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Teacher Loan Forgiveness: How to Get Up to $17,500 of Your Student Debt Erased

By Matthew Frankel, CFP® – Updated Feb 3, 2020 at 12:05PM

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If you’re a teacher with student loans, your student loan balance could get much lower after five years of work experience.

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While the Public Service Loan Forgiveness (PSLF) program gets more headline coverage these days, and for good reason, it’s important to realize that working for 10 years in public service while paying on your student loans isn’t the only way to get your student loans forgiven.

One program in particular, the Teacher Loan Forgiveness Program, can help reduce the student loan burden for borrowers who decide to teach in lower-income schools. And unlike the PSLF program, you can qualify for Teacher Loan Forgiveness in just five years.

What is Teacher Loan Forgiveness?

The Teacher Loan Forgiveness Program is designed to provide student debt relief to certain federal student loan borrowers who pursue careers in education. We’ll get into the specifics later, but the general idea is that federal student loan borrowers who teach for five consecutive years in a low-income school can get as much as $17,500 of their loans forgiven.

The eligibility requirements: The quick version

There are four basic requirements that must be met before your loans can be forgiven under the Teacher Loan Forgiveness Program:

  • You must not have had an outstanding Direct or FFEL loan balance as of Oct. 1, 1998.
  • You must have worked as a full-time teacher for five full and consecutive academic years, and at least one must have been after the 1997-98 academic year.
  • This teaching work must have been done at a qualified low-income K-12 school or educational service agency.
  • The loans to be forgiven must have been made prior to the end of your qualifying teaching service.

Now, the first requirement is self-explanatory. However, the others need a bit more explaining, so let’s look at them one by one.

Do you meet the five-year requirement?

The main points to keep in mind are that the five years of teaching must be full and consecutive. In other words, you can’t teach for two years at a qualifying school, take a year off, and then go back and teach for three more years. However, the five years don’t necessarily have to be at the same school.

While your teaching service was being completed, you must have met the requirements for being a highly qualified teacher, which essentially means that you had at least a bachelor’s degree and full state certification as a teacher. You also have to demonstrate competency in your academic subjects, generally by taking a state test.

One common question is “what happens if I didn’t teach for an entire school year?” When this happens, the partial year could still potentially count as one of your five if you taught for at least half of the academic year, the employer considers you to have fulfilled contractual requirements for one year of teaching experience, and you either returned to school to further your teaching education, had a medical condition covered under FMLA, or you were called to active-duty status in the armed forces.

Does your school qualify?

You might be surprised at how many schools are classified as low-income schools for the purpose of Teacher Loan Forgiveness. If you aren’t sure whether your school qualifies, the Department of Education publishes a directory for each school year.

Here’s an important point. To qualify, your school only needs to be classified as a low-income school for one of the five years. If your school was considered a low-income school for one school year, the years you taught after that school year can still be considered.

Do your loans qualify?

To qualify, you must have Direct Loans or Federal Stafford Loans (subsidized or unsubsidized), or a Direct or Federal Consolidation Loan that was used to repay one of these types of loans. And if you’re in default on a loan, you can’t take advantage of Teacher Loan Forgiveness until you’ve made repayment arrangements for that loan.

Unfortunately, PLUS Loans and Federal Perkins Loans are not eligible for the Teacher Loan Forgiveness Program, although Perkins loans may potentially be eligible for other forms of cancellation.

How much can you have forgiven?

In a nutshell, there are two levels of loan forgiveness in the Teacher Loan Forgiveness Program:

  • You can have up to $17,500 of loans forgiven if you were a highly-qualified mathematics or science teacher at the secondary level, or a special education teacher at any K-12 level.
  • You can have up to $5,000 of loans forgiven if you taught at a low-income school in any other academic subject area.

Will you have to pay income tax on the amount that’s forgiven?

The Teacher Loan Forgiveness Program, as well as most other student loan forgiveness programs, are tax-exempt programs. After completing program requirements, participants who have their loans forgiven won’t have to pay any income tax on the amount.

On the other hand, it’s important to mention that not all forms of student loan cancellation enjoy this treatment. For example, if you have a portion of your loans forgiven because you’ve paid under an income-driven repayment plan for a certain length of time, that forgiveness amount is still considered taxable income under current law.

Can teachers also get Public Service Loan Forgiveness?

The short answer to this question is yes, but there are a few things you need to know. Teachers can certainly qualify for Public Service Loan Forgiveness (PSLF) based on their employment, and this program requires that you make 120 qualifying monthly payments on your student loans.

You can qualify for both programs, but you can’t use the same time period to qualify for them. In other words, if you complete five years of qualified teaching and get some of your loans forgiven under Teacher Loan Forgiveness, the clock then resets for the purposes of Public Service Loan Forgiveness. You’ll need to make 120 qualifying monthly payments after you’ve received your Teacher Loan Forgiveness.

For many borrowers, especially those with high student loan balances, the Public Service Loan Program is the more lucrative option, so if you anticipate qualifying for PSLF, it’s a smart idea to think about whether it’s worthwhile to apply for Teacher Loan Forgiveness after completing your first five years.

How do I apply for Teacher Loan Forgiveness?

You can apply for Teacher Loan Forgiveness after completing your five consecutive years of qualified teaching by submitting the application to your loan servicer. You’ll need to get the chief administrative officer of the school at which you taught to complete the certification section, and depending on your circumstances, you might need more than one form (there’s only one spot for certification by your school’s officer, and a form can only be submitted to one loan servicer).


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