This post may contain affiliate links. Please read my disclosure for more information.
Growing up in Nebraska and being a huge Nebraska Cornhusker fan, I never would have imagined that I would have moved to Texas. But that's exactly what happened in the fall of 2009. I moved to Texas to student teach, because they offered me a paycheck along with student teaching.
Towards the end of my student teaching, I was offered a position at the exact same school. That part time position led to a full time position in 2010 and essentially began my journey to getting my student loans forgiven.
While in college, I was told about the teacher loan forgiveness program. This program was very intriguing to me, because I could work five years and have up to $17,500 forgiven by the federal government. To receive this forgiveness, you had to work for a school with an underserved population.
Well, the school that hired me was exactly that. It met the requirement to allow me to receive teacher loan forgiveness. All I needed to do was work five years and fill out the form correctly at the end of my fifth year.
In August of 2010, I began teaching and had two different types of loans serviced by two different companies. The two companies were Nelnet and Campus Partners. Nelnet serviced my Direct Subsidized Loans and Campus Partners serviced my Perkins Loans.
As I was preparing to figure out the teacher loan forgiveness program, someone had told me that I had to wait until the end of my five years to fill out the paperwork. This sounded right and I just went through my first year teaching, not knowing that I could have saved a lot by researching the information.
Unfortunately that information was only correct for Direct Subsidized and Direct Unsubsidized Loans. I later discovered that the Perkins Loan allows partial loan forgiveness each year you complete teaching.
At the time of my graduation, I had $5,700 in Federal Perkins Loans and I paid off $700 in principal by the end of my first teaching year. This left me with a $5,000 loan when I discovered that I could have my Perkins Loans forgiven each year.
The Perkins Loan was forgiven using the following percentage structure, based on the original value of the loan:
- 2011: 15% of $5,700 = $855 + any interest accrued
- 2012: 15% of $5,700 = $855 + any interest accrued
- 2013: 20% of $5,700 = $1,140 + any interest accrued
- 2014: 20% of $5,700 = $1,140 + any interest accrued
- 2015: 30% of $5,700 = $1,710 + any interest accrued
Not only does the Perkins Loan forgive a partial amount each year, but they also place your loans in deferment (not required to pay) and you don't have to even think about them. Therefore, no payments were required, I just had to send in a form after the completion of each year of teaching.
The Direct Subsidized and Direct Unsubsidized Loans are the exact opposite from the Perkins Loan. You have to pay each month over the course of the 5 years of teaching and you only fill out the form after completing your 5th year of teaching.
In December 2013, I had $11,573 left in Direct Subsidized Loans. Interestingly, I was looking into going to grad school. A representative from a graduate school program mentioned that any loan taken out before my completion of my five years of service would be forgiven.
This took me a second to comprehend. I thought that you had to work five years after receiving the loan to be eligible for the loan forgiveness. That's not the case, you can take out a student loan during your 5 years of service and still have the loan forgiven.
Since I was going to graduate school anyway, it made sense to take out an extra $6,000 student loan and have it forgiven. In my first semester of grad school, I took out a student loan big enough to push my total amount of above $17,500.
That was the only semester of grad school that I took out a student loan. All other semesters, my wife and I paid with our cashflow. Looking back on the 5 years, the best decision that I made was to go to graduate school. It allowed me to come out ahead financially, because of the following reasons:
- While in school, loans are deferred.
- Direct Subsidized Loans don't earn interest, while in deferral for education.
- Thus, no interest was charged on the $11,573!
- I did not have to pay back my loan for the last year and a half of the required 5 years.
- Prior to loan deferral, I was on pace to pay off $4,000 of my student loan every 6 months.
- In a year and a half, that would have paid off my remaining balance of $11,573, before receiving loan forgiveness.
- I was able to get an extra $6,000 forgiven, because I took out a student loan for grad school.
Related: Saturday Special, We're Debt Free!
On June 22, 2015, I was notified that my Perkins Loan had been forgiven in full. That was $5,000 gone! All that was left was the Direct Subsidized and Direct Unsubsidized loans to be forgiven. On August 7, 2015, I discovered that my loan balance was $0.00, when I logged into my account and a letter was officially mailed to me on August 11, 2015.
So, 5 years after starting my teaching job in August of 2010, my student loans were gone and my wife and I were debt free! That's $22,500 forgiven, because I taught for five years.