My name is Heath and I have a problem.
It’s not necessarily a bad problem, but it is why I am writing this at almost one in the morning. I love helping people with student loans. It is a passion that has luckily become a career.
Everyone loves forgiveness. It’s what over ⅓ of my questions received are. My sister-in-law included. She sent me the link for the article written by Heather in 2013 about teacher forgiveness programs. After the unfortunate task of having to explain why she didn’t qualify, I began to read the comments and realized there was confusion on some common forgiveness issues.
So because of my aforementioned love of assisting, I emailed Heather and she instantly offered a chance for me to write to you. So here we go. Now I could write a big book on this stuff, so I’m going to hit the highlights.
The basics was already covered in the previous article. In order to qualify for Teacher Loan Forgiveness, you have to teach full-time in a Title I school that serves low-income families. To know if your school qualifies, click here.
You can qualify for either $5,000 or $17,500 in forgiveness depending on your subject matter. If you teacher at an elementary or secondary school as a highly qualified Special Education Teacher or as a Secondary School Math or Science Teacher, you may qualify for up to $17,500 in forgiveness. There is small print that goes with this such as the disability must correspond to your training, but this gives you a pretty good overview.
If you are full-time in a secondary school in a subject relevant to your major or in an elementary school where you demonstrated knowledge and teaching skills in reading, writing, math, etc (see almost all elementary classrooms), you may be eligible for $5,000 in forgiveness. You must be a classroom teacher, so things such as librarians do not count.
So before we move on, let me answer the question I know you are wondering. Yes you can do both. Problem is if you qualify for the $5,000, to qualify for the remaining $12,500 (if you meet the criteria) you must teach an additional five years. This typically doesn’t make sense if you qualify for Public Service Loan Forgiveness (which we will cover on another day).
Where everyone seemed a little bit confused though is what loans are eligible. So let us go over what loans are eligible and not eligible. Please remember that we are only talking about Direct Loans and FFEL (Federal Family Education Loan) Program Loans. Perkins and private loans are different ducks that go by different rules.
So let me first tackle the three things I saw that people were most confused about and then I’ll hit all other points. First off, PLUS loans are not eligible. Ever. What PLUS loans are are Federal Graduate Loans or Parent PLUS loans (loans taken out by you for your children’s education). So for those of you asking what about your Graduate Loans that you are currently taking, the answer is forget about them, doesn’t apply (however give you a hint to the next piece on PSLF, they do qualify, so not all hope is lost!).
Secondly, it was asked whether you should keep paying if you are applying for forgiveness. The answer will almost always be yes unless you owe less than your forgiveness amount is.
However make sure it is less than what it will be after interest is added. Here is the easiest way to do that. Interest accrues daily. So if you have a loan amount of $4,000 and an interest rate of 6%, your yearly interest rate (since you won’t be making any payments to offset it) will be $240.00 (that is 4,000 x .06). If you are only in your first year $240 x 5 years is $1200. In this situation you would owe $5,200 after 5 years and would still have to keep paying after forgiveness if you qualify for 5k in forgiveness. But if you have only 4 years left, which is $960, then you could apply for what is called a Teacher Loan Forgiveness Forbearance since $960 + $4,000 is under $5,000 in our example. Simple right? Just remember you must apply for this yearly and can apply as soon as you will be eligible for this forbearance.
Here is why.
A consolidation loan is only eligible if ALL the loans you included in that consolidation are eligible. So let’s say you have a loan that is too old, or you added a Graduate loan to it, etc., it would disqualify all of it. But if all the loans are eligible for the consolidation, the consolidation loan is eligible as well. So it’s not the consolidation that makes it ineligible but what loans you consolidated.
The good news if you still want to consolidate is two fold. One is you don’t have to include all the loans for consolidation, so you can separate the bad apples that are giving you problems. Also you can consolidate an already consolidated loan with another eligible loan so you can even do a new consolidation down the road after forgiveness if you are still eligible!
Now the other qualifications:
- You must not have any outstanding balance on your Direct Loans or FFELP loans as of 10/1/98 or on the date you obtain a Direct or FFELP loan after 10/1/98. Put into English that means if you had loans that was given out before that date and you didn’t pay if off before the magical date, you don’t qualify.
- Loans disbursed after the fifth year of teaching are not eligible for forgiveness. So let us say your fifth year qualifying ended in 2010 and you have a loan that was disbursed in 2011, you cannot put your forgiveness towards this loan.
- Loans disbursed during the 5th year of teaching are not eligible if the term end date is prior to the end date of the 5th complete academic year. So let’s say our loan has a disbursement date of March 8 but your term doesn’t end till December 16. If your year end date is 6/15 of the same year, it is not eligible because it overlaps.
There is more information I could go into in regards to turn around times and how the forgiveness is applied, but I believe we have covered the main points. But before I make my exit, there is one more thing I want to tell you about.
If you are considering doing PSLF also, I would advise you to choose. This is because while you can do both, it will take a minimum of 15 years (5 for TLF, 10 for PSLF) because the dates cannot overlap. As a result, it is rarely beneficial to do both. I will discuss which to choose in my final installment
So before we go, let me leave you with a present. I have created a free guide that tackles twelve of the most common myths teachers have about their student loans. So sign up today and let’s tackle your loans together!
Need more help? Check out these other posts on Hojos site or email me at firstname.lastname@example.org !
Want more information about student loan forgiveness? There are now four different posts on the blog to help you out! Click any of the pictures below to get more information!