Cancelling Student Loans for Teaching Service

Can You Cancel Some or All of Your Student Loan Debt?

Many a young person has gone into teaching as a way to escape poverty only to find that, as a teacher, he or she suffers under a substantial student loan debt. But can that young person have some or all of that debt forgiven for teaching?

At this time, a student can receive one of two types of federal student loans: Federal Perkins Loans and Stafford loans. Stafford loans are obtained either from a private lender under the Federal Family Education Loan Program or directly from the federal government under the Federal Direct Loan Program.

For many years now, students have been able to cancel Federal Perkins Loans for their teaching service. The criteria for cancellation are outlined in the promissory note the student signs before he or she obtains the loan. A borrower can have up to 100% of the loan forgiven for service in a public or nonprofit elementary or high school that serves students from low-income families or handicapped students.

A special education teacher whose students are infants, toddlers, children or youth with disabilities can receive up to 100% cancellation. A teacher of science, math, foreign language or of bilingual education can also receive up to 100% cancellation, as can a teacher in an area that has a shortage of qualified teachers, as determined by the state's education agency.

Perkins Loan cancellations for teachers are progressive; that is, teachers qualify to have 15% of principal (plus interest that accrued during that year) cancelled during the first and second qualifying years, then 20% during the next two qualifying years, then 30% during the fifth qualifying year.

This teacher cancellation provision is good for those who have Perkins loans. The problem is that most people get Stafford exclusively or almost exclusively. If they do receive Perkins loans, they are typically a small part of a student's aid debt. Perkins loans are also generally easier to repay than Staffords. They are often for smaller amounts than Staffords, and also have a lower interest rate. Perkins have a fixed rate of 5%; Staffords are fixed at 6.8% now.