Student Loan Forgiveness Options for Teachers and Schools

Last Updated: October 10, 2008

This article appeared in the October 2008 Rural Policy Matters

The federal government offers several student loan forgiveness programs for college graduates who teach certain subjects or teach in schools designated as low-income. The programs can be an important tool in recruiting teachers. But many schools don’t know about them.

Many states also have loan forgiveness programs so schools and prospective teachers should contact their states to determine if there are additional programs available.

We’ve outlined three major federal student loan forgives programs below. The programs vary based on the type of loan the borrower has and certain restrictions may apply to the borrower. Low-income schools are Title I-eligible [those in which 30% or more of students meet a measure of poverty under section 1113(a)(5) of the Elementary and Secondary Education Act].

What Schools Need To Do

To make full use of the recruiting advantages of the forgiveness programs schools should:

  • Make sure the school, if eligible, is listed on the federal student loan website as a qualifying low-income school. Go to Low-Income School Search. If your school is not listed and you think it should be, contact your state’s Department of Education to find out whether the school can be added to the database. Many prospective teachers check these websites as they consider where to apply, so you want to be included if you are eligible. Also, because schools sometimes go on and off the Title I list with changing demographics, the loan forgiveness programs allow teachers to receive forgiveness for the year the school is on the list and any subsequent year. In other words, if a teacher is hired by a Title I school in 2006-07 and the school is no longer Title I eligible in 2007-08, the teacher may continue to receive forgiveness. The same principle holds true if a school receives Title I designation: qualifying teachers will be eligible for forgiveness from that year forward.  
  • Know if any open or recently filled positions or your school/district are designated as shortages area by your state. The Teacher Shortage Area Nationwide List includes federal (page 4) and state shortage areas. Again, check with your state if you think there’s a mistake on the list.
  • Publicize your school's eligibility for federal and state loan forgiveness programs in your recruitment efforts. Let job candidates know that your school will help them with the paperwork.

Federal Loan Forgiveness Programs

Perkins Loans: Perkins Loans are made by institutions of higher education to students with financial need. Borrowers qualify for cancellation of up to 100% of a Perkins Loan if they: 

  • Teach full time in a low-income public or nonprofit elementary or secondary school or a school operated by or under contract with the Bureau of Indian Affairs (pre-K teachers also qualify in some cases); or,
  • Teach – regardless of the school’s income level – special education (including teachers of infants, toddlers, children, or youth with disabilities), mathematics, science, foreign languages, bilingual education, or in a field or location determined by a state education agency to have a shortage of qualified teachers. The majority of classes must be taught in the field.
  • Work full-time as a librarian or speech language pathologist in a low-income school. Note: this is a new provision of the recently passed Higher Education Act and may not yet be listed on the Perkins website. To be eligible you must be certified to work in schools as required by your state.

Graduates with Perkins Loans must request the appropriate loan cancellation forms from their college. Cancellation rates for eligible borrowers are 15% per year for the first and second years of service, 20% for the third and fourth years, and 30% for the fifth year of service.

FFEL and William D. Ford Direct Loans (Stafford Loans): Forgiveness works differently for FFEL (Federal Family Education Loan) and Direct Loans than for Perkins Loans. To be eligible, borrowers must work in a school designated as low-income. Forgiveness occurs only after five consecutive years of full-time teaching. The program offers:

  • Up to $5,000 in loan forgiveness for most highly qualified teachers in low-income schools; and
  • Up to $17,500 for highly qualified teachers of math, science, or special education in low-income schools.

The borrower applies for loan forgiveness online after completing their fifth year of teaching. Lenders are permitted to grant forbearance on the loan for each year of qualifying teaching, but the borrower must negotiate forbearance directly with the lender.

Higher Education Act: The recently re-authorized Higher Education Act includes a provision (Sec. 430) for federal student loan forgiveness of up to $10,000 ($2,000 per year of service for no more than five years). Details are not yet complete, but the legislation defines eligibility for school service as follows:

  • Early childhood educators (pre-K), teachers of critical foreign languages, teachers of ELL students;
  • Employees in low-income schools who work full-time as a Highly Qualified teacher; librarian; speech language pathologist; school counselor; superintendent, principal, or other administrator;
  • A Highly Qualified teacher who “is an individual from an underrepresented population in the teaching profession.”

Other links to information on loan forgiveness programs:

  • Federal student loan forgiveness website
  • Federal website with information on ways to reduce or eliminate payments
  • American Federation of Teachers has a webpage on loan forgiveness programs that includes links to state programs and information about several private programs.
  • National Education Association has a loan repayment webpage that explains options for private as well as federal student loans.
  • The College Cost Reduction and Access Act of 2007 allows many public service employees to receive cancellation of remaining student loan debt after the borrower has made 120 monthly payments. Click here for the summary.

See “State Student Loan Forgiveness” for a sampler of state programs to recruit teachers to hard-to-staff subjects and schools.

Read more from the October 2008 Rural Policy Matters.