perks of the Perkins Loan Cancellation program is that you can have up to 100% of your loans canceled.
The Perkins Loan Cancellation program works a bit differently than other debt relief for teachers. It provides loan cancellation on an annual basis, with certain percentages being canceled after each year. You get 15% of your loan cancelled after each of the first two years of service. The third and fourth years of service each result in 20% of your loan being canceled. Finally you get 30% of your loan cancelled for the fifth year.
The unique structure of the loan cancelation program means that you don’t have to work for a set number of years to reap the benefits. This makes it a great option for people who need flexibility in their work because they plan to move or may investigate other careers.
There are some qualifications that you must meet. Most recipients work at low-income schools. However, certain types of teachers like science, math, foreign language, and special education teachers can participate no matter what school they work at. Additionally, teachers at private schools can qualify if their school has non-profit status from the IRS.
As you can see, there are lots of different debt forgiveness options for teachers. Getting teacher debt relief from student loans is a huge first step to finding relief from all of your debts, so check out the options available and find the program that works best for you.
Elizabeth is an expert on Debt Consolidation as she provides helpful advice to people who are dealing with debt problems. She graduated college with a BS in Finance. After college, she took a job working at a non-profit debt counseling program. It was at this position where Elizabeth honed her expertise for helping people understand how different financial products work and finding ways to help people pay off their debts.