1) Public Service Loan Forgiveness (PSLF) Program
- Unlike other programs, PSLF does not require you teach at a low-income public school but only requires that you work for qualifying employer. This includes government organizations at any level (U.S. federal, state, local, or tribal), not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code, or other not-for-profit organizations that provide certain types of qualifying public services.
- You must have Direct Loans. If you have other types of federal loans, like FFEL or Perkins Loans, you must consolidate in order for those loans to qualify. To check which types of loans you have, log in to StudentAid.gov.
- You should repay your loans on an income-driven repayment plan if you want to get the most value out of the program. You can apply for an income-driven repayment plan on StudentAid.gov.
- In order for payments to count toward the 120 needed for forgiveness, you must meet specific requirements.
- Loan amounts forgiven under PSLF are NOT considered taxable by the IRS.
2) Teacher Loan Forgiveness (TLF)
- You must have been employed as a full-time teacher at an eligible school for five complete and consecutive academic years, and at least one of those years must have been after the 1997–98 academic year.
- Certain highly qualified special education and secondary mathematics or science teachers can qualify for up to $17,500 in forgiveness. Other eligible teachers can qualify for up to $5,000.
- PLUS Loans and Perkins Loans are not eligible to be forgiven through this program.
- Any time you spent teaching to receive benefits through AmeriCorps cannot be counted toward your required five years of teaching for TLF.
- To maximize your forgiveness amount, you can apply for a Teacher Loan Forgiveness Forbearance, which means you will not have to make monthly loan payments (however, interest will still accrue). Borrowers who have a loan balance that is greater than the TLF amount they are applying for (either 17,5000 or $5,000) are not eligible for this type of forbearance.
- For example, Jane teaches special education at an eligible low income school and her loan balance is $10,500. She is planning on qualifying for Teacher Loan Forgiveness in 5 years to pay off her loan balance, but she doesn’t want to make payments in the meantime because lowering her loan balance will reduce her loan forgiveness amount. Jane decides to apply for a TFL Forbearance so she doesn’t have to make payments on her loans and so she can receive as much loan forgiveness as possible.
- You apply for TLF after you’ve completed the five-year teaching requirement.
3) Perkins Loan Cancellation for Teachers
Things you should know about this program include:
- This program can only forgive your Federal Perkins Loans. Check to see if you have Perkins loans at StudentAid.gov.
- If you’re eligible for this program, up to 100% of the loan may be canceled for teaching service, in the following increments:
- 15% canceled per year for the first and second years of service
- 20% canceled for the third and fourth years
- 30% canceled for the fifth year
- Each amount canceled per year includes the interest that accrued during the year.
- To find out if a school is classified as a low-income school, check our online database for the year(s) you’ve been employed as a teacher.
- Even if you don’t teach at a low-income school, you may qualify if you teach mathematics, science, foreign languages, bilingual or special education, or a different subject determined by your state education agency to have a shortage of qualified teachers in your state.
- Private school teachers can qualify if the school has established its nonprofit status with the Internal Revenue Service (IRS), and if the school is providing elementary and/or secondary education according to state law.
4) State-Sponsored Student Loan Forgiveness Programs
Several states have their own loan forgiveness program for educators. Washington State does not currently offer those entering the teaching field a loan forgiveness program.
Weighing Your Options
As you’re trying to decide whether to pursue PSLF or TLF first, you’ll want to compare the total amount you’d pay over the life of the loan under each program by using our Loan Simulator.
You can also consult your federal loan servicer. It can give you advice based on your specific situation and finalize any changes you need to make to your repayment plan.
You may qualify for more than one of the federal forgiveness programs we discussed. In some instances though, your decision to take advantage of one program may impact your ability to take advantage of another, so you want to be sure you look at them carefully.
- You must have Direct Loans in order to qualify for Public Service Loan Forgiveness. If you have any Perkins Loans, you may be tempted to consolidate them into the Direct Loan Program in order to make them eligible for PSLF. However, if you do that, you’ll no longer qualify for Perkins Loan cancellation. You may be better off leaving your Perkins Loans out of the consolidation loan so you can take advantage of both programs.
- You may not receive a benefit under both the Teacher Loan Forgiveness Program and the Public Service Loan Forgiveness Program for the same period of teaching service. For example, if you make payments on your loans during your five years of qualifying employment for Teacher Loan Forgiveness and then receive loan forgiveness for that service, the payments you made during that five year period will not count toward PSLF.
- Some people could benefit from both PSLF and TLF. For example, receiving TLF after 5 years and PSLF after 15 years. This is a rare situation ideal for a borrower with a higher loan balance and a lower annual gross income (AGI).
This article was written by Nicole Callahan and Miranda Houchins from the U.S. Department of Education’s office of Federal Student Aid.