It’s an election year and, as usual, one hot topic is college education and affordability. While one side calls for free college for all, another advocates for student loan forgiveness programs, still another places emphasis on the market itself and the ingenuity of the modern student. Unfortunately, with all this chatter, very little is actually being done to reduce the cost and burden of college in America today.
Yet, the benefits of a college education are well-documented and widely-accepted. Not only does attending a 2- or 4-year school help prepare you for the workplace and increase your critical thinking skills, it also increases your lifetime earnings. In fact, according to a 2014 report by the Federal Reserve Board, the average lifetime earnings of a college graduate is $830,000 more than a high school grad. Granted, there are always those special few who can thrive without a higher education, but, for most Americans, the key to a higher paycheck is found in the halls of the ivory tower.
There is another side to this argument, however. One based on the fact that this report, and those like it, rely on the premise that most college graduates are able to pay off the added debt of their education within 20 years of completing it. Yet, with college costs continually on the rise, this fact seems dubious to many would-be scholars, especially those who want to go into fields like law or medicine or study at top-tier universities. Luckily, there are alternative ways to pay off student debt and enjoy that higher income sooner. These so-called student loan forgiveness programs are federally-sponsored ways to get “free money” to pay off student loans in 10 years or less.
Here’s a breakdown of who qualifies and what they need to do:
Public Service Student Loan Forgiveness
Individuals dedicating their lives to public service, in any number of fields, may have their student loans forgiven entirely after 10 years, so long as they make on-time payments up until that time. Instituted in October of 2007, the Public Service Loan Forgiveness (PSLF) program will take its first effects in October of next year, since it requires 120 on-time payments (or 10 years’ worth) first. Here are the details:
Who Qualifies?
Full-time employees in one of the following public service-related fields:
- Federal, Local, or State Governments
- Non-profits who are tax-exempt with a 501(c)(3) designation
- Select additional non-profit organizations that provide a qualifying service such as law enforcement, emergency management, early childhood education, working with the disabled, or working for a school or public library, and more
- Individuals serving in AmeriCorps or the Peace Corps
Unfortunately, anyone working for a 501(c)(3) nonprofit that has a religious affiliation does not qualify. Nor do individuals working for partisan political organizations, labor unions, or for-profit companies, regardless of the field they are in.
What Loans Are Repaid?
The PSLF Program will pay the balance of any of the following government-issued Direct student loans:
- Federal Direct Subsidized Stafford Loan (Direct Loan)
- Federal Direct Unsubsidized Stafford Loan (Direct Loan)
- Federal Direct PLUS Loan
- Federal Direct Consolidations Loan
Notably, the only federal student loans missing from this list is the Federal Perkins Loan and the Federal Family Education Loans (FFEL). You can, however, have your FFEL or Perkins Loans forgiven under the PSLF program if they are consolidated into a Federal Direct Consolidation Loan.
There is also a separate program where teachers can have 100% of their Federal Perkins Loan amount forgiven in a relatively short period of time. It is called Teacher Cancellation for Federal Perkins Loans and is specifically geared at teachers working in low-income and private schools and who teach in designated “high needs” areas which differ from state-to-state, but generally include math, science, and special education.
Additional Requirements
In order to have the balance of your student loan paid back under the PSLF program, you must meet a number of qualifications in addition to your field of work. This includes:
- Maintaining full-time employment, defined as an average of 30 hours per week, for the entire 120-month repayment period.
- Continuing your full-time public service employment until the loan forgiveness is granted
- Being in good standing (i.e. not in default) on all qualified student loans
Applying for the PSLF Program
Applications for the PSLF program must be filled out each year that you maintain qualifying employment, and includes filling out this Qualifying Employment Form and submitting it an any other required paper work, such as W-2 forms, to FedLoan Servicing (www.myfedloan.org).
Once the 120 payments have been made, you will be able to submit the full PSLF loan forgiveness application. At this time, there is no limit to the amount of money that the government will forgive, meaning that you could get all of your federal loans forgiven through the PSLF Program.
Student Loan Forgiveness for Teachers
While the PSLF Program is pretty broad in its scope, the Student Loan Forgiveness Program for Teachers, also known as Teacher Loan Forgiveness, offers a faster payout for a more select number of individuals. In this program, qualified teachers can receive anywhere from $1-$17,500 of student loan forgiveness in as little as 5 years. Teachers in high-needs areas such as math, science, and special education, qualify for higher sums.
Who Qualifies?
Teachers of any subject who work at a federally-designated low-income elementary, middle, or high school for a period of 5 years. The federal government will also offer loan forgiveness to qualified individuals working in educational services among similarly low income students and their families.
For the purpose of this program a “teacher” is anyone who provides direct classroom instruction or classroom-like instruction to students. This includes special education teachers.
What Loans Are Repaid?
The following federal student loans are eligible for forgiveness under this program for teachers:
- Any Federal Direct Student Loans (see list above)
- Federal Family Education Loans (FFEL)
Teachers who only have PLUS loans, unfortunately, cannot take advantage of this loan forgiveness program. In addition, the loans must have been granted after October 1, 1998.
Additional Requirements
The Teacher Loan Forgiveness Program is all about encouraging teachers to enter and remain in the profession, especially in the service of at-risk youth or in high-needs subject areas. Thus, where and what you teach are the most important factors for determining if you qualify for this type of loan forgiveness and how much money will be forgiven. To that end, teachers must be employed in a school that, for at least one year of their five-year service, meets these criteria:
- It qualifies for Title I funds under the Elementary and Secondary Education Act of 1965
- The U.S. Department of Education choses it because of a student population of 30% or more which qualifies for those Title I funds
- The U.S. Department of Education places it on the Annual Directory of Low Income Schools for Teacher Cancellation Benefits
Whether listed on the directory or not, all schools run by the U.S. Bureau of Indian Education (BIE) qualify, but teachers may not use years teaching under the AmeriCorps program to count towards the 5-year requirement for loan forgiveness.
In addition, educational professionals working at qualifying educational service agencies for five consecutive years following the 2007-08 academic year qualify.
Finally, in addition to where they teach, teachers must remain current (i.e. not in default) on their federal student loans and operate as a “highly qualified teacher” according to the laws of their state, for the entire 5-year period in question.
Applying for Teacher Loan Forgiveness
After their five years of service are up, teachers can apply for the Teacher Loan Forgiveness program directly using this form.
