Why Teacher Loan Forgiveness Isn't As Good As You Think It Is

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Is Teacher Loan Forgiveness Your Best Option? The Pros and Cons of Teacher Loan Forgiveness
It’s no secret that teachers take on a significant amount of student loan debt but don’t usually earn lucrative salaries to lift them out of that debt. The average student debt among Student Loan Planner’s clients who are teachers is $100,828. In contrast, the average K-12 teacher earned a median salary between $59,420 to $61,660 in 2019, according to the Bureau of Labor Statistics.
Although you might feel called to teach, that doesn’t mean student loans should derail your other financial goals. The federal Teacher Loan Forgiveness Program is a valid way out of student loan debt, and a lifeline for those who want to serve children in the neediest communities.
Why Teacher Loan Forgiveness Isn't As Good As You Think It Is

How Teacher Loan Forgiveness works

To attract teachers to schools that are otherwise underserved and ease the burden of student loan debt, the U.S. Department of Education created the Teacher Loan Forgiveness Program. This doesn’t, however, provide instant forgiveness of all student loans for all teachers across the board. 
Here are the requirements and limits of the teacher loan forgiveness program:
● You must teach full-time at a low-income elementary or secondary school, or through an educational service agency. 
● You’re required to teach for five consecutive years at the qualifying school or agency.
● You must be a highly-qualified teacher (essentially, have your bachelor’s degree and all state teaching certifications).
● You must have eligible Direct Loans (subsidized or unsubsidized) or loans through the Family Federal Education Loan (FFEL) Program. 
Meeting these criteria makes you eligible for student loan forgiveness. The maximum forgiveness award of $17,500 is reserved for math or science teachers at the secondary level, and special education teachers at either the elementary or secondary level.
For all other highly-qualified elementary and secondary school teachers, the maximum amount of forgiveness is $5,000. 

Benefits of Teacher Student Loan Forgiveness

The Teacher Loan Forgiveness Program is wonderful for many educators. Shaving off up to $17,500 of your debt makes a real difference in your financial situation. 
One of the pros of this program is the short service requirement. It’s only five years of work in a qualified school, and then your loans can be forgiven. That’s half of the time, compared to the Public Service Loan Forgiveness (PSLF) program, another federal loan forgiveness option. Under PSLF, educators would have to put in 10 years of payments before being eligible for forgiveness.
It’s also helpful that making a certain number of payments isn’t a requirement for teacher loan forgiveness. Of course, under the terms of your loan, you’re going to make payments anyway, but that’s one less program requirement to document along your journey toward loan forgiveness. 
Finally, the altruistic reasons for pursuing loan forgiveness might be of personal value to you since serving in a low-income school might feel more impactful. 

Disadvantages of Teacher Loan Forgiveness

In spite of the benefits, Teacher Loan Forgiveness falls short in some areas. It’s not automatically the best option for teachers. 
The major negative aspect of teacher loan forgiveness is that it doesn’t forgive your entire student loan balance. The maximum amount teachers that select teachers can have forgiven is $17,500. Since teachers have an average six-figure student loan debt, a great deal of debt is left for you to repay even after forgiveness. 
Not only is the maximum award low compared to other loan forgiveness options, very few teachers qualify for the maximum amount. The majority of teachers fall in the subject areas that only offer $5,000 in forgiveness. Unless you’re in math, science or special education (and have relatively low student loan debt), PSLF is the better option. 
There are limitations on the number of federal loan forgiveness programs you can enroll in. Although you can technically pursue both Teacher Loan Forgiveness and PSLF, your teaching years don’t count, simultaneously. You’d have to put in your five years for Teacher Loan Forgiveness, and then start the clock over to meet the 120 qualifying payment requirement through PSLF. 

Alternatives to Teacher Loan Forgiveness

Since the Teacher Loan Forgiveness Program isn’t the best option for every teacher, here’s a brief explanation of a couple of the best alternatives: PSLF and refinancing. 

PSLF Program

Some teachers are better off seeking Public Service Loan Forgiveness (PSLF). If you teach full-time in a U.S. federal, state, local or tribal government or nonprofit organization, you might be eligible for PSLF. You’ll need to have Direct Loans and make 120 qualifying payments through an income-driven repayment plan. 
If you meet all of the PSLF criteria, all remaining student loans are forgiven, making this a great path for many teachers who have high loan balances. Plus, the forgiven amount isn’t considered taxable income, preventing a major tax hit when it’s time to file your return. 

Student Loan Refinance

Not all teachers may qualify for PSLF, in which case refinancing your loans to get a better interest rate is the next best choice. If you have private loans or your employer doesn’t qualify, PSLF isn’t an option. 
Your original interest rate could be 6 or 7%, so refinancing to a lower rate like 3.5% would make a significant difference. When you refinance your loans at a lower rate, you pay less overall in interest, getting out of student debt more quickly. 

The Bottom Line

Overall, Teacher Loan Forgiveness can be a valuable way to rid yourself of some student loan debt, quickly. But if you don’t meet the program’s requirements or the forgiveness amount is too low compared to your debt, consider PSLF or student loan refinancing to reduce your student loan burden.