What Haven't You Been Told About Teacher Loan Forgiveness?

 

Answer: Taxation.

You must factor in the taxation of what amount you're forgiven through the teacher loan forgiveness program. Any amount forgiven through this program is taxed as ordinary income. This is rarely mentioned, but with the average teacher salary is taxed at a rate of 20%, this could surely put a hole in your pocket! For instance, if you were to get the maximum amount provided under TLF ($17,500) this would equate to a $3500 tax liability for the tax year you were forgiven!

The Solution:

In most cases, the amount forgiven that is taken off the priciple amount owed is not offset by a savings in the borrower's monthly payment over the new term. This is why we rarely recommend teacher loan forgiveness. Instead, we recommend enrolling into a tax free, much lower payment forgiveness plan that all public school teachers qualify for regardless of title 1 employment, years employed or their teaching expertise.

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Teacher Loan Forgivness Facts

Teachers provide perhaps the most crucial service to American children - education. But in order to become a public school teacher, individuals must obtain higher education degrees that often come at a high price. In order to help ease this burden, the federal government created a program that allows up to $17,500 of teachers' federally backed student loans to be forgiven, provided that certain requirements are met.

Which types of loans qualify for teacher student loan forgiveness?

Several types of federal student loans qualify under this forgiveness program, including:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Subsidized Federal Stafford Loans
  • Unsubsidized Federal Stafford Loans.

You must have taken out a loan before beginning your employment as a teacher, and different qualifications may apply if you received your loans or began your career before the 1997-1998 school year. Additionally, you cannot have an outstanding balance or be in default on your loan payments.

What kind of teaching employment qualifies?

The teacher student loan forgiveness program is intended to directly benefit low-income communities. According to the U.S. Department of Education, to qualify, you must work for five years in either an elementary or secondary school in which 30 percent of the students qualify for services provided by Title I of the Elementary and Secondary Education Act of 1965, in a school district which qualifies for federal funds under Title I, that is listed in the Annual Directory of Designated Low-Income Schools for Teacher Cancellation Benefits.

It's important to note that your five years of teaching in a low-income school must be for the complete school year and served consecutively.

Teaching service begun or completed after 2004

Several changes to the teacher student loan forgiveness program took effect in 2004. If you completed or began your tenure as a teacher after this school year, you must be designated a highly qualified teacher in order to receive forgiveness on your loans. This means that you have obtained a state certification or have passed your state's teacher licensing examination, along with holding a bachelor's degree and passing quality evaluations set forth by the federal government depending on the academic level (elementary, middle or secondary) you teach.

How much of my loan will be forgiven?

If you meet all of the above requirements, you may qualify for either $5,000 or $17,500 in student loan forgiveness.

Any highly qualified teacher serving a low-income community can qualify for $5,000 to be discharged from their loans after five years of service.

Special education teachers and math and science secondary school teachers can qualify for $17,500 in forgiveness after teaching for five years.

How can the Student Loan Repair Center help?

If you think you may qualify for teacher student loan forgiveness, the Student Loan Repair Center can help you every step of the way! When you contact us at 1-866-872-4300 or fill out our online form, we will evaluate your case and give you a free fast quote to reduce your debt burden. From there, we take care of the application process, making receiving your student loan forgiveness completely headache-free. To start your journey to reduce your student loans and find out how you can benefit from this and other government consolidation and forgiveness programs, speak to one of the Student Loan Repair Center's experienced staff.

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