Guide to Student Loan Repayment for Teachers

With an average debt load of more than $35,000, the college class of 2015 was inarguably the most indebted in history.

Many of the 40+ million college graduates with student loans are bending under the weight of their monthly debt obligations. This struggling demographic includes teachers, of course, since our nation’s educators are historically underpaid despite being highly educated.

One silver lining teachers can look forward to, however, is that there are several student loan forgiveness options created specifically for them. And even if you don’t qualify for forgiveness, there are a couple of strategies you can use to get out from under the burden of student loan debt fast.

If you’re a teacher who wants to be free from debt, here are your best options:

Federal Public Student Loan Forgiveness (PSLF)

Since teachers commonly work in the public sector by default (most schools are counted as public service organizations), PSLF is one option to consider.

After committing to a full-time public service career and making 120 on-time payments, the remaining balance on your Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct Consolidation Loans may be forgiven.

Federal Teacher Loan Forgiveness

Federal Teacher Loan Forgiveness was created to encourage teachers to work in low-income school districts. Under this program, teachers who work for qualified elementary schools, secondary schools, and educational service agencies may receive forgiveness of up to $17,500.

To qualify, you must teach at your school for five consecutive years and never let your loans go into default. Some states will also match the funds you receive, so be sure to check out all the state, local, and federal programs you may qualify for.

Federal Perkins Loan Cancellation

Teachers who have Federal Perkins Loans, which are student loans geared to those with a demonstrated financial need, may have the remaining balance of their loans forgiven after five years working at a qualifying school (serving mostly low-income families, special education, or in a high-need discipline with a teaching shortage).

Loans are forgiven in a tiered manner: 15 percent of the balance is cancelled in the first two years, followed by 20 percent cancelled during years three and four. The final 30 percent of your loans can be forgiven during your fifth year.

Teacher Education Assistance for College and Higher Education (TEACH) Grant

The TEACH grant program offers up to $4,000 per year in forgiveness to teachers who agree to work in certain positions and continue their education. You must be enrolled in an undergraduate, postbaccalaureate, or graduate program that participates in the TEACH grant program, agree to work in a school that serves low-income families, and meet certain achievement and GPA requirements.

You should note, however, that if you don’t meet the program requirements, your grants will automatically convert into loans. In other words, failing to meet your obligations means having to pay all of your grants back.

Student Loan Prepayment

While the idea of pay extra money toward your loans might sound preposterous if you’re already struggling, this strategy can pay off in spades if you can make it work.

This student loan prepayment calculator can show you exactly how long it will take you to pay down your loans and how much interest you can save by making extra payments.

For example, say you have $35,000 in student loan debt at 5% interest. Rather than making the necessary $371 monthly payments on the standard 10-year payment plan, you bump it up to $500. You would shave more than three years off of the life of your loans and become debt-free after 83 months (6.9 years).

Better yet, choosing this path would save $3,080 in total interest.

Student Loan Refinancing

Teachers with high interest loans can consider student loan refinancing in order to get a lower interest rate and better terms.

While you lose access to federal protections such as loan forgiveness programs, deferment, and forbearance when you refinance federal loans with a private lender, refinancing could save you thousands of dollars in interest. Not to mention, you can refinance several loans into one, with a single monthly payment.

As always, you should make sure you understand the terms and conditions of any new loan you’re considering before signing on the dotted line.

The Bottom Line

Although none of these options are perfect, teachers will find there is more than one way to pay down their student loans. At the end of the day, it’s wise to consider each of these options and how they might work in your favor. With a decade or longer of repayment to look forward to, it makes sense to look for ways to save money, time, or both, along the way.