Lending is a compromise. The point is to motivate graduates to work in poorly paid or otherwise undesirable positions in order to wipe out or significantly reduce their student loan balance. Without these programs, key community institutions would be severely understaffed.
If you're a teacher or a student reading this, these criteria will likely sound familiar to you.
Many school districts struggle to fill their schools with full staff, especially when it comes to specific positions. Lending programs are one of the best ways for them to attract applicants and keep them until they have an impact.
Teachers have several options when it comes to lending. Here's what you should know about each one.
Forgiveness of the teacher loan
The Teacher Credit Program is the only federal credit program designed specifically for teachers. Math or science teachers teaching in secondary schools or special education teachers can receive loans of up to $ 17,500. Any other type of teacher can only receive loans of up to $ 5,000.
The program has strict requirements. Teachers must be licensed or certified in their state and must teach for five consecutive years in a school that caters primarily to low-income students. A list of eligible schools can be found here.
Teachers will also qualify if they work in different schools in each of the five years, but each of those schools must be eligible.
Teacher loan allocation is only available for direct subsidized and unsubsidized loans, and for subsidized and unsubsidized Federal Stafford loans. Perkins loans are not eligible.
If you have a direct consolidation loan or a federal consolidation loan that includes a Perkins loan, that portion is not eligible for teacher loan facilities. PLUS or graduate school credits are also not eligible for teacher credits.
The Public Service Loan Forgiveness Program (PSLF) is arguably the best option for forgiveness from teachers. Unlike the teacher loan program, borrowers don't have to work several years in a row to qualify. This is especially helpful for teachers who have a year or two off.
Teachers can work for a primary or secondary school in either a public or private school. You must work at least 30 hours a week to qualify. After 120 qualified payments, they can request that their remaining loan balance be allocated. There is no limit to the relief, and teachers do not owe any tax on the amount awarded.
Only direct loans are eligible for PSLF. If you have FFEL or Perkins loans, you need to group them together into a direct consolidation loan in order to qualify.
Teachers should submit the PSLF Employer Certification Form each year, which the employer uses to review and calculate how many qualified payments have been made.
PSLF can be used with Teacher Loan Forgiveness, but borrowers only receive one credit for one program at a time. If $ 5,000 of your loans are awarded through teacher loan approval after five years, the five year payments do not count towards PSLF.
While working towards the PSLF, teachers must choose from one of the earnings-based repayment plans. These options lower your monthly payment.
Perkins Loan Teacher Cancellation
Teachers with Perkins Loans can have their loan balance paid in full. To be eligible, they must work full-time in a school with low-income children or as a special needs teacher. Teachers can also become eligible by teaching a subject where their state lacks teachers.
Private school teachers and those who have two part-time teaching jobs also qualify. Pre-school and kindergarten teachers can only be eligible if their state regards these grades as part of primary education.
Unlike PSLF or the Teacher Loan Forgiveness program, teachers can earn partial loans. After five years of service, they receive 100% forgiveness.
This is how much is given every year:
15% forgive after one year of work
15% awarded after two years of work
20% awarded after three years of work
20% awarded after four years of work
30% awarded after five years of work
State award programs
Your state may have its own teacher forgiveness program. Click here to see what options are available. You can also try Googling your state and the "Teachers Forgiveness Program" and see what comes your way. You may need to teach in an underserved area or teach a specific subject to qualify.
Private student loan options
Teachers on private loans rarely have access to credit. Here are a few options available to you:
Refinancing of personal loans
If you want to save money on personal loans, refinancing at a lower interest rate is your best option.
Private lenders often require a credit score of 650 or higher in order to qualify for a refinance. Some lenders may also have an income requirement, but it depends on the specific lender. For example, LendKey accepts borrowers with low salaries.
When refinancing personal loans, make sure you understand the term you are signing up for. For example, if you still have five years on your personal loans and refinance for a 10 year term, you may pay more interest over the term of the loan as the term doubles.
If you can afford it, keep making the same payments as before. Provided you haven't made significant changes to your budget or lost your source of income, it should be doable. If you keep the same payment rate, you can repay the loan faster and save interest.
Take out a home equity loan
If you are a homeowner, you can take additional equity out of your home and use it to pay back your student loans. Generally, you must have 80% or more equity in the house to qualify.
Home equity loans can have lower interest rates and longer terms than private student loans. It can also be easier to qualify for a home loan since the bank has collateral behind it.
The downside to this strategy is that if you default on a home equity loan, the bank can potentially take back your home. In comparison, the refinancing of your private student loan is much less.
Zina Kumok (110 posts)
Zina Kumok is a freelance writer who specializes in personal finance. As a former reporter, she has covered murder trials, the Final Four, and everything in between. It has been featured in Lifehacker, DailyWorth, and Time. Read how she repaid $ 28,000 in student loans at Conscious Coins in three years.