Category: Teachers / Professors

Student loan forgiveness program guide

Post author By Y@DminG
Post date September 19, 2018
12 Comments on Student loan forgiveness program guide

For many, student loans represent a significant investment in an individual’s future. Borrowing to complete an undergraduate, graduate, or professional degree program is often the only means to pay for the cost of higher education, as the price tag continues to increase at public and private institutions alike.

Currently, more than 44 million Americans have outstanding student loan debt, totaling over $1.4 trillion among them, and these figures make it hard to fathom how student loan balances will ever be paid off.

Fortunately, some student loan borrowers have access to valuable forgiveness programs that offset the burden of paying for student debt over the course of several years. In this guide, borrowers can learn about what student loan forgiveness is, the available student loan forgiveness programs, caveats to forgiveness, and how private student loans are impacted.

What Is Student Loan Forgiveness?

Student loan forgiveness is the process of having outstanding loan balances canceled after a period of on-time, consistent monthly payments. Whether in full or in part, student loan forgiveness means that a borrower has the slate wiped clean and there is no longer an obligation to repay a remaining balance.

The cancellation of student loan debts takes place through the borrower’s student loan servicer, but the federal government via the Department of Education takes on the financial responsibility of student loan forgiveness. Students may be eligible for loan forgiveness based on their employment, their career field, or their selected repayment program.

Student Loan Forgiveness Programs

There are several student loan forgiveness programs available to qualified borrowers through the Department of Education, including Public Service Loan Forgiveness, Teacher Loan Forgiveness, Income-Driven Repayment Forgiveness, and Perkins Loan Cancellation.

Public Service Loan Forgiveness

Under the Public Service Loan Forgiveness program, also referred to as PSLF, individuals who borrowed federal student loans to help pay for their education who work in a public service position may have outstanding balances forgiven after a period of ten years of repayment. The program started in 2007 and is made available to qualifying workers, like teachers, military personnel, nurses, and firefighters, who hold a job in a non-profit organization or the government.

To qualify, borrowers must have worked in a qualifying field for at least ten years and made payments on their federal student loans for at least the same amount of time. Employment with a qualified organization must be full-time, which means at least 30 hours per week. At this time, only federal direct loans are eligible for PSLF, but a consolidation of other types of loans may indirectly provide loan forgiveness to some qualified borrowers. After the 120th payment is made, borrowers may submit an application to their federal student loan servicer.

Teacher Loan Forgiveness

Individuals who borrowed to help pay for their college degree may qualify for teacher loan forgiveness through the Department of Education. Through the teacher loan forgiveness program, borrowers who work as teachers on a full-time basis may qualify to have up to $17,500 in direct or Stafford student loans forgiven. Eligible teachers must work in a low-income public elementary or secondary school, and they must have worked in that environment consecutively for the last five years.

While direct and Stafford loans are eligible for the teacher loan forgiveness program, borrowers must have taken out their first loans on or after October 1, 1998. Borrowers who believe they are eligible for teacher loan forgiveness may submit an application directly to their student loan servicer after the five years of consecutive, qualifying employment is complete.

Forgiveness Via Income-Drive Repayment

The federal government also offers student loan forgiveness to borrowers who elect to participate in an income-driven repayment program. Through these repayment options, which include income-based, income-contingent, Pay As You Earn and Revised Pay As You Earn, a borrower’s monthly student loan payment is capped as a percentage of monthly discretionary income, recalculated each year.

At the end of the repayment term, either 20 or 25 years, the remaining balance is automatically forgiven so long as borrowers have made consistent, on-time payments. To apply, borrowers must contact their federal student loan servicer directly to ensure they are on the most appropriate repayment program and are ultimately eligible for income-driven repayment forgiveness.

Perkins Loan Cancellation

Certain borrowers who show an exceptional financial need at the time of applying for federal financial aid may qualify for Federal Perkins Loans. These loans are low-interest federal student loans made available to both graduate and undergraduate students, up to certain limits. Perkins loans are only offered through participating schools, and the college or university offering the loan is the student’s lender, not the federal government.

Borrowers with Perkins Loans who work in certain types of public service or certain occupations may qualify to have a percentage of the loan canceled after each year of employment. Perkins Loan cancellation is currently offered to volunteers in the Peace Corps or ACTION program, teachers, members of the U.S. armed forces, nurses or medical technicians, law enforcement, Head Start workers, child or family services workers, and professional providers of early intervention services. To apply for Perkins Loan cancellation, borrowers must contact the school from which the original loan was acquired.

Special Considerations and Drawbacks

While student loan forgiveness can ease the burden of large student loan balances, there are caveats. First, student loan forgiveness tied to an income-driven repayment plan has certain tax implications for borrowers. At the time outstanding loan balances are forgiven, a borrower is taxed on that amount as income.

As an example, for an individual with a 25% income tax rate who has $30,000 in student loan debt forgiven may owe $7,500 in income tax the year the balance is canceled. Fortunately, borrowers who qualify for Public Service Loan Forgiveness, Teacher Loan forgiveness, or Perkins Loan cancellation are not taxed on any balance forgiven.

Additionally, borrowers who plan to utilize a federal student loan forgiveness program are susceptible to legislative changes that could severely impact their chances of being released from obligations. In recent months, student loan forgiveness for all current programs has been debated in Congress, leaving some borrowers weary of banking on forgiveness as part of their long-term financial plan.

There is no prediction that can be made as to what will take place with any of the student loan forgiveness programs, but borrowers should be aware that any or all of these benefits may disappear in the future, leaving the responsibility to repay student loans fully on their shoulders.

Finally, student loan borrowers who plan to use student loan forgiveness through PSLF or teacher loan forgiveness often work in career fields that offer lower earning potential over a lifetime. Taking a smaller annual income is beneficial in qualifying for loan forgiveness, but it may lead to challenges in setting aside savings for long-term financial goals.

Each loan forgiveness program requires years of on-time payments before loan balances are forgiven, so it is important for borrowers to weigh the pros and cons of career decisions in advance.

Forgiveness for Private Student Loans?

All student loan forgiveness programs mentioned in this guide are relevant for student loan borrowers who have federal student loans, or those originally provided through the Department of Education.

Private student loans offered by financial institutions not tied to the federal government do not currently qualify for student loan forgiveness under any federal program. There are, however, rare instances where student loans provided by private lenders may be canceled.

Borrowers may be able to have private student loans discharged through bankruptcy proceedings, but only when they are able to prove that the monthly payment will impose an undue hardship for an extended period of time. Each bankruptcy court varies by state, and this means that the tests used to evaluate undue hardship also varied greatly.

Generally speaking, if a borrower is unable to maintain a minimal standard of living for himself or his dependents based on income and expenses, including private student loan payments, a discharge through bankruptcy may be possible.

For student loan borrowers who currently have federal student loan debt, the idea to refinance into private student loans may be appealing. This is because most private student loan lenders offer extended repayment plans and variable interest rates that seem lower at the onset of a loan refinance, saving borrowers money on their monthly payment as well as on the total cost of borrowing over time.

However, because private student loan lenders do not offer any respite to borrowers by way of loan forgiveness over time, individuals should carefully consider their options with their federal student loans before opting to refinance with a private lender.

Overall, federal student loan forgiveness can be a smart strategy for borrowers who plan to work in a certain career field or select an income-driven repayment plan after graduation. When consecutive, on-time payments are made to eligible federal student loans, forgiveness can be a light at the end of a long tunnel.

However, borrowers need to be aware of the caveats of federal student loan forgiveness, including tax implications, uncertainty about the viability of forgiveness programs, and the need to take lower-income positions before relying heavily on a forgiveness program to repay student loan debt.

Tags archive, student loans

Federal Employees Local / State Employees Teachers / Professors

Will I receive spousal or survivor Social Security if I have a government pension?

Post author By Y@DminG
Post date August 1, 2018
2 Comments on Will I receive spousal or survivor Social Security if I have a government pension?

Will I receive spousal or survivor Social Security if I have a government pension?

Spousal and survivor Social Security benefits. Retirement plans and government pensions. Exceptions and more exceptions.

You’re a government employee and you have a government pension coming, but what about your partner’s retirement plan? You may be entitled to some of their Social Security benefits, but does your government pension influence what you receive? It turns out it does, and the government has the details down to a T.

First things first. What are you entitled to?

You can collect up to 50% of your spouse’s Social Security benefits instead of your own. This is good if your own benefits are less than that. If you’re a widow or widower, you can collect up to 100% of your late spouse’s benefits.

Now is when the Government Pension Offset enters the picture.

The Government Pension Offset reduces your spousal or survivor Social Security benefits if you receive a government pension on which you didn’t pay Social Security taxes.

However, the Government Pension Offset doesn’t apply if:

You have a private company pension.
You’re collecting both a government pension and Social Security based on your own work history. Keep in mind the Windfall Elimination Provision may apply.
Your government pension is not based on your own earnings.
Your government pension is from a job for which you paid SS taxes and:
- Your last day of employment that your pension is based on is before July 1, 2004; or
- You filed for and were entitled to spousal/survivor benefits before April 1, 2004; or
- You paid SS taxes on your earnings during the last 60 months of government service.

Keep in mind that if you remarried before the age of 60, you are not entitled to a survivor benefit.

If you’re still with me and those exceptions don’t apply to you, let’s look at the calculation. You have a government pension and are entitled to spousal or survivor Social Security benefits. What happens when those two worlds collide?

Spousal or Survivor Social Security Benefits vs. Your Government Pension

The Calculation

In a nutshell, your Social Security benefits are reduced to 1/3 the amount of your monthly government pension. (Even if you take your government pension in one lump sum instead of monthly payments, Social Security will calculate the reduction as if they were monthly payments.)

Example 1: Your spousal/survivor SS benefits totals $2,000/month and your government pension is $2000/month. We subtract $1,333 ($2,000 x 2/3 (or 0.667)) and you’re left with $667 per month from Social Security (1/3 the original amount) plus $2,000/month from your government pension. Your total combined benefits are $2,667 per month.

Example 2: Your spousal/survivor SS benefits totals $2,000/month and your government pension is $5000/month. Your SS benefits will be completely eliminated because what we would subtract (2/3 of your government pension, or $3,335) is more than your total SS benefits. You are left with just your government pension of $5,000 per month.

If you don’t want to do the math, use the government calculator here.

But it’s not all deductions and bad news!

Don’t forget Medicare. Even if you don’t get cash benefits from your spouse’s work, you can still get Medicare at age 65 based on your spouse’s record if you aren’t eligible for it yourself.

Retirement benefits are a tricky business. Spousal and survivor Social Security benefits aside, calculating even your own retirement benefits as a California public employee and especially as a public-school teacher can be confusing. If you haven’t already, get a solid grasp on what you’re entitled to first, and then figure out what else you may have coming your way from your partner.

Life is unpredictable. The more you know, the better prepared you’ll be for those inevitable twists and turns.

Tags archive, pension, retirement

Local / State Employees Teachers / Professors

Will I receive Social Security if I have CalSTRS or CalPERS?

Post author By Y@DminG
Post date June 23, 2018
12 Comments on Will I receive Social Security if I have CalSTRS or CalPERS?

Person holding sheet with question mark over face

Will I receive Social Security if I have CalSTRS or CalPERS?

If you’re a California public school teacher or public employee, you may have asked yourself this very question. In fact, I get asked it a lot from my clients. Understanding your CalSTRS retirement benefits if you’re a teacher or trying to figure out your CalPERS retirement as a public employee is not that simple. So when we start factoring in Social Security, of course there are going to be questions.

That’s when the Windfall Elimination Provision comes breezing in. It turns out your tax withholdings and previous jobs make a big difference, so let’s clear the air! Because we don’t want to throw caution to the wind when it comes to your retirement. (Let’s see how many more references to wind I can make so you’ll never forget the name of this provision!)

According to the Cambridge English Dictionary, a windfall is a large amount of money that you win or receive from someone unexpectedly. Could that someone be Social Security?

The Facts

Your SSI benefits will likely be affected if:

• You work for an employer who doesn’t withhold Social Security taxes from your salary. This can impact your retirement or disability pension. AND

• You’ve worked for another employer who did hold back Social Security retirement or disability benefits.

• You’re a public-school teacher. Most public-school teachers do not pay into SSI.

The Windfall Elimination Provision can also apply if:

• You turned 62 after 1985 OR

• You became disabled after 1985 AND

• You first became eligible for a monthly pension based on work where you didn’t pay SS taxes after 1985. Even if you’re still working, this applies.

If you’re a federal employee, you’re affected if:

• You performed federal service under the Civil Service Retirement System (CSRS) after 1956.

***If you only performed federal service under a system such as the Federal Employees’ Retirement System (FERS), your SS benefits won’t be reduced. Social Security taxes are withheld for workers under FERS.***

The Windfall Elimination Provision does NOT apply if:

• You’re a federal worker that was first hired after 12/31/1983.

• You were employed on 12/31/1983 by a non-profit organization that didn’t withhold SS taxes from your pay at first, but then began withholding SS taxes.

• Your only pension is for railroad employment.

• The only work you performed for which you didn’t pay SS taxes was before 1957, or

• You have 30 or more years of substantial earnings under SS.

• The standard 90% factor doesn’t get reduced.

• On page 2 of the Windfall Elimination Provision breakdown, consult the chart listing substantial earnings for each year. As long as you make that amount or over, that year counts towards the 30 years. The second chart shows the percentage corresponding to how many years of substantial earnings you have.

***This doesn’t apply to survivors’ benefits. Benefits for widows and widowers may be reduced because of the Government Pension Offset.***

The Calculation

Your Social Security benefit is based on your average monthly earnings adjusted for average wage growth. These average earnings are separated into three amounts and these amounts are multiplied by three factors to calculate your full Primary Insurance Amount (PIA).

Your PIA is what you would receive if you chose to receive benefits at the normal retirement age, neither later nor earlier.

If you become eligible for retirement or disability benefits in 2018, these three factors are calculated:

1.) The first $895 of your average monthly earnings is multiplied by 90%

2.) The earnings between $895 and $5,397 are multiplied by 32%

3.) The remaining balance is multiplied by 15%

The sum of A, B, and C is your PIA, which is then decreased or increased depending on whether you start collecting benefits before or after the full retirement age (FRA).

Let’s look at some examples:

Example 1:

A worker retires at 66 (his full retirement age, FRA) in 2018 with average earnings of $6,000/month. The Windfall Elimination Provision (WEP) does not apply.

1.) $895 (first $895 of earnings) x 90% = $805.50

2.) $4,502 (next part of earnings between $895 and $5,397) x 32% = $1,440.64

3.) $603 (remaining balance) x 15% = $90.45

Total PIA = $2,336.59 per month

Example 2:

A worker retires at 66 (his FRA) in 2018 with average earnings of $6,000/month. In this case, the WEP applies as he had 10 years of substantial earnings and then the rest in CalSTRS-covered employment that didn’t withhold any SS taxes.

1.) $895 x 40% (see chart) = $358

2.) $4,502 x 32% = $1,440.64

3.) $603 (remaining balance) x 15% = $90.45

Total PIA = $1,889.09 per month

You can manually figure out your average monthly earnings by following this chart. However, due to its complexity, it’s easier to use the following calculators:

This chart that shows the maximum amount your benefit may be reduced because of WEP.

***

Even if retirement feels like it’s far away, it’s good to know this information now so you can make plans accordingly. So, remember the Windfall Elimination Provision . . . because the winds of change are upon us and retirement will be here before you know it!

Tags archive, pension, retirement

Teachers / Professors

How to calculate your CalSTRS retirement benefits

Post author By Y@DminG
Post date May 28, 2018
No Comments on How to calculate your CalSTRS retirement benefits

How to Calculate Your CalSTRS retirement benefits

If you ask a California public school teacher what CalSTRS is, they’ll likely respond that it has something to do with their retirement. But for many, that’s as much as they know. In fact, a lot of teachers that I work with have never calculated how much they’re expected to receive from their CalSTRS pension when they retire. Nor do they know when is a good age to retire to maximize their benefits.

Why worry about CalSTRS now?

As appealing as it may sound now to postpone the retirement discussion, it’s not necessarily in your best interest. If you figure out these details now, you’ll have a good idea of how much your fixed income will be during retirement. Not only that, but you can calculate how much you need to save to your voluntary 403(b) plan to supplement CalSTRS.

Let me walk you through the steps so you can rest a bit easier and know that you’re doing what’s necessary now to enjoy those golden years later.

1. Figure out your Benefit Structure

This is done using your initial hire date:

CalSTRS 2% at 60: You were first hired before 01/01/2013 or were a member of a concurrent retirement system before 01/01/2013 and you performed service under that system within six months of becoming a CalSTRS member.

CalSTRS 2% at 62: You were first hired on or after 01/01/2013.

2. Calculate your Retirement Benefit

Retirement Benefit = Service Credit x Age Factor x Final Compensation

Scratching your head at what service credit and age factor are? Let me walk you through those variables:

a. Know your Service Credits

Full-time employees generally earn 1 service credit per 1 school year. Part-time employees generally earn a percentage of a service credit based on the percentage of the full-time contract.

Service credit at retirement = Current service credit balance + future service credits expected

For example, if you currently have 20 full-time service credits and are expected to work another 10 years full-time, your service credit at retirement is estimated to be 30.

If you work 50% of the full-time contract, you will receive 0.5 service credit for that year.

*Any contributions on earnings from service in excess of one year will be credited to your Defined Benefit Supplement (DBS) account up to any compensation cap.

*For CalSTRS 2% at 60, if you purchased “air time” previously, you can add this to your total service credit at retirement. The ability to buy “air time” ended on 12/31/2012.

What about unused sick leave?

Unused sick leave becomes service credit at retirement:

Days of unused sick leave / # of base days for full-time service = Service credit granted

*The base service days cannot be fewer than 175 days. If you’re an administrator, add the vacation days per contract year.

For example, if you have 125 unused sick days, and 182 full-time service base days, the service credit granted is 0.687 service credits (125/182). If you’re expected to have 30 years of service at retirement, you will now have 30.687 years of service at retirement.

b. Find your Age Factor

Remember your benefit structure that we discussed at the beginning?

CalSTRS 2% at 60

The age factor is set to 2% at age 60. If you retire prior to age 60, this will decrease.

The earliest you can retire is age 50 with a base age factor of 1.1%. However, you must have 30 years of service credits to retire between 50 and 54 years old.

*If you have 30 years of service at age 50, your age factor is 1.3% (1.1% base + 0.2% career factor). (This can be found in the Member Handbook under Age Factor Tables.)

*However, if you have 20 years of service at age 50, you can’t retire until age 55 because you don’t have the mandatory 30 years of service to be able to retire between 50 and 54.

You can retire with any amount of service credits starting at age 55. If you have 30 or more years of service under the 2% at 60 benefit structure, a career factor of 0.2% will be added to the age factor until it maxes out at 2.4%. The age factor maxes out at 2.4% at age 63 regardless.

*If you retire at 60 years old with 30 years of service, your age factor is 2.2% (2.0% base + 0.2% career factor).

*If you retire at 60 years old with 29 years of service, your age factor is 2.0% (2.0% base + 0.0% career factor).

CalSTRS 2% at 62

The age factor is set at 2% at age 62. If you retire prior to age 62, this will decrease.

The earliest you can retire is at age 55 with an age factor of 1.16% with any amount of service credits. The age factor maxes out at 2.4% at age 65. (With this benefit structure, there are no career factor benefits.)

*If you retire at 60 years old with 30 years of service, your age factor is 1.76%.

c. Calculate your Final Compensation

CalSTRS 2% at 60:

If you have 25 or more years of service credit, CalSTRS will use your highest 12 consecutive months of average annual compensation.

If you have fewer than 25 years of service credit, CalSTRS will use your highest average annual compensation during any period of 36 consecutive months of paid employment covered by CalSTRS.

CalSTRS 2% at 62:

Your final compensation is based on your highest 36 consecutive months of average compensation, regardless of how many years of service.

If you want to get a really rough estimate of your financial compensation, you can use a Time Value of Money calculator. Enter the following values:

Mode: Choose “End”.
Present value: Enter in your current annual salary.
Payment: Leave blank.
Future value: Leave blank.
Annual rate (%): Enter in an estimate of the average annual pay raise you expect to receive. If you think you should average a pay raise of 3% per year, either put that in or put in a lower number, such as 2%, if you want to be more conservative.
Periods: The number of additional years you expect to work. If you think you’re going to retire in 10 years, put in “10”.
Compounding: Choose “Annually” from the list.
Press on the “FV” button to calculate your estimated final compensation.

*For example, if you currently make $80,000/year and are expecting to retire in 10 years with an average pay raise of 2% per year, your final compensation is estimated to be $97,519.55. Keep in mind that this is only a rough estimate!

Cheers to progress! We’ve gone through the variables, so now we can calculate your retirement benefit! Remember:

Retirement Benefit = Service Credit x Age Factor x Final Compensation

Let’s look at an example:

You are 60 years old with 30 years of service credits. You’re looking to retire in 2 years. Your final compensation is estimated to be $90,000 per year at retirement. Let’s calculate!

1. Calculate manually:

Before technology swooped in, we had to do this stuff by hand. (Remember that with this example, you fall into the CalSTRS 2% at 60. That is important for your career factor.)

32 (service credits) x 2.4% (max age factor + 0.2% career factor) x $90,000 (final compensation)

= $69, 120 per year benefit

2. Use the CalSTRS online calculator:

But yes, technology has made our lives easier, at least in some ways! This calculator will also show you the estimated benefits for the various beneficiary options available … which brings me to … beneficiary options! (You didn’t think that was it, did you?)

3. Choose a Beneficiary Option

Member-only Benefit

This option will give you the highest monthly benefit for your lifetime. However, the benefits stop after you die, whether that is 1 year or 40 years into retirement. If there are any remaining contributions and interest in your Defined Benefit account, they will be paid to your beneficiary or estate in a lump-sum payment.

100% Beneficiary Option

You will receive the most reduced benefit with this option. If you die, your beneficiary will receive 100% of what you received. If your beneficiary dies before you, your benefit will be increased to the Member-Only Benefit.

75% Beneficiary Option

You will receive a reduced benefit. If you die, your beneficiary will receive 75% of what you received. If your beneficiary dies before you, your benefit will be increased to the Member-Only Benefit.

50% Beneficiary Option

You will receive a reduced benefit. If you die, your beneficiary will receive 50% of what you received. If your beneficiary dies before you, your benefit will be increased to the Member-Only Benefit.

The lower the percentage for the beneficiary, the greater your payout. After the member-only benefit option, the 2^nd highest option for you is 50%, which gives your beneficiary 50% of your pay when you die. With the 75% option, you receive a little less, but your beneficiary will receive 75% of your pay. And lastly, you receive the lowest payout with the 100% option because your beneficiary will receive the same amount as you.

That wasn’t so bad, was it? Do you feel a bit more prepared? You’ve devoted your career to our state’s future, so it’s high time you sat down and thought about your own. For more information, be sure to check out the Member Handbook or let yourself be taught for a change with CalSTRS tutorial videos. There’s a wealth of information out there for the taking!

Tags archive, pension, retirement

Teachers / Professors

Student loan forgiveness for teachers

Post author By Y@DminG
Post date May 11, 2018
No Comments on Student loan forgiveness for teachers

Jar with note that says we've got kids to teach & lots & lots of student debt

Student Loan Forgiveness for Teachers

If I were to ask you what your favorite class in high school or college was, you’ll likely recall the teacher more than the class. Teachers have an undeniable influence on education, but higher education isn’t always so kind to our future teachers.

With student loans averaging in the tens of thousands of dollars, and average teacher salaries in California starting at around $40,000, it isn’t hard to see that student loans are a major obstacle to overcome.

Thankfully, there are student loan forgiveness programs for educators. Keep in mind that these are for federal student loans, not private loans. Let’s take a better look:

Public Service Loan Forgiveness (PSLF)

One of the most popular ways to forgive student loans, this program forgives the remaining balance on Direct Loans. The Federal Family Education Loan (FFEL) Program Loans and Perkins Loans may become eligible if they are consolidated into a Direct Consolidation Loan.

Requirements:

120 monthly payments have already been made
- Payments on FFEL and Perkins don’t count towards the 120 required payments
Payments were made under a qualifying repayment plan
- You should repay your loans using the income-driven repayment plans if you’re seeking student loan forgiveness. (See the end of this article for info about these repayment plans and your taxes.)
You work full-time for a qualifying employer, but it doesn’t have to be at a Title 1 school

Remember to submit the PSLF Employment Certification Form every year and every time you switch employers.

Apply here for the PSLF.

Teacher Loan Forgiveness

This option forgives one of two amounts of your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.

Either:

$17,500 is forgiven if:

You teach mathematics or science at the secondary level
You teach special education at the elementary or secondary level

OR $5,000 is forgiven if:

You teach full-time elementary or secondary level education that doesn’t include mathematics, science, or special education

If you have a Direct Consolidation Loan or a Federal Consolidation Loan, you may be eligible for forgiveness of the outstanding portion of the consolidation loan that repaid an eligible Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan.

A Perkins Loan does not qualify.

Requirements:

No outstanding balance on Direct Loans or FFEL Program loans as of 10/01/1998 or on the date that you obtained a Direct Loan or FFEL Program loan after 10/01/1998.
You’ve worked full-time as a highly-qualified teacher for 5 complete and consecutive academic years.
You’re employed at an eligible Title I low-income school. See if your school qualifies here.
The loan that you want forgiveness for must have been made before the end of your 5 academic years of qualifying teaching service.

Can I have loans forgiven through the Teacher Loan Forgiveness Program AND the PSLF program?

Yes, but not for the same period of teaching service. If you complete 5 years of qualified service, the payments you make will not count towards the 120 payments required under the PSLF. 120 additional payments must be made. Keep in mind:

*The PSLF program forgives the entire amount after 10 years so unless you’re planning on working less than 10 years, the PSLF is your best option.

*Federal Family Education Loans (FFEL) do not qualify for PSLF. If you haven’t consolidated, go with the Teacher Loan Forgiveness program first, then consolidate your loans to qualify for PSLF.

Apply here for Teacher Loan Forgiveness.

Perkins Loan Teacher Cancellation

Up to 100% of your Federal Perkins Loan may be cancelled over a period of 5 years. A small part is forgiven every year according to a scale:

Year 1: 15% forgiven
Year 2: 15% forgiven
Year 3: 20% forgiven
Year 4: 20% forgiven
Year 5: 30% forgiven

Requirements:

Employed full-time in a public or non-profit elementary or secondary school:
- Teacher at a low-income Title I school OR
- Special education teacher OR
- Mathematics, science, foreign language, or bilingual education teacher or in any other field of expertise determined by a state education agency to have a shortage of qualified teachers in that state
Go here for a listing of Teacher Shortage Areas nationwide

To apply, contact the school that issued the loan or with the school’s Perkins Loan servicer.

State-Based Loan Forgiveness Programs

Check out the link for more information about your state. California does offer the Assumption Program of Loans for Education (APLE) program, but no new applications have been accepted since the 2011-2012 school year.

And last but not least . . . what about my taxes?

Income-driven repayment plans

With this type of repayment plan, the payment does not exceed 10-20% of your discretionary income. The loan term is increased from the standard 10 years to 20-25 years, and any remaining loan balance is forgiven at the end of the term. However, it IS considered taxable income. See here for more information.

Good news! Student loan amounts under the three plans below are NOT considered taxable by the IRS.

For more information on each, see these links below:

Public Service Loan Forgiveness (PSLF)

Teacher Loan Forgiveness Program

Perkins Loan Teacher Cancellation

So . . . feeling overwhelmed?

You’re not alone! Rest assured that there are plenty of resources out there to guide you. The California Teachers Association has created a video, and it offers resources available to educate you.

You’ve devoted your life to educating others. Now take some time to educate yourself. When the reward could mean erasing thousands of dollars of student debt, this crash course will be well worth your time.

Tags archive, student loans