ABOUT
LOAN FORGIVENESS:
What Is Loan
Forgiveness & Repayment?
Where there
are shortages, there are loan forgiveness programs to entice people
into that field or place of employment.
Loan forgiveness is an agreement to pay all or a portion of your
educational loans in exchange for service.
These are forgiven in the years following graduation by federal,
state, or private programs through meeting the agreed upon service
requirement. Some programs, like the SON's Nurse Faculty Loan
Program provide a stipend while you are in school and forgives
85% of it during the service agreement period.
History
of Loan Forgiveness Programs
- 1958: The
National Defense Student Loan Program (a predecessor of the
Perkins loan program established by the National Defense Education
Act in 1958) includes loan forgiveness provisions.
- 1968: Alaska
had a loan forgiveness provision for state loans if the borrower
remained a state resident for four years after graduation. The
forgiveness was not career-specific. The program ended in 1987,
with the transition from the state general fund to capital markets
in 1988.
- 1982: The
military's Student Loan Repayment Program started on October
1, 1982 after a demo program in FY1981.
- 1987: The
National Health Service Corps (which was established by the
Emergency Health Personnel Act in 1970, PL 91-623) started its
loan repayment program.
- 1988: Start
of Maryland's Janet L. Hoffman Loan Assistance Repayment Program
(LARP) for public service attorneys.
- 1993: AmeriCorps
established by the National and Community Service Trust Act.
- 1998: Stafford
loan forgiveness for teachers established starting for loans
originated on or after 10/1/1998
Loan Forgiveness
Under certain
circumstances, the federal government will cancel all or part
of an educational loan. This practice is called Loan Forgiveness.
To qualify, you must:
- Perform
volunteer work;
- Perform
military service;
- Teach or
practice medicine in certain types of communities; or,
- Meet other
criteria specified by the forgiveness program.
To find out
whether you qualify for loan forgiveness, talk to the human resources
staff at your employer.
See also
FinAid's Public
Service Loan Forgiveness section.
Some, but not
all, loan forgiveness is excluded from income. See Taxability
of Student Loan Forgiveness for additional details.
Volunteer
Work
These volunteer
organizations offer loan forgiveness:
AmeriCorps. Serve for 12 months and
receive up to $7400 in stipends plus $4725 to be used towards
your loan. Call 1-800-942-2677.
Peace Corps. Volunteers may apply
for deferment of Stafford, Perkins and Consolidation loans and
partial cancellation of Perkins Loans (15% for each year of service,
up to 70% in total). Volunteers make a real difference in the
lives of real people with two years of service in more than 70
developing countries. Contact the Peace Corps at 1111 20th St.,
NW, Washington, DC 20526 or call 1-800-424-8580 or 1-202-692-1845.
Volunteers in Service to America (VISTA).
Volunteer with private, non-profit groups that help eradicate
hunger, homelessness, poverty and illiteracy. Provide 1700 hours
of service and receive $4725. Call 1-800-942-2677 or 1-202-606-5000.
Military
Students
who are in the Army
National Guard may be eligible for their Student Loan
Repayment Program, which offers up to $10,000. (Note, the military
and veterans' associations provide many scholarships and tuition
assistance programs. See the section on Military
Aid for details.)
Teaching
Students
who become full-time teachers in an elementary or secondary school
that serves students from low-income families can have a portion
of their Perkins Loan forgiven under The National Defense
Education Act. This program forgives 15% of your loan for the
first and second years of teaching service, 20% for the third
and fourth, and 30% for the fifth. Contact your school district's
administration to see which schools are eligible.
Mississippi
teachers who currently have their Alternate Route Teaching
License and teach in a shortage area may be eligible for the Teacher
Loan Repayment program. Visit the Mississippi Office of State
Student Financial Aid web site at www.ihl.state.ms.us
or call 1-601-432-6997.
The American
Federation of Teachers maintains a list of other loan
forgiveness programs for teachers.
Legal
and Medical Studies
Many law
schools forgive the loans of students who serve in public interest
or non-profit positions. For more information, contact Equal
Justice Works (formerly the National Association for Public
Interest Law) at 2120 L Street, NW, Suite 450, Washington, DC
20037-1541 (phone 1-202-466-3686 or fax 1-202-429-9766). The American
Bar Association (ABA) also has a summary of Loan
Repayment Assistance Programs (LRAP) and State Loan
Repayment Assistance Programs.
The US Department
of Health and Human Services offers loan forgiveness programs
through the National Health
Service Corps and the Nursing
Education Loan Repayment Program. These programs offer loan
forgiveness to physicians and registered nurses who agree to practice
for a set number of years in areas that lack adequate medical
care (including remote and/or economically depressed regions).
The US National
Institutes of Health's NIH Loan
Repayment Programs repays up to $35,000/year of student loan
debt for US citizens who are conducting clinical medical research.
The US Department
of Agriculture's Veterinary
Medicine Loan Repayment Program (VMLRP) offers loan forgiveness
of $25,000 per year for three years for veterinarians who commit
to work in a veterinary shortage area for three years. The application
deadline is June 30.
If you're
a California resident, contact the Office
of Statewide Health Planning and Development (State Loan Repayment
Program, 400 R Street, Room 330, Sacramento, CA 95811; 1-916-326-3745).
Other states may have similar programs.
Many hospitals
and private healthcare facilities use loan forgiveness to recruit
occupational and physical therapists. Contact the American Physical Therapy Association
(1111 North Fairfax St., Alexandria, VA 22314-1488; 1-800-999-2782)
or the American Occupational Therapy
Association (P.O. Box 31220, 47200 Montgomery Lane, Bethesda,
MD 20824-1220; 1-301-652-2682).
Other loan
repayment programs for medical school students include:
The American
Association of Medical Colleges (AAMC) maintains a database of
state and other
loan repayment programs for medical school students.
Other
Paths to Forgiveness
Students
who receive the Michael Murphy Loan to study law enforcement,
law, probation and parole, penology, or other related fields
are eligible to work off one-fifth per year as a State Trooper
(or related law enforcement official) in Alaska. Contact the Alaska State Troopers, Director's Office
Scholarship Fund, 5700 East Tudor Rd., Anchorage, AK 99507; 1-907-269-5511.
Maryland
state and local government employees who earn less than $40,000
gross annually may be eligible for a loan assistance/repayment
program to study law, nursing, physical and occupational therapy,
social work and education. Contact the Maryland State Scholarship
Administration, 16 Francis St., Annapolis, MD 21401; 1-410-974-2971
x146.
Federal
Government Loan Forgiveness Programs
Federal
Student Loan Forgiveness
Perkins, Stafford,
and other FFELP loans are subject to various loan forgiveness
and cancellation programs. A portion of full-time teachers' student
loans can be forgiven for each year teaching in low-income schools,
or in teacher shortage subject areas such as math, science, special
education, or foreign language. There also exist programs for
forgiveness of social workers and childcare workers' Stafford
loans, for forgiveness of law school, medical school, and veterinary
school loans for professionals working for the public interest
or in shortage areas of the country, and for forgiveness of Peace
Corps volunteers.
Perkins
loans and Stafford
Loans can be cancelled for full-time service as a teacher
in a designated elementary or secondary school serving students
from low-income families, special education teacher (includes
teaching children with disabilities in a public or other nonprofit
elementary or secondary school), qualified professional provider
of early intervention services for the disabled, teacher of math,
science, foreign languages, bilingual education, or other fields
designated as teacher shortage areas, employee of a public or
non-profit child or family service agency providing services to
high-risk children and their families from low-income communities,
nurse or medical technician, law enforcement or corrections officer,
staff member in the educational component of a Head Start Program,
service as a Vista or Peace Corps Volunteer and service in the
Armed Forces (up to 50% in areas of hostilities or imminent danger).
See also the
US Department of Education's pages on Cancellation/Deferment
Options for Teachers and Cancellation
for Childcare Providers, as well as the Teacher
Loan Forgiveness Form.
The US Department
of Education maintains a database of low-income
schools eligible for teacher loan cancellation for Perkins
and Stafford loans.
Secondary
school math and science teachers, and elementary/secondary school
special education teachers who commit to working in high-need
schools for five years can obtain up to $17,500 in Stafford loan
forgiveness. They must teach full time for five consecutive years
in a qualifying low-income school and be "highly qualified". (The
Taxpayer-Teacher Protection Act of 2004, HR 5186, increased the
amount of forgiveness from $5,000 to $17,500 on October 30, 2004.)
Visit the
HRSA web site for information on Nursing
Education Loan Repayment
The Federal Student Loan Repayment
Program allows federal agencies to establish loan forgiveness
programs to help recruit and retain employees. This is technically
a loan repayment program and not a loan forgiveness program, as
the agencies make payments directly to the loan holder and the
payments represent taxable income to the employee. The agencies
can repay up to $10,000 in Federal student loans per employee
per calendar year, with a cumulative maximum of $60,000 per employee.
Employees must agree to work for the agency for at least 3 years.
For more information, see the Student
Loan Repayment Program FAQ. This program is authorized by
5 USC
5379 (alternate link)
and 5
CFR 537. Federal Employee Student Loan Assistance Act (P.L.
108-123, 11/11/03) increased the repayment limits to $10,000 per employee
per year and $60,000 per employee cumulative. (The federal
government's jobs site is located at www.usajobs.opm.gov. They also have a site
focused on jobs for recent
graduates.)
Federal
Perkins Loan Teacher Cancellation
You qualify
for cancellation (discharge) of up to 100 percent of a Federal
Perkins Loan if you have served full time in a public or nonprofit
elementary or secondary school system as a
teacher
in a school serving students from low-income families; or
special-education
teacher, including teachers of infants, toddlers, children,
or youth with disabilities; or
teacher
in the fields of mathematics, science, foreign languages, or
bilingual education, or in any other field of expertise determined
by a state education agency to have a shortage of qualified
teachers in that state.
Eligibility
for teacher cancellation is based on the duties presented in
an official position description, not on the position title.
To receive a cancellation, you must be directly employed by
the school system. There is no provision for canceling Perkins
Loans for teaching in postsecondary schools.
Note that
you also qualify for deferment while you’re performing
teaching service that qualifies for cancellation. Contact the
school that holds your loan for information on applying for
deferment.
Definition
of Teacher
A teacher
is a person who provides students direct classroom teaching,
or classroom-type teaching in a non-classroom setting, or educational
services directly related to classroom teaching (for example,
school librarian or guidance counselor).
It’s
not necessary for you to be certified or licensed to receive
cancellation benefits. However, your employing school must consider
you to be a full-time professional for the purposes of salary,
tenure, retirement benefits, etc. If you are a supervisor, administrator,
researcher, or curriculum specialist, you are not considered
a teacher unless you primarily provide direct and personal educational
services to students.
Definition
of Full Time for a Full Academic Year
You must
teach full time for a full academic year or its equivalent.
There is no requirement that you must teach a given number of
hours a day to qualify as a full-time teacher; the employing
school is responsible for making that decision.
An “academic
year or its equivalent” for teacher cancellation purposes
is defined as one complete school year or two half years that
are (1) from different school years, excluding summer sessions;
(2) complete, and (3) consecutive. The two half years also must
generally fall within a 12-month period.
Teaching
Part Time at Multiple Schools
You can
receive cancellation if you are simultaneously teaching part
time in two or more schools if an official at one of the schools
where you taught certifies that you taught full time for a full
academic year.
Teaching
in a Private School
You may
receive teacher cancellation for services performed in a private
academy if the private academy has established its nonprofit
status with the Internal Revenue Service (IRS), and if the academy
is providing elementary and/or secondary education according
to state law.
Teaching
in a Preschool or Prekindergarten Program
You may
receive teacher cancellation only if the state considers such
a program to be a part of its elementary education program.
A low-income-school-directory designation that includes prekindergarten
or kindergarten does not suffice for a state determination of
program eligibility.
Teaching
in Low-Income Schools
A cancellation
based on teaching in a school serving students from low-income
families may be granted only if you taught in an eligible school
as determined by the state education agency. To be considered
a “low-income school,” the school must be in a school
district that qualified for federal funds in the year for which
the cancellation is sought. Also, more than 30 percent of the
school’s enrollment must be made up of children from low-income
families.
To find
out if the school that employs you is classified as a low-income
school, you can check our online database for the year(s) that
you have been employed as a teacher. Questions about the inclusion
or omission of a particular school should be directed to the
state education agency contact in the state where the
school is located, not to the U.S. Department of Education.
The Secretary
considers all elementary and secondary schools operated by the
Bureau of Indian Affairs (BIA)--or operated on Indian reservations
by Indian tribal groups under contract with BIA--to qualify
as schools serving low-income students.
NOTE:
If you have had a portion of your loan cancelled for teaching
at a low-income elementary or secondary school in one year,
you can continue to have portions of your loan cancelled for
teaching at that school even if it is not listed as a low-income
school in later years. Under certain circumstances, the institution
that holds your Perkins Loan may permit retroactive cancellation
if you can demonstrate that you qualified for cancellation in
a prior year. However, the institution may not refund payments
made during such a retroactive period.
Teaching
in Special Education
You must
have an official at the public or other nonprofit elementary
or secondary school certify that you are teaching handicapped
or learning disabled students, either on the Federal Perkins
Loan postponement/cancellation form or on an official letter
from the school bearing the school's seal or letterhead. For
Perkins Loans made on or after July 23, 1992, this cancellation
includes special education teachers.
If you provide
one of the following services, you qualify as a teacher only
if 1) you are licensed, certified, or registered by the appropriate
state education agency for that area in which you are providing
related special educational services, and 2) the services you
provide are part of the educational curriculum for handicapped
children:
- speech
and language pathology and audiology;
- physical
therapy;
- occupational
therapy;
- psychological
and counseling services; or
- recreational
therapy.
Teaching
in a Designated Subject Shortage Area
This cancellation
is based on full-time teaching if there is a shortage of teachers
in your subject area. Each year the state education agency determines
any subject shortage areas in the elementary and secondary schools
within the state. Check with your local school system or state
education agency to find out if your subject matter area has
been so designated. If you teach full time in science, mathematics,
foreign language, or bilingual education, you qualify for cancellation
even if the state has not designated one of these subject areas
as a shortage area.
For a borrower
to be considered as teaching in a field of expertise, the majority
of classes taught must be in that field of expertise.
Teacher
Shortage Areas Nationwide Listing
(Word or PDF).
Applying
for Teacher Cancellation
You must
request the appropriate forms from the office that administers
the Federal Perkins Loan program at the school that holds your
loan. You must also provide any documentation the school requests
to show that you qualify for cancellation. It is the school’s
responsibility to determine whether you qualify, and the school’s
decision cannot be appealed to the U.S. Department of Education.
Schools may not cancel any portion of a loan for teaching services
you performed either before the date the loan was disbursed
or during the enrollment period covered by the loan.
Cancellation
Amounts for Years of Service
If a borrower
is eligible for teacher cancellation under any of the categories
listed above, up to 100 percent of the loan may be canceled
for teaching service, in the following increments:
- 15
percent canceled per year for the first and second years
of service,
- 20
percent canceled for the third and fourth years, and
- 30
percent canceled for the fifth year.
Each amount
canceled per year includes the interest that accrued during
the year.
Last updated/reviewed October 30, 2006
